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Describe the differences between (a) a manufacturer, (b) a wholesale distributor, and (c) a retailer.

Short Answer

Expert verified
Manufacturers produce goods, wholesalers distribute in bulk, and retailers sell directly to consumers.

Step by step solution

01

Define a Manufacturer

A manufacturer is a business or entity that produces goods or products from raw materials. They use labor, machines, tools, and chemical or biological processing to transform raw materials into finished goods. Manufacturers are the first step in the supply chain, as they create the final form of products that will be sold to consumers or further along the chain.
02

Define a Wholesale Distributor

A wholesale distributor purchases goods in bulk from manufacturers and resells them to retailers or other businesses. The main role of a wholesale distributor is to break bulk—that is, to buy large quantities of items from manufacturers and sell smaller quantities to retailers, thereby streamlining the distribution process. Wholesale distributors do not typically sell directly to the general public.
03

Define a Retailer

A retailer is a business that sells products directly to the general public or end consumers. Retailers purchase products from wholesalers or manufacturers and offer these goods in smaller quantities through physical or online stores. They are the last step in the supply chain and interact directly with the customers to sell the goods in their final market-ready form.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Manufacturer
A manufacturer plays a crucial role in the supply chain as they are responsible for creating goods from raw materials. Think of them as the starting point for products that eventually reach consumers. Manufacturers apply labor, machinery, and sometimes complex chemical or biological processes to piece together raw components into a complete item ready for sale. Whether it's assembling a car, making electronics, or creating packaged food products, manufacturers make sure that the items are in their final form before moving on to the next step in the supply chain.

Manufacturers engage in large-scale production to optimize efficiency and cost-effectiveness. By doing so, they can benefit from economies of scale, reducing the cost per unit through mass production. These productions can range from high-tech industries such as electronics and automobiles to simple produce like household goods and clothing.

Overall, manufacturers are essential for the creation and initial supply of goods essential for retailers and consumers alike.
Wholesale Distributor
Wholesale distributors are an integral intermediary in the supply chain, positioned right after the manufacturer and before the retailer. Their main job is to purchase large quantities of products from manufacturers and sell them in smaller amounts to retailers or other entities. This process, known as 'breaking bulk,' enables retailers to access a wide range of products without needing to purchase large, impractical quantities.

Distributors store, manage, and transport goods effectively, ensuring that products are delivered efficiently and at a reduced logistical cost. They have networks and infrastructure that allow them to manage large volumes of goods, coordinate with various manufacturers, and maintain a supply ready to meet retail demands.

However, unlike retailers, wholesale distributors typically sell to businesses and not directly to consumers. They streamline the transition of goods through the supply chain, ensuring that retailers have a consistent supply of products ready for sale.
Retailer
Retailers are the final link in the supply chain, bringing products to consumers through physical or online stores. They purchase goods from wholesalers or directly from manufacturers, offering them in smaller, consumer-friendly quantities. This makes products accessible to individuals, who can buy what they need without concern for storage or excess.

Retailers focus on customer service, product assortment, and engaging shopping experiences to attract and retain customers. They act as the interface between the product and the consumer's needs, ensuring the right products are available at the right time and place. This might include providing support services, installing products, or offering after-sales support.

The role of retailers is pivotal, as they interpret consumer trends and demands directly, guiding the rest of the supply chain on what products to produce and supply next. Whether through neighborhood shops, large department stores, or online platforms, retailers are where the consumer completes their purchasing journey.

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Most popular questions from this chapter

Journal Entries for Merchandise Transactions-Periodic System Drake Company was established on July 1. Its sales terms are \(2 / 10, \mathrm{n} / 30\). Credit terms for its purchases vary with the supplier. Selected transactions for the first month of operations are given below. Unless noted, all transactions are on account and involve merchandise held for resale. All purchases are recorded using the periodic inventory system. July 1 Purchased goods from Dawson, Inc., \(\$ 3,500 ;\) terms \(1 / 10, n / 30\). 2 Purchased goods from Penn Company, \(\$ 5,100 ;\) terms \(2 / 10, n / 30\). 3 Paid freight on shipment from Dawson, \(\$ 200\). 5 Sold merchandise to Ward, Inc., \(\$ 1,700\). 5 Paid freight on shipment to Ward, Inc., \$80. (Hint: debit Delivery Expense) July 8 Returned \(\$ 300\) worth of the goods purchased July 1 from Dawson, Inc., because some goods were damaged. Dawson approved the return. 9 Received returned merchandise from Ward, Inc., \$200. 10 Paid Dawson, Inc., the amount due. 10 Purchased goods from Dom Company with a price of \(\$ 2,200\). Terms \(2 / 10, n / 30\). 11 Paid freight on shipment from Dorn Company, \(\$ 130\). 15 Received the amount due from Ward, Inc. 15 Sold merchandise to Colby Corporation, \(\$ 4,200\). 16 Mailed a check to Penn Company for the amount due on its July 2 invoice. 18 Received an allowance of \(\$ 100\) from Dorn Company for defective merchandise purchased on July \(10 .\) 19 Paid Dorn Company the amount due. 25 Received the amount due from Colby Corporation. Required Prepare the necessary journal entries for Drake Company.

Journal Entries for Merchandise Transactions on Seller's and Buyer's Books- Periodic System Fame Distributing Company had the following transactions with Arlington, Inc., during November: Nov. 10 Fame sold and shipped \(\$ 8,000\) worth of merchandise to Arlington, terms \(2 / 10, n / 30\). 12 Arlington, Inc., paid freight charges on the shipment from Fame Company, \(\$ 450 .\) 14 Fame received \(\$ 850\) of merchandise retumed by Arlington from the November 10 sale. 19 Fame received payment in full for the net amount due on the November 10 sale. 24 Arlington returned goods that had originally been billed at \(\$ 700\). Fame issued a check for \(\$ 686 .\) Required Prepare the necessary joumal entries (a) on the books of Fame Distributing Company and (b) on the books of Arlington, Inc. Assume that both companies use the periodic inventory system.

Cost of Goods Sold and the Periodic System Kuyu Company uses the periodic inventory system. Kuyu started the period with \(\$ 12,000\) in inventory. The company purchased an additional \(\$ 25,000\) of merchandise, and retumed \(\$ 1,500\) for a full credit. A physical count of inventory at the end of the period revealed that there was an ending inventory balance of \(\$ 6,000\). What was Kuyu's cost of goods sold during the period?

Journalize Periodic Inventory Entries Prepare the journal entries to record the following transactions for the Kristen Company using a periodic inventory system. a. On June 2, Kristen purchased \(\$ 250,000\) of merchandise from the Ferway Company with terms, \(3 / 15, n / 30\). b. On June 5 , Kristen returned \(\$ 50,000\) of the merchandise purchased on June 2 . c. On June 13, Kristen paid the balance due to Ferway.

Journal Entries for Sale, Return, and Remittance-Periodic System On March 10, the Stone Company sold merchandise listing for \(\$ 3,000\) to the Dillard Company with terms of \(1 / 10, n / 30\). On March 14, \$200 of merchandise was returned because it was the wrong size. On March 20, Stone Company received a check for the amount due. Required Prepare the journal entries made by Stone Company for these transactions. Stone uses the periodic inventory system.

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