Chapter 26 What Is Place?
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supply chains are long and complex because
hundreds of raw and manufactured parts
are often needed for making manufactured
products. Figure 26-9 shows the most
common channel of distribution from raw
material to final consumer.
Agents and Brokers
Another type of intermediary is the agent
or broker. An agent is an intermediary who
brings buyers and sellers together. Broker
is another term for agent. The purpose of an
agent is to connect sellers and buyers. An
agent never buys or handles the product.
An agent may be hired by the seller or the
buyer, but the goal of the agent is to arrange
an exchange satisfactory to both parties.
The simplest situation in which agents
are used is in the selling of residential
real estate. There may be hundreds of
homeowners who want to sell their houses.
There may also be hundreds of buyers. How
will the sellers find the buyers? How will
the buyers find the house they want? The
real estate agent specializes in knowing the
houses that are for sale and in finding people
who want to buy a house. The real estate
agent knows the houses and gets to know
what the buyers want. The real estate agent
will then show a buyer several houses. The
agent brings the house seller and the house
buyer together. The real estate agent never
owns the house. The seller usually pays the
real estate agent a fee for selling
the house.
Agents and brokers may be used at any
step of a distribution channel. At the raw
materials step, a precious metals broker
might connect mining companies with
jewelry manufacturers who need the mined
metals. In the middle of the channel, agents
and brokers might connect manufacturers
with wholesalers. Agents are especially
useful for offshore manufacturers who want
to connect with wholesalers in the United
States. Brokers are also used when a U.S.
manufacturer wants to sell to a foreign
country. The U.S. manufacturer may not
know the wholesalers, retailers, or even the
language of the foreign country. The broker
knows the foreign country’s distribution
system. The broker will connect the
manufacturer with a wholesaler.
Role of Intermediaries
Why do producers use intermediaries?
The apple farmer could sell his apples
directly to consumers, with no inter­
mediaries. A channel of distribution with no
Raw Materials Suppliers
(mines, farms)
Product Manufacturers
(factories)
Retailers
(stores)
Final Consumer
(end users)
Wholesalers
(warehouses)
A Common Channel of Distribution
26-9
This figure shows the most common channel
of distribution for consumer goods, from raw
materials to final consumer. A channel of
distribution is also called a supply chain. Some
products have longer or shorter supply chains
than this one.