Exel believes it has a solution to suppliers' fears about ex factory gate pricing pushing up their costs Ex factory gate pricing is the latest retailer initiative to hit the manufacturer. It will mean that the multiples take control of the supply chain at the factory gate', which could be the manufacturers' warehouse or a retailer consolidation centre as well as the factory gate itself. The concept is still in its infancy in the UK and the proposed approaches are evolving and varied. Sainsbury, for example, is focusing first on the opportunities to link primary and secondary distribution; Tesco, at the moment, is concentrating entirely on primary distribution; others are pursuing tactical initiatives while waiting to see how the retail leaders fare. For fmcg manufacturers, ex factory gate pricing is the latest demonstration of the multiples' determination to take control of the primary supply chain. The impact is likely to be varied but it carries the potential ­ through loss of control and additional handling ­ to reduce the efficiency and increase the cost of the manufacturer's supply chain. For retailers, on the other hand, seizing control of the primary operation generates significant opportunities to drive further efficiency into the supply chain while offering them the just-in-time, retail-ready deliveries they require. According to Mike Samuels, vice president retail at Exel, retailers see a number of benefits. "Firstly, there will be reduced transport costs through integration of flows and improved purchasing of transport. "Retailers also believe there will be better visibility and control of product flow ­ particularly valuable for products with high variability of demand and for those which are internationally sourced. "Furthermore, retailers are looking to achieve visibility of pure product cost, without the overlay of transport cost, so that they can better compare between manufacturers, not just here but across Europe." It is the retailers' requirement of suppliers to provide a full breakdown of costs which is currently creating particular concern. Manufacturers suspect their margins are about to be squeezed again by the multiples and fear ex-factory gate pricing will effectively result in them having to bear greater distribution costs to serve smaller retailers. Exel occupies an unusual position in the debate since its merger with MSAS Global Logistics in 2000. Exel acts as a fourth party partner for Sainsbury in operating its National Transport Service Centre and has been closely involved in the retailer's primary supply chain. On the other hand, Exel is also a logistics provider to fmcg manufacturers. This hybrid experience has led Exel to propose an alternative solution to meet retailers' requirements without introducing further handling and costs into the manufacturers' supply chain. John Winston, md of Exel UK, explains: "The requirements of retailers have helped us define our offering to the fmcg sector ­ in other words, their demand for minimal stockholding, comprehensive stock availability, complete stock visibility and consolidated deliveries. "However, our proposition is also driven by our objective of aiding manufacturers to service the retailers' RDC networks cost effectively while retaining control of their supply chains." Exel's alternative model is the bringing together of like-minded manufacturing clients to use their scale in providing consolidated loads and RDC-ready consignments to retailers. It is centred on a network of campus-style sites working on a 24/7 basis and offering shared warehousing as well as shared management and systems infrastructures. By, in effect, moving the factory gate to a shared consolidation centre on behalf of groups of manufacturers, Exel can meet retailers' requirements while, at the same time, minimising the number of stockholding points for manufacturers and maintaining their economies of scale for serving smaller customers. Even if major retailers still want to collect, the size and scale of the operation that remains will allow for efficient, consolidated loads to the secondary tier of retailers and wholesalers. Investment in facilities and the latest technology would be Exel's, so both retailers and manufacturers benefit from a solution for which their outlay is minimal. Exel already has a network of 20 shared-user facilities throughout the UK and has invested over £20m to create a campus style centre at Bawtry in South Yorkshire. This is one of Europe's first multi-user sites to focus exclusively on the fmcg sector and currently represents the premier example of Exel's alternative model. {{FOCUS SPECIALS }}