Chain of production and channels
The Chain of Production
The chain of production is the various From this…..
production or processing stages that a good
or service goes through before it is sold to
Farmer grows wheat
Farmer sells the wheat to the miller who
Miller sells flour to the baker who makes To this….
Baker sells the cakes to wholesalers and / or
Retailers sell the cakes to the consumers
The Three Sectors of the Economy
The primary sector is made up of the extractive
industries who take (extract) materials from the land or
the sea, e.g., Farming, fishing, mining, and oil and gas.
The secondary sector is the manufacturing and
construction sector of the economy. The firms in this
sector use the goods produced by the primary sector
and change them into finished products, e.g. the
clothing, food processing and building industries.
The tertiary or service sector provides services to all
other sectors of the economy, e.g. mechanics and
The Channels of Distribution
Channels of distribution are the methods used to
transfer finished goods from manufacturers to
consumers. Common examples are:
1 Manufacturer wholesaler retailer consumer
2 Manufacturer retailer consumer
3 Manufacturer consumer
A wholesaler is a company or person that buys
large quantities of goods from many
manufacturers and sells them in smaller
quantities to retailers.
Wholesaler aids manufacturer
Role played by wholesaler Benefit to manufacturer
Buys very large quantities Manufacturers have a small
number of customers, which
reduces their overhead costs
Stores the goods Manufacturers are saved the
Promotes the goods to retailers Reduces the manufacturer’s
and consumers advertising costs
Pays promptly for goods Gives the manufacturer working
capital for current expenditure
Provides the manufacturer with Prevents the manufacturers from
information from retailers making goods that may be going
regarding consumer trends out of fashion
Wholesaler aids retailer
Role played by wholesaler Benefit to retailer
Provides a wide range of goods Retailers need deal with only a
small number of wholesalers
rather than many manufacturers
Sells goods in small quantities Retailers do not have to store
large quantities of goods
Delivers goods Reduces retailer’s transport costs
and saves retailer’s time
Provides credit facilities Retailers may be able to sell all
their stock before payment is due
Provides information about new Prevents retailers over-stocking
products coming onto the market goods that may be going out of
Cash and Carry Wholesalers
Cash and carry wholesalers act as
supermarkets to retailers. Consumers are
not permitted to shop in them.
They differ from the traditional
1. They do not give credit.
2. They do not deliver goods.
3. They operate on a self-service basis.
4. They provide ample parking space for
5. Their prices tend to be lower than
Functions of a retailer
A retailer is somebody (or an outlet) who sells
finished goods to consumers.
Functions of a retailer:
1. Provides a wide rang of d goods to consumers in one
2. Sells goods to consumers in small quantities
3. Offers advice to consumers on products they may
4. Informs manufacturers of changing consumer trends
5. Creates a demand for goods by advertising
6. Arranges finance for consumers for expensive goods
7. May accept “trade-ins” to make it easier for consumers
to buy new goods
Recent trends in retailing in Ireland
1. The arrival of international discount
stores in the grocery and related
products industry, e.g. Aldi and Lidl.
2. Major growth in the number of
shopping centres and retail outlets.
3. Increasing use of e-commerce
4. Growth of farmers’ markets
5. Many retailers of expensive “A retail outlet”
consumer durable products are now
providing or arranging low interest
6. Growth in the promotion and
acceptance of ‘own brand’ labelled