More than half of Scottish suppliers have little or no knowledge of factory gate pricing (FGP) which could leave many of them at a severe disadvantage unless they take steps now to address the situation, a new report by Scottish Food & Drink reveals.
FGP is being driven by the big grocery chains. It entails the retailers collecting products directly from their suppliers’ premises and integrating the distribution into their existing network, thereby improving supply chain efficiency and driving down costs. However, the practice can have an impact on suppliers’ margins.
According to the report, many Scottish suppliers believe that the introduction of FGP will have no implications for their business. Only 13% of suppliers are engaged in FGP. Scottish Food & Drink logistics project manager Heatha Anderson says: “There is certainly an attitude of ‘it won’t happen to me’, with many companies putting their head in the sand. Almost one third says it would not affect their business – despite most suppliers anticipating that the volume of factory gate pricing would increase in the next six months and impact the whole industry.” She continues: “The majority of suppliers felt that factory gate pricing is here to stay and that most retailers will introduce factory gate pricing as a way of working. They see it becoming fully integrated into retailer and supplier operations.”
Scottish Food & Drink commissioned
the research, carried out by IGD, to
establish the suppliers’ perception of
the issues currently affecting the
distribution of food products, in particular the FGP initiative. The
company says the findings will be used
to shape the support and initiatives