Factory gate pricing

FACTORY GATE PRICING (FGP)

1. Definition.

FGP involves identifying the component costs of a product and then separating the transport element. The costs include raw materials, labelling andpackaging, marketing, labour, transport, etc.
With FGP goods are no longer delivered to the retailer distribution centres (DC). Instead retailers collect the goods at the “factory gates”. Due toasymmetry in the networks and better coordination between inventory and transportation costs, this is likely to result in lower supply chain costs.
FGP enables the supply chain partners to know the valuethat has been added at every stage of the process along the supply chain, with Open Book Costing (OBC) the supply chain partners can see which process has added value to the product, and ActivityBased Costing identifies the cost of each activity.

No Factory Gate Pricing situation

In a general retail supply chain, suppliers perform the primary transport of goods to one or more retailersDC’s


In a FGP situation retailers are in control of the primary transport. The retailer can determine the timing of replenishment and plan the pickup routes visiting multiple suppliers. In additionretailers also control the coordination of both the primary and secondary distribution.

COLLABORATIVE PLANNING, FORECASTING AND REPLENISHMENT (CPFR)

CPFR is a business practice that combines theintelligence of multiple trading partners in the planning and fulfilment of customer demand. CPFR links sales and marketing best practices, such as category management, to supply chain planning andexecution processes to increase availability while reducing inventory, transportation and logistics costs.
CPFR is the latest program to be developed from Efficient Consumer Response (ECR). Theconcept requires retailers and manufacturers to agree on sales forecasts for a given period based on sales history, promotion plans, and other significant data in order to establish present order...