Channels of Distribution
When a producer sells a product directly to the consumer without intermediaries.
What is Direct Distribution?
This is the act of buying goods and services for business use.
What is Purchasing?
These are the direct costs of producing goods that a business sells, such as materials and labor.
What is Cost of Goods Sold (COGS)?
This is the overall process of creating goods and services.
What is Production?
This type of cost stays the same no matter how many products a company makes.
What is a Fixed Cost?
A business that sells products directly to the end user, such as Target or Walmart.
What is a Retailer?
This formal document lists the types, quantities, and prices of goods a company agrees to buy.
What is a Purchase Order (PO)?
These costs remain the same no matter how much a company produces — like rent or insurance.
What are Fixed Costs?
This process involves making products from raw materials using machines, tools, or labor.
What is Manufacturing?
When a manufacturer uses a middleman to get products into stores, they’re using this type of distribution.
What is an Indirect Distribution Channel?
This type of distribution involves using intermediaries like wholesalers or retailers to get products to consumers.
What is Indirect Distribution?
This term describes the entire process of acquiring goods and services — from selecting suppliers to payment.
What is Procurement?
These costs change with production levels — for example, raw materials or hourly wages.
What are Variable Costs?
This type of production creates large quantities of standardized products quickly and efficiently.
What is Mass Production?
After an order arrives, this step involves checking and accepting the goods to ensure they match what was ordered.
What is Receiving?
This business buys goods in bulk from producers and resells them, often to retailers.
What is a Wholesaler?
This step in the purchasing process involves accepting and inspecting goods to ensure they match the order.
What is Receiving?
Calculated by subtracting the cost of goods sold from total revenue, this figure shows how much a company earns before expenses.
What is Gross Profit?
When products are made to meet the specific needs of an individual customer, this type of production is used.
What is Custom Production?
The full process of acquiring goods and services.
What is procuring or procurement?
This business buys goods in bulk from producers and resells them, often to retailers.
What is a Wholesaler?
This represents the stock of materials or products a business keeps on hand for use or resale.
What is Inventory?
This type of expense covers everyday business needs like utilities, supplies, and administrative salaries.
What are Operating Expenses?
This term measures how efficiently inputs like labor and materials are turned into outputs.
What is Productivity?
The efficiency of combining labor, materials, and capital to create goods.