Analysis of factory gate pricing in the UK grocery supply chain

Purpose – The paper aims to analyse the reasons behind the leadership shown by a case study retailer through the introduction of factory gate pricing (FGP) within the grocery sector. Further, there is an evaluation of the transport management techniques used to support FGP and the operational benefits gained. Design/methodology/approach – The research is based around a single case study of a UK grocery retailer, which has adopted FGP. A range of data sources has been collected during a project with the retailer. Techniques used include process mapping, interviews, workshops and company presentations. Findings – Strategically, the introduction of FGP has provided economies for the retailer strengthening its position in the market. Four main transport management techniques have been deployed to achieve this, generating reductions in transport and inventory costs while improving customer service levels. There are also some issues that need addressing, in relation to the need for a single point of control, who manages this point and the technological capabilities of transport providers. Research limitations/implications – Only a single case study is presented, and the research was carried out during the early phase of implementation. Practical implications – FGP requires a certain degree of scale to be effective, and should complement current processes within a business. There is a need to manage relationship issues with suppliers and transport providers. Originality/value – The paper presents a detailed case study of FGP within the grocery sector, which is more complex than previous application of the concept. The strategic rationale for pioneering FGP is considered, along with its tactical deployment and operational benefits. Concerns are also highlighted, to provide a balanced evaluation.