Page 4 - Lesson Note 5

When a manufacturer employs one or more intermediary to move goods from the

point of production to the point of consumption, the distribution network is

called indirect. This may take any of the following forms:

1. Manufacturer-Retailer Consumer (One Level Channel): In this form of

arrangement one intermediary i.e., retailers is used between the

manufacturers and the customers.

That is, goods pass from the manufacture to the retailers who, in turn, sell

them to the final users. For example, Maruti Udyog sells its cars and vans

through company approved retailers.

2. Manufacturer-Wholesaler-Retailer-Consumer (Two Level Channels):

This is the most commonly adopted distribution network for most

consumer goods like soaps, oils, clothes,rice,sugar and pulses.

Here the wholesaler and retailer function as connecting links between

the manufacturer and consumer. Use of two middlemen in the channel

network enables the manufacturer to cover a larger market area.

3. Manufacturer-Agent-Wholesaler-Retailer-Consumer (Three Level

Channels): In this case, manufactures use their own selling agents or

brokers who connect them with wholesalers and then the retailers. Thus,

one more level is added to the levels discussed in the proceeding

arrangement.

It is done particularly when the manufacturer carries a limited product

line and has to cover a wide market. An agent in each major area is

appointed, who in turn contact the wholesalers.

PHYSICAL DISTRIBUTION