Factory Gate pricing Essay Example | Topics and Well Written Essays - 1750 words

Factory Gate pricing - Essay Example either directly to the stores or to his retail ware houses. The retail got the finished goods at reduced prices than before. Prior to the implementation of the FGP the supplier used to incur the transportation costs and the retailers the inventory costs at the warehouses. The factory gate pricing give the option to reduce the investment cost on maintaining the inventory for the distribution centre at times as the retailer will have he option to transport the goods directly to the shops. The retailer has the option of making the entire supply chain operations under one roof. FGP brings the control of primary transportation from the factory to distribution centers and inventory into one hand which likely leads to generate cost savings operations. In addition FGP offers two other sources for savings. Firstly, retailers generally have a vast product range for which they can make the transportation-inventory trade-off at one point of time. The orders from different suppliers that are located close to each other may be synchronized in time, such that they can be combined in the same vehicle route. Secondly, under FGP, primary and secondary distribution can be integrated and can be handled by one single entity. The supply chain initiative can be improved by optimizing the usage of space by the retailer by using the same vehicle to deliver the goods to the shop and to the distribution centre on one single trip.Significance of factory gate pricing The significance of FGP is that it removes traditional geographic transport boundaries where an assigned logistics provider controls all vehicle movement within a particular region for a... The significance of FGP is that it removes traditional geographic transport boundaries where an assigned logistics provider controls all vehicle movement within a particular region for a retailer. Better vehicle utilization as suppliers shares vehicles in order to reduce costs by sharing the space with the vehicles. Removal of uneconomical vehicle movements through combining additional products from different sources to ensure every lorry is full when it sets out on its delivery route. Benefits of implementing factory gate pricing. The benefits of factory gate pricing are Effective Transportation as the retailer is involved with the supplier and the time for transportation reduces to a considerable extent. Effective transportation may lead to Improved Availability of the goods in the stores and sustainable stock can be maintained in the shops. The decrease in transport costs leads to reduced prices on the finished goods. Environmentally it will be a positive aspect as the vehicles wi ll fully carry the goods of different supplier thus reducing the repeat trips to the same route thus reducing the vehicular traffic which results in reduced air pollution. Collaborative Planning, Forecasting and Replenishment â€Å"CPFR is the sharing of forecasts and related business information among business partners in the supply chain to enable automatic product replenishment†. CPFR is designed to link the supply and demand processes allowing for a more consumer driven supply chain. CPFR aims to seamlessly link the industry from manufacturer to consumer.