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Marketing Channels - Essay Example

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The factory gate is the point at which the product is fully assembled and ready to be sent to the retailer's distribution center (Factory Gate Pricing 2004). Under FGP, the retailer takes over the primary distribution from the supplier which means the retailer no longer has to pay the cost of transportation that was previously included in the price the supplier charged for product. The retailer buys the product "at the factory gate" and arranges transport. Instead of several separate vehicles making delivery to a central point, one vehicle can make several stops to pick up goods from suppliers in a specific geographical area. Also, goods can be collected at port of entry into the UK which will cost less, and collecting goods at a manufacturing site located outside the UK could create additional savings.
FGP has been in use in the UK by a number of grocery retailers and, as stated earlier, offers component costs of product with transportation costs separated. According to Scottish Food and Drink, there is a lack of knowledge about FGP among suppliers, but the majority of those suppliers using FGP have had a positive experience and believe it is here to stay (How Do I 2004). According to them, certain areas need exploration in deciding whether FGP is the right solution.
According to Potter (2003), FGP was first introduc...
Understanding supply chain costs
Having thorough understanding of logistics operations
Putting cross-functional teams in place
Making top-level commitments between organisations, for instance, CEOs
Once these factors have been considered and FGP is put in place, it becomes obvious that transportation costs are a key area of concern.
Effect on Supply Chain Partners and Customers
According to Potter (2003), FGP was first introduced in the UK by the fashion and automotive sectors in order to establish organisation and optimisation of transport by purchaser to point of delivery. Applying FGP in the UK grocery sector, however, is probably its most complex application. Tesco was the first to implement it, then Sainsbury's, Asda and Carrefour. A Tesco case study realized the following FGP benefits:
1. Reduction in transport miles
2. Reduction in transport costs
3. Supply chain visibility
Aware of orders being placed on suppliers
Analyses of the extra costs of demand amplification
on transport
Better use of transport through backloading
Higher service levels
The more consolidation, the more savings on wider scale Potter, p. 20

Collaborative Planning, Forecasting and Replenishment: What Is It
According to the Grocery Manufacturers association, collaborative planning, forecasting and replenishment (CPFR) is a revolutionary business process wherein trading partners use technology and a standard set of business processes for Internet-based collaboration on forecasts and plans for replenishing product (Collaborative Planning 2002, par. 1). Because it is a new process within the industry, intended to develop a collaboration strategy among trading partners, a study was undertaken by GMA outlining basic tenets ...Show more

Summary

In the food industry, distribution becomes more important than in most other industries. Some of the reasons for this are shorter life cycles for goods and an increasing need for freshness of product. Retail grocery chains are under pressure because suppliers outnumber retail distribution centers. In an effort to cut costs, both suppliers and retailers are looking into new ways of moving product.
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