If you sell goods to consumers via e-commerce or through a brick and mortar store, you may have thought about buying goods directly from manufacturers. By cutting out the middleman, or the distributor, you can benefit from the manufacturer’s lower prices.
While this may prove beneficial in some limited circumstances, it’s generally best to buy from distributors. In fact, buying direct from manufacturers can be more costly to your business and make inventory management more difficult. Here are four reasons why distributors are often the better choice:
Lower Shipping Costs and Faster Deliveries
There tend to be more distributors than manufacturers, and therefore you’re more likely to have nearby distributors. This proximity reduces shipping costs and delivery times. Faster deliveries reduce lead times, which reduce the size of your inventory. Reduced shipping costs and inventory levels can more than make up for the distributor’s higher prices.
Smaller Minimum Orders
For manufacturers, big production runs reduce the production cost per item. To keep their production facilities running without generating enormous inventories, manufacturers prefer selling large quantities at a time. This is why their minimum order sizes can exceed the needs of all but the largest of retailers.
Distributors are willing to buy large quantities at a time, store the goods in big warehouses, then sell smaller orders to lots of retailers. For the retailer, buying direct from a manufacturer would result in enormous and costly inventories. This would negate any benefits from the manufacturer’s lower prices.
Larger Product Choice
Distributors typically buy a variety of goods from multiple manufacturers. Therefore a distributor can provide the retailer with a larger product selection than the manufacturer, whose facilities are typically set up to produce specific types of goods.
More Flexibility
Unlike manufacturers, distributors can immediately fulfil your orders at any time from their inventories, which they maintain at sufficient levels to avoid stock outs. With manufacturers, you would have to coordinate your orders with their production runs.
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