Factory Gate Pricing (FGP) is a relatively new phenomenon in retail distribution . Under FGP product are no longer delivered at the retailer distribution centre ,but collected by the retailer at the factory gates of the suppliers. Owing to both the asymmetry in the distribution networks & the better inventory & transport coordination mechanisms this is likely to result in high saving.

1. FACTORY GATE PRICING

2. INTRODUCTION
 Factory Gate Pricing (FGP) is a relatively new phenomenon
in retail distribution .
 Under FGP product are no longer delivered at the retailer
distribution centre ,but collected by the retailer at the
factory gates of the suppliers.
 Owing to both the asymmetry in the distribution networks
& the better inventory & transport coordination
mechanisms this is likely to result in high saving.

3. DEFINITION
 Factory gate pricing (FGP) is a modern replenishment
method aimed at removing unnecessary transportation
costs & improving the efficiency of the supply chain .
 It involves retailers asking their suppliers to provide
products at ‘factory gate prices’ ,i.e. product costs
exclude the cost of delivery to the retailer.

4. PLANNED IMPLEMENTATION
 Long term investment in infrastructure to be reviewed
 Improve cost accounting systems
 Be transparent in production costs, inventory holding
costs , transport cost
 Ensure accurate operations measurements
 Product Damages & Origin
 Vehicle Utilization
 Start measuring retailer collections.

5. PLANNED IMPLEMENTATION
Consider the future
 Own network vs. retailer networks vs. planned changes.
 Expansions
 Order profiles

6. THE BENEFITS OF FGP
 Efficient transportation
 Improved availability
 Lower prices for consumers
 Environmental

7. When to use it
 FGP is especially appropriate when the number
of suppliers in the supply chain is far greater
than the number of retailers .
 It is the ratio of the number if dispatching
points(supplier locations) & the number of
delivery points(retailer locations)that matters.

8. How to use it
Companies that are potentially interested in adopting
FGP should ask:
1. Whether a reduction of delivery frequency is possible, &
2. Whether transferring the responsibility for transportation
leads to cost advantages or service improvements.
3. The transport flexibility of the retailer.
4. The characteristics of the products.

9. FINAL ANALYSIS
 A retailers incentive to participate in FGP is the increased
purchasing power & various economy-of-scale advantages.
 Suppliers ,on the other hand , are generally not content with
these development and are reluctant to participate in FGP
 Arguing that the associated increased (price) transparency
weakens their negotiating position.
 The absence of a fair mechanism for reallocating synergetic
advantage impedes the introduction of FGP , as it prevents
the creation of trust.

10. THANK YOU