What effect does adding a distributor as a channel between manufacturers and retailers have?

Adding a distributor as a channel between manufacturers and retailers primarily leads to a decrease in transportation costs. This occurs because distributors can consolidate shipments, reducing the number of individual deliveries that need to be made directly from manufacturers to retailers. Instead of each manufacturer having to ship separately to multiple retailers, the distributor can receive bulk shipments from several manufacturers and then break them down for more efficient delivery to retailers. This consolidation minimizes the frequency and complexity of shipping, which typically results in lower transportation costs overall.

Furthermore, the role of the distributor can streamline logistics, as they often have established routes and infrastructure to manage transportation efficiently. This efficiency can lead to economies of scale, thus reducing overall costs related to transportation and logistics in the supply chain.