1 intermediaries arise in the process of exchange

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1. Intermediaries arise in the process of exchange because they can improve the efficiency of the process. Since the location of supply and demand points are at widely different locations, there is the need for physical movement of products. The demand of consumers at different geographical locations are intermittent and smaller in quantity, prohibiting individual customer specific transportation. This is referred to as spatial discrepancy. Mass consumed products are to be produced and stocked in advance to cater to the demand. This difference in line of production and consumption are referred to as temporal discrepancy which requires for risk of inventory stocking. There is a variation in quantities and assortment demanded. The producers produce large quantities of an item while the individual consumer purchases a limited quantity of wide variety of items at a given point of time. So to facilitate exchange specific quantities and unique assortments must be built up from the product range. This is the discrepancy of quantity and assortment in the exchange process. The other factor is the buyers intention to buy on the believe that right products are available at right quantities and at desired assortments. This does not guarantee an exchange. 2. Channel intermediaries arise to adjust the discrepancy of assortment and through the performance of sorting processes. The Sorting function is necessary to bridge the discrepancy between the assortment of goods and services generated by the producer and demanded by consumer. This discrepancy arises out of the fact that manufacturers typically produce a large quantity of limited variety of goods whereas consumers usually desire only a limited quantity of wide variety of goods. The sorting function performed by intermediaries include the following activities. a) Sorting out: It involves breaking down a heterogeneous supply into separate stocks that are relatively homogeneous. For example, separating the potatoes from the supply of vegetables to a restaurant. b) Accumulation: It involves bringing similar stocks from a number of sources together into a larger homogeneous supply (Wholesalers Annamalai University
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166 accumulating various goods for retailers and in turn, retailers for consumers). c) Allocation: It involves breaking a homogeneous supply down into smaller and smaller lots. Goods received in car loads are sold in case lots. d) Assorting: It involves building up the assortment of products for resale in association with each other. While sorting out and accumulation predominate in the agricultural marketing, allocation and assorting are marked in finished goods. 3. Marketing agencies group together in channel arrangements to provide for the reutilization of transactions. Every transaction involves ordering of, valuation of and payment for goods and services. The seller and buyer must agree to the mode, amount and timing of payment. The cost of distribution can be minimized if the transactions are reutilized. This process facilitates the development of exchange system.
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