The Three Types of Intermediary

Systems Economics Lexicon · Reading the Enterprise Barcode

Intermediaries in the Enterprise Barcode split into three types, each coded by what the intermediary actually does with the product — not by industry or size.

Intermediary With Inventory applies when the intermediary is a counter-party to the transaction — it takes possession of the product before passing it on. Macy’s buying clothing from a manufacturer and reselling it is the book’s clearest case; The Goodyear Tire & Rubber Company selling through an independent auto parts shop is another. Some With Inventory intermediaries modify the product before it moves on — BorgWarner’s car parts, incorporated by General Motors into a finished car, make GM an intermediary rather than a customer, because GM uses BorgWarner’s product as an input to build something new, not as a subject resource in its own right. The type also covers agents that rent or lease a product instead of selling it, and — in one specific case the book names — healthcare providers acting as intermediaries in the distribution of surgical implants.

Agent Intermediary applies when the intermediary serves a networking function, connecting two parties who want to transact, without ever taking inventory. Expedia and Priceline are the book’s example: they broker hotel and airline bookings without the booking ever touching their own balance sheet. eBay, real estate developers, and asset managers show the same pattern — a broker or platform enabling a connection, not taking possession of anything.

Payer Intermediary applies when the intermediary subsidizes or otherwise pays the enterprise, making the product easier for the customer to access — usually in exchange for something else from the enterprise. Advertisers paying media producers so consumers get content for free are the clearest case; an employer or government paying for health insurance on a policyholder’s behalf works the same way.

One deliberate omission from the barcode is worth knowing: shipping and transportation companies qualify as intermediaries by definition, but the book excludes them anyway. They’re so pervasive — appearing in nearly every barcode — that including them would add noise rather than distinguish one product line from another.

See also: Economic Agents in the Locus Model’s Enterprise Barcode · Co-Customer

Part of Reading the Enterprise Barcode, course 4 of 7 in the Locus Theory series. For the full term-by-term specification, see the Lexicon.