Factory Gate Pricing

Factory Gate Pricing is receiving a lot of attention. Strictly speaking it is a name for a mechanism to determine the price of goods, without taking into account transportation costs.

Traditionally this is known as ‘ex factory’ (or ‘ex works’). However, the term has a much broader meaning. Factory Gate Pricing is about reversing control: the retailer takes over responsibility for management of the primary transport – from manufacturer to retailer – from the manufacturer. So it is a form of Service Based Pricing.

Involvation conducted a study on Factory Gate Pricing in collaboration with Nederland Distributieland (NDL).

In this study we collaborated with managers from practice as well as with several academics. The logistics managers of Coop Codis, Dekamarkt, Jumbo, Superunie and Kwantum represented the practical side. The academic contributions came from prof.dr.ir. Jos Vermunt (deputy director of NDL), prof. dr. René de Koster (Erasmus University) and prof.dr.ir. Hein Fleuren (CentER Applied Research, Tilburg University).

In the study we have focussed on the following issues:

  1. What is the potential of Factory Gate Pricing for a Dutch supermarket chain? Is it possible to work out this potential in practice?
  2. For which chains, chain parties and parts of the product range is Factory Gate Pricing suitable; which opportunities and bottlenecks are involved?
  3. When and to what extent would it be interesting to pick up this concept together with multiple chains/retailers? Which forms of cooperation could be formed for this?
  4. Which concrete changes would be needed with regard to processes, management, systems and organisation to be able to implement Factory Gate Pricing? A distinction is made between implementation with a single retailer versus combined implementation with multiple retailers.

We would be happy to arrange a workshop for you on Factory Gate Pricing.

Growth creates complexity, which requires simplicity
Andy Stanley