Intermediate goods - Semi finished Goods
Intermediate goods is that stage in the life cycle of a goods which is in between the raw material stage and the finished goods stage. In other words, intermediate goods are semi finished goods.
It may not be known to all that there is a huge demand for intermediate goods. Many manufacturers use intermediate goods as the raw material for their final product and there are number of suppliers who add some value to the raw materials but doesn’t produce the final or end product.
Understanding with an Example
Suppose A is the raw material and C is the final product.
To produce C from A , first A has to be converted to B and then B has to be processed to produce C.
The process of producing B is completely different from that of producing C.
The process adopted, the machines, the technology, the expertise, everything may be different. The promoters may face limitations in terms of capital, manpower, expertise, etc in producing C from A.
In such cases, there may be a firm which produces B from A and sell B to a firm which produces C from B.
By doing so, they are able to optimally utilize the assets or resources at their disposal.
This can speed up the production process too.
