Wholesale distributors play a vital role in supply chain management of every manufacturing organization. There are many functions provided by the wholesalers which make them indispensable for an active supply chain distribution system. These functions not only facilitate an affective functioning of manufacturers and retailers, but also help them achieve more with less cost.
The first important function of wholesale distributor is that they eliminate the need for a separate distribution channel by the producers themselves. It makes the producers just focus on their other operations and processes. Secondly, determining the demand of a product in the market is very difficult for the producer. Unless and until the producer himself has all the statistics regularly updated, there is no way to determine the actual demand in the market. Wholesalers, being the nerve of the market, help producers know how to adjust their production capacity with the changing demands of the market. Wholesalers sometimes purchase huge inventory that transfers the risk of selling the products. This frees a lot of working capital for the producer, ensuring smooth flow of the processes carried out by the producer. Wholesalers have also got excellent transportation facilities for delivering the stocks in time.
One of the most important functions that the wholesalers perform for the producer is the customer feedback. As directly interacting with retailers, the wholesaler exactly knows about the customer view on each product. A close tie with the wholesaler will help producer know his customers better. This would not only help in better product development, but also ensure that the producer’s product is proactively marketed with competitor products. Wholesaler not only provides effectiveness to the producer, he also plays a very vital role in helping the retail side of the supply chain. Retailers, especially for the FMCG companies, usually sit in the city centers. Real estate is really expensive there and a retailer cannot pay the rent for large storages. Wholesalers not only help in stock buffering, but also deliver the products as and when demanded. Retailers usually have a very low financial leverage.
Wholesalers also help finance their stocks for a later on recovery. As wholesaler has the product sorting specialty, they can also help in effective display and assortment of the products. In many troubled times the retailers look at wholesalers for help in different issues from financing to product assortment and supply & demand management. Both producers and retailers have their own limitations and cannot substitute the functions provided by the wholesaler. Wholesaler therefore acts as the hub of supply chain management.