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Category Archives: Dictionary of Logistics

Logistics Terms and Definitions

Factory Gate Pricing (FGP)

Factory Gate Pricing (FGP) is an approach to purchasing goods, under which (low) ex-works purchasing prices are agreed for products, and the buyer is responsible for arranging the transportation of the product from the supplier to the delivery points. Typically, the customer is also responsible for insuring the products against damage during transit.

FGP requires and leverages efficient transport systems of (large) buyers (alternately a large 3PL can also be used). This is why Factory Gate Pricing is popular in retail and automotive environments. Big retailers and car assemblers can combine primary Less Than Truckloads shipments from several suppliers into Full Truck Loads. Such primary distribution can even be combined with secondary distribution (shipments from distribution centers or assembly plants to retail outlets). This combination is called “Backhauling“.

The main benefits of Factory Gate Pricing are:

  • Lower distribution costs (through efficient combined transportations, better control and coordination, centralized information).
  • Increased supply chain visibility for retailers.
  • Enables lower inventory levels and improved availability (Just-in-time, Efficient Consumer Response).
  • Vertical Integration.
  • Increases barriers to entry for new entrants through being more efficient.
  • Decreases the bargaining power of suppliers through decomposing the product price.
  • Transport Economies of Scale through backhauling. Better Capacity Utilization.
  • Lower prices for the end consumer.
  • Environmental benefits through lower emissions of full trucks.

Just as Vendor Managed Inventory, the Factory Gate Pricing concepts is centralizing the responsibility for stock levels to reduce supply chain costs and realize lower prices for end consumers.

Factory pricing is also referred to as supplier collection or ex-works pricing.

 

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Activity-based modelling

Concept used to ‘test’ a variety of alternative activity strategies using varying quantitative information.

 

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Active inventory

An inventory from which items are currently being drawn or will be drawn within a short space of time.

 

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Activa

Model designation for Mercedes medium-weight truck range.

 

Act of Parliament

Document setting out Parliamentary law following debate and voting on a Bill by both Houses of Parliament (ie the Commons and the Lords) which then receives the Royal Assent. Acts are enabling legislation which detail new law or give relevant government Secretaries of State powers to create subordinate legislation in the form of regulations published in Statutory Instruments or Statutory Orders.

 
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Posted by on August 17, 2011 in Dictionary of Logistics

 

Act of God

Any fortuitous act/action that could not have been prevented by any amount of human care and forethought. A term used in insurance and meaning an accident of, or caused by, nature, such as flood, storm, lightning or a combination of freak weather conditions. Many policies do not pay out in such eventualities.

 

Act

Common abbreviation for an Act of Parliament*.