August 2003 Factory Gate Pricing Aids Availability by Nick Wright Factory Gate Pricing (FGP) has worried many suppliers and there has been a tendency to jump to the worst conclusions about this latest retailer initiative. However, there are a number of potential upsides to be realised by suppliers large and small. One of these is improved on-shelf availability. The potential of FGP to help improve on-shelf availability comes from 2 main sources. First, the mere fact of a single organisation (the retailer) taking control all the way from factory gate to supermarket shelf is, of itself, likely to lead to improvements in on-shelf availability. Joined-up systems generally work better. Second, the serious investment being made by the retailers in processes and systems will simply leave many current operations standing. For many suppliers, a very small increase in on-shelf availability, and hence sales, would more than offset the profit lost due to factory gate pricing. The first task is to assess the level of increased sales which would offset the profits lost in the change. The second is to identify how best to make your supply chain operations mesh with those of the retailer under the new regime. Factory gate pricing is here to stay. The challenge now is to turn it to advantage in the pursuit of better on-shelf availability.

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