Final answer:
The number of channel members at each level of the supply chain is known as distribution intensity, which is central to a company's distribution strategy and can range from intensive to exclusive. This concept is connected to economies of scale, where increased production leads to lower average costs, influencing distribution strategies for stores like Costco or Walmart.
Step-by-step explanation:
The number of channel members to use at each level of the supply chain is referred to as distribution intensity. This concept is all about how widely a product is distributed and the strategy a company chooses for getting its products to the end consumer. It can vary from intensive distribution, where a product is stocked in as many outlets as possible, to exclusive distribution, where it is only available in select outlets. The choice of distribution intensity will depend on factors such as the type of product, the target market, and the company’s overall marketing strategy.
In the context of optimal scale of production and economies of scale, understanding the most efficient level of production is key to minimizing costs and maximizing profits. For instance, warehouse stores like Costco or Walmart operate on the principle of economies of scale, where a larger factory can produce at a lower average cost than a smaller factory, hence they often use an intensive distribution strategy to reach a wide customer base and capitalize on reduced costs.