Question
As a purchaser, what is the importance of understanding the channel of distribution?
Answer
The term ‘distribution channel’ essentially defines how goods or services reach the end user or consumer. The overall channel forms a chain of businesses or suppliers, which is an integral part of the product or service delivery process. Each ‘middle-man’ within a distribution channel acts as a cog in a larger machine which allows delivery of a product to the end user. From a purchaser’s perspective, a distribution channels forms the basis of multiple elements; these include core aspects such as price, lead time and availability of products. A longer distribution channel often means that an overhead is added each time an intermediary is included in the channel, a shorter channel on the other hand means a lower overhead added across the distribution line. While a smaller distribution channel might be beneficial to the purchaser in some cases, the importance of a longer channel to reach a wider audience cannot be undermined. As a longer distribution channel often means that there might be multiple tiers of purchasers, this effectively defines the cost and the availability of a product or service. Global distribution of any product or service often relies heavily on a fairly complex and long distribution channels, though a similar approach applies to almost all fast moving consumer goods. A purchaser therefore needs to understand the distribution channel in order to extract the highest possible value from a product or service being purchased.
