I. Executive Summary.
Channels of distribution are critical to the success of a manufacturer. A well designed channel creates time, place and ownership utility for the consumer and can augment the manufacturer's product. Distribution channels may move product directly from the manufacturer to the consumer, or make use of intermediaries between the manufacturer and the consumer.
This report consists of two parts: Part 1 explains some of the major concepts relating to distribution channels, and Part 2 relates the findings of a case study of the computer industry. The first section of the case study explores Dell's use of direct channels and Compaq's use of indirect channels in Canada. We will see how Dell uses the direct model to easily allow the customization of computers for consumers, and how the direct model allows Dell to operate with very little inventory through the use of a just-in-time inventory system. Compaq uses indirect channels to utilize the ability of its wholesalers to efficiently move its computers from its manufacturing plant to retailers where customers expect to be able to shop for computers.
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