On Dec 30, 8:04*am, "HeyBub" wrote:
mm wrote:

Not about garage doors or doors or Home Depot or really big chains or
home improvement stuff, but in general, I've wondered for a long time
about the "cutting out the middle man" thing.

Doesn't this sometimes mean more work for the vendor, and so he
charges middleman prices instead of true wholesale prices? *Or
something in between the two, and whether it really makes more work
for him or not?

If the "middleman" was not an efficient mechanism, it wouldn't be used.

The vendor probably will not charge "middleman" prices to an end user
because his costs are not the same. Imagine a publisher that sells 5,000
copies of a new book, "Collecting Locomotives for Fun & Profit."

If the publisher puts all 5,000 copies on pallets and ships them to a book
wholesaler, the publisher has one set of costs. If, however, the publisher
sells five copies each to a thousand bookstores, he's got an entirely
different set of expenses.

I'm not sure if I'm following your logic correctly - not that I'm
disagreeing it - but I'm not sure that it fits the borg situation.

Normal Use of Middleman Mechanism:

1 - ACME Roofing puts 500,000 bundles of shingles on pallets and ships
them to MRW Inc. (MiddleMan Roofing Wholesalers)
2 - MRW ships 1000 bundles to each of 500 Home Depot locations

Alternative Use of Middleman Mechanism:

1 - ACME Roofing puts 500,000 bundles of shingles on pallets and ships
them to MRW Inc. (MiddleMan Roofing Wholesalers)
2 - MRW ships an average of 50,000 bundles to each of 10 Home Depot
Regional warehouses
3 - Each Home Depot warehouse ships an average of 1000 bundles to each
of 50 Home Depot locations

Elimination of Middleman Mechanism:

1 - ACME Roofing puts 500,000 bundles of shingles on pallets and ships
them to 1 national Home Depot warehouse
2 - That warehouse ships an average of 50,000 bundles to each of 10
Home Depot Regional warehouses
3 - Each Home Depot regional warehouse ships an average of 1000
bundles to each of 50 Home Depot locations

In other words, Home Depot is acting as it's own middleman. With
economies of scale, this can be more cost effective than using MRW
Inc. It even gives Home Depot the opportunity to be the middleman for
other stores. I'm not saying they are doing this, but the opportunity
exists.

It's similiar to what my School District is planning to do with for
transportation services next year. We currently contract with XYZ
Transportation for bus services. We currently cover all costs of XZY
to provide those services (gas, maintenance, storage, salaries, etc.)
plus they make a profit. Starting next year, our school district will
puchase our own busses, build our own depot and provide transportation
services "in-house". We're paying XYZ for everything anyway, *plus*
paying XYZ's profit, so by doing it ourselves, we save the cost of the
profit. In addition, we have an agreement in principal with 2 smaller
school districts in our area to provide transportation services for
them - at cost plus a smaller profit than they are currently paying
their provider. They save money, we offset some of our costs as well
as control the use of the services without having to deal with XYZ
every time a one-off transportation need arises.

Similiarly, Home Depot can switch suppliers or product lines without
having to go through MRW. They can fire ACME or increase their
shipments or whatever much more efficiently without MRW in the middle.