Intermediaries serve an important purpose as they make it possible for companies to deliver their products to the end user without the need to own or control the entire supply chain. The use of intermediaries also helps to serve the critical functions of reducing transaction costs, along with diversifying risks and exposures associated with transporting goods.
Problems can obviously occur during transit, and so there is a need for protection in the form of insurance for supply chain intermediaries. Distribution of goods takes place by means of channels, and those intermediaries are basically the independent companies or organizations within the channel that make products available for consumption.
Supply chain agencies and the types of risks they face
The number of transit risks, all of which can be quite costly, can include all types of incidents, including:
- Rough handling of goods resulting in damage
- Non-delivery due to jettison (the act of casting goods from a vessel or aircraft to lighten or stabilize it), and
- Natural disasters, just to name a few
There are four main types of intermediary: agents, wholesalers, distributors, and retailers.
A firm may have many different intermediaries in its distribution channel, or it can have no intermediaries, preferring to distribute through direct marketing.
Agents or brokers are individuals or companies that act as an extension of the manufacturing company whose main job is to represent the producer to the final user in selling a product, While wholesalers take title to the goods and services that they serve as intermediaries for, they’re independently owned and own the products that they sell, always buy in bulk, and store the products in their own warehouses until it’s time to resell them to other intermediaries. Thus, they don’t operate on a commission system as agents do.
On the other hand, distributors align themselves to complementary products and therefore can maintain a closer relationship with their suppliers than wholesalers do. Retailers, from smaller entities like mom and pop store’s, to large chains like Target and Walmart, purchase products from market intermediaries and sell them directly to the end user for a profit. Having insurance for supply chain intermediaries helps cover any losses for those intermediaries who cannot deliver on time, or experience issues or incidents that results in a loss of cargo.