If the wholesaler is eliminated, the manufacturers will face the following difficulties:
(a) Unable to facilitate large scale production: If the wholesaler is eliminated, manufacturers will not be able to collect small orders from number of retailers and undertake purchases in bulk quantities.
(b) Unable to bear risk: The wholesale merchants deal in goods in their own name, take delivery of the goods and keep the goods purchased in large lots in their warehouses. They bear lots of risks such as the risk of fall in prices, theft, pilferage, spoilage, etc. In their absence, manufacturers will have to assume such risks.
(c) No Financial assistance: The wholesalers provide financial assistance to the manufacturers in the sense that they generally make cash payment for the goods purchased by them, hence, reducing the working capital requirement of manufacturer. In their absence, a large part of the manufacturer’* working capital will remain blocked till all goods are sold.
(d) Lack of Expert advice: If the wholesaler is eliminated, manufacturers will not remain updated about the changes customers’ tastes and preferences, market conditions, competition, etc. this information which is essential for regulating production will not be available.
(e) No help in marketing function: By collecting orders from retailers and supplying goods to them, the wholesaler allows the manufacturer in concentrating on production rather than marketing activities. In absence of wholesalers, the manufacturers will need to market products as well.
(f) Unable to facilitate continuity: The wholesalers facilitate continuity of production activity throughout the year by purchasing the goods as and when these are produced. In their absence, the manufacturers will need to regulate and control production in lean season.
(g) Storage: If the wholesaler is eliminated, manufacturer will face the problem of storing goods. They will need to arrange for storage of goods from production till actual demand season, by engaging warehouses on their own.
