Sainsbury and Tesco are negotiating with suppliers to introduce ex-factory gate pricing across all categories in what looks set to be a fundamental reworking of the grocery supply chain. In the wake of edicts requiring the preparation of new pricing structures sent by the two multiples to suppliers in the last few weeks, manufacturers are preparing for a tough round of commercial talks. Ex-factory gate pricing utilises retailers' excess transport capacity to collect products from manufacturers. A small amount is already done in the chilled and produce categories ­ a move which is seen as in keeping with ECR principles and which operates to the benefit of many small producers who cannot afford complex distribution functions. However, as retailers seek to extend the scope of their backhauling and integrate new pricing mechanisms, tensions look set to rise over the discounts retailers will expect suppliers to offer in lieu of distribution costs. Suppliers have also raised concerns about the economic implications of losing critical mass in their own distribution functions and the logistical difficulties of retailers' lorries competing for prime pick-up slots. Sainsbury's supply chain director Martin White was undeterred, however, calling it the "next generation" in distribution. "In the 1970s and 1980s the advent of distribution centres meant retailers took responsibility for delivering the last bit to the stores. "We're now saying we're moving one step beyond. "Only by putting all of the supply chain at stake can you really drive towards total efficiency. We'll worry about how to carve that up later." Food and Drink Federation director of economics Bob Price said: "Some doubt Tesco has given this adequate thought as it has only looked at it in its own partial environment. "No doubt some compromise can be reached through discussion, but the aggressive timescale has certainly put people off." {{NEWS }}

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