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Section 10.3 Place
by you. Or, you may have bought it from the wholesaler’s website. The
path the pencil took to reach you is the channel of distribution.
Distribution is not free. There are many costs associated with
getting products to the end users. These distribution costs increase the
prices charged for goods or services. Therefore, it is important to find
efficient ways to distribute products that keep costs under control.
Types of Distribution Channels
There are two distribution channels a product can take: direct
or indirect. Figure 10-6 shows the two different types of distribution
channels.
A direct channel is when goods or services go directly from the
manufacturer to the end user. For example, a child care business
provides services directly to the parent or guardian of the child. Most
service businesses use direct channels of distribution.
An indirect channel uses intermediaries to get the product from the
manufacture to the end users. For example, a bicycle may go from the
producer, to a wholesaler, and the retailer before reaching the end user.
Transportation Options
If the channel of distribution includes moving products from one
place to another, there are a number of transportation options. The six
main types of transportation are truck, train, plane, ship, pipeline, and
digital, as shown in Figure 10-7.
A freight forwarder is a
company that organizes
shipments. It is not
a shipper or carrier,
rather it specializes in
the logistics of supply-
chain management and
assists companies in
contracting carriers.
FYI
Figure 10-6. Channels of
distribution depend on the
product or service that is
delivered.
Channels of Distribution
Direct Channel
To End User
Indirect Channel To End User
Producer
End user
Producer
Retailer
Internet
Producer Producer Producer
Agent
End user End user End user End user
Wholesaler
Retailer Retailer
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