Please explain the relations between distributors wholesalers and manufacturers?

Question

I understand what each of the above parties do however i cant understand why they dont just join up to be one company...

I want to know who buys off who and who sells to who and what contact each have with retailers and business'

thanks

Answer 1

Great question and maybe I can help.  All aspects mentioned have one "goal", make money/profit.  Manufacturers look at volume, the more "distributors" more product they sell and move.  Manufacturing plants "look" at not only "sells" but "volume" of product(s) manufactured and "shipped".

Distributors buying direct from manufacturers often do so in "volume" or "QPA", Quantity Purchase Agreement.  QPA is an agreement of a set price for a set quantity of product(s) typically over a one year period, shipped in intervals.  Distributors DO NOT want to be "locked" in to the same and/or only "name brand" which reduces their "client" base with limited product(s).  In some instances, it is no longer cost effective to maintain operations or other circumstances of a "manufacturing plant", therefore, a "shut down".  Distributors protect themselves with a variety of manufactured product(s) from different "plants".

Wholesalers maybe Distributors as well and sell to businesses and retailers.  They need "product" to reflect differences in costs they can offer, design, operation differences, etc., a variety to meet "client(s)" request or needs.  Distributors deal with certain manufacturers and if a Wholesaler needs other than current Distributors they MUST have access to other avenues, or lose money.

In almost all cases it is not cost effective and/or justified to combine.  Throughout "economic" history companies MUST "diversify" in order to be successful.  Limiting to a specific product and/or brand by a "manufacturer" can only produce what their "distributor" request, in turn, determined by "wholesalers".  A slow down by any can create layoffs, loses in income, etc.

Hope this helps.  I have worked for "distributors" and "wholesalers".