Putting –out system-weavers producing cloth at home: The merchant distributes work among the weavers based on the orders he has received for cloth. The weavers get the yarn from the merchant and supply him the cloth. For the weavers, this arrangement seemingly has two advantages. The weavers do not have to spend their money on purchase of yarn. Also, the problem of selling the finished cloth is taken care of.
However, this dependence on the merchants both for raw materials and markets means that the merchants have a lot of power. They give orders for what is to be made and they pay a very low price for making the cloth. The weavers have no way of knowing who they are making the cloth for or at what price it will be sold. At the cloth market, the merchants sell the cloth to the garment factories. In this way, the market works more in favors of the merchants.
The arrangement between the merchant and the weavers is an example of putting –out system, whereby the merchant supplies the raw material and receives the finished product. It is prevalent in the weaving industry in most regions of India.
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