The Factory Gate Price Challenge
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A Totally New Commercial Proposition
Differing commercial approaches by retailers to the handling of inbound stock illustrate the pressure which suppliers will experience to respond differently to their various customers and the differing ways in which cost information will need to be used to negotiate new charges, rebates, prices and trading terms.
While Primary Freight Transport charges are little different structurally from suppliers’ current transport arrangements, Factory Gate Pricing is a totally new commercial proposition. Effective Factory Gate Pricing strategy will require an in–depth understanding of the average embedded cost of transport for each SKU sold nationally. This involves allocating per–load transport charges back to the SKUs in each shipment, aggregating to national level and allocating a transport component to the national delivered price of the SKU.
However, there can be only one Factory Gate Price, for a given service offer. Suppliers’ pricing and trading terms strategy will have to direct where the Factory Gate Price will be set and how each customer’s trading terms will be adjusted to compensate for the fact that each individual customer’s transport cost will be different from the transport component removed from your FIS price to establish a universal Factory Gate Price.
With experience on both the retailer and supplier side of the Primary Freight and Factory Gate initiatives and using the Profit Impact Model, Focus is uniquely well placed to help you navigate through the PF/FGP maze, with confidence.