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What is a channel of distribution.

Updated on May 24, 2012

What is a channel of distribution.

The channel of distribution is the network of institutions that perform a verity of interrelated and coordinating functions in the movement of goods from produces to consumers.

The distribution system involves many process. It is the movement of goods from manufacturers to the end consumers. Many parties are involved in the distribution system. Main parties are (1) Manufactures or producers (2) Distributes (3) Facilitating agencies (4) Consumers.

Manufactures produce the goods. It could be manufacturing goods in a factory or other goods which are produced in the farm like grains and fruits.

Distributors distribute the goods to the consumers. They are also called intermediaries. They identify the demand and source of goods. They directly negotiate between the producer and consumers. They also does certain other functions like buying, selling, Packing, Packaging, assembling, grading, risk bearing etc.

Facilitating agencies are the agencies who facilitate the transfer of goods from producers to the consumers. Insurance companies, Banking institutions, Warehousing agencies, Transport companies are some of the examples of facilitating agencies.

Consumers are the end users of the product. They are the last participants in the distribution system.

A Channel of distribution is mainly concerned with the middle men who assist the producers to distribute the good to the consumers. Many companies does not deal with the end users. They use middle men to distribute the goods. These middlemen take the title of the goods and transfer it to the consumer. Some other causes they assist the producer to transfer the title of goods to the consumers. Channel of Distribution mainly concerned with the transfer of title from the producers to the consumers directly or through a chin of intermediates as most producers do not sell goods directly to the consumers.

Creates Place Utility: Now a days most companies depend on the channel of distribution to sell their goods to the end users as these distribution channels create place, time and position utilities to the product and effectively does the function of physical distribution. Many products are produced in a manufacturing unit which are used by consumers all over the country. For example, apples are produced in Kashmir and Himachal Pradesh, bur are used by people all over India. Most of the textile mills are located in Mumbai, Ahmedabad and Chennai. But the users of the cloths are spread all over Inida. Nano Cars are produced in a plant at Gujarat. But the end users of the Nano car spread all over India. So distribution channel is the vital part of the business all over the world. A distribution channel helps in the movement of goods from producers to the consumer and thus creates place utility to the product.

Creates Time Utility
: Some products like Woolen clothes and rain coats are used by the consumer in the winter and rainy season respectively. But these goods are produced through out the year by the manufacturing companies. Some products like food grains are produced by the farmers in the respective season. But the food grains are used by the consumers throughout the year. Distributors facilitate the function of making the good available to the consumer at the time of utility. So Channel of distribution facilitate the time utility. They remove the time barrier i.e. the time of production and the time of consumption.

Creates Convenience Utility
: Distribution channel make it possible for the consumer to buy products in the convenient shape, size, style and package. Distributors buys goods in bulk quantity and sell the same to the consumers as per their need and size and shape. They also pack the goods properly for the protection and convenience. Small packets and big packets are available at the distributor. Consumer can buy goods as per his need.

Creates Possession Utility:
Distribution channel also make it possible for the customer to buy goods at a price suitable to him. Quality goods costs more. Goods are available in a cheap rate in low quality.  Goods in less quantity costs less money. Likewise bulk quantity costs more. Distributors make it possible for the consumers to buy goods as per his purchasing power. So Channel of Distribution facilitate the possession utility.

The channel of distribution is the network of institutions that perform a verity of interrelated and coordinating functions in the movement of goods from produces to consumers.

In short Distribution channel facilitate the movement of goods from producers to the consumers while performing the function of time, place and from utility.

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