Part 1 Lngistics in Supply Chain Ma

Part 1 Lngistics in Supply Chain Managemen1
e-commerce are struggling to find the most appropriate logistics and fulfillment strat-
egy for their firm.
Pricing and Logistics
Pricing is another aspect of marketing strategy that directly interacts with logistical
operations. The terms and conditions of pricing determine which party has responsibil-
ity for performing Iogistics activities. A major trend in price strategy has been to de-
bundle the price of products and materiaIs so that services such as transportation,
which were traditionally included in price, are now identified as separate items. Pric-
ing practices have a direct impact on the timing and stability of logistical operations.
In this section, several basic pricing structures are reviewed, followed by a discussion
of pricing impact areas. No attempt is made to review the broad range of economic
and psychological issues related to pricing decisions. The focus is on the relationship
between pricing and logistical operations.
Pricing Fundamentals
Pricing decisions directly determine which party in the transaction is responsible for
performance of logistics activities, passage of title, and liability. F.O.B. origin and de-
livered pricing are the two most common methods.
F.O.B. Pricing
The term F.O.B. technically means Free On Board or Freight On Board. A number of
variations of F.O.B. pricing are used in practice. F.O.B. origin is the simplest way to
quote price. Here the seller indicates the price at point of origin and agrees to tender a
shipment for transportation loading, but assumes no further responsibility. The buyer
selects the mode of transportation, chooses a carrier, pays transportation charges, and
takes risk of in-transit loss and/or damage. In F.O.B. destination pricing, title does
not pass to the buyer until delivery is completed. Under such circumstances, the seller
arranges for transportation and the charges are added to the sales invoice.
The range of terms and corresponding responsibilities for pricing are illustrated in
Figure 4-7. Review of the various sales terms makes it clear that the firm paying the
freight bill does not necessarily assume responsibility for ownership of goods in tran-
sit, for the freight burden, or for tiling of freight claims.
Delivered Pricing
The primary difference between F.O.B. and delivered pricing is that in delivered pric-
ing the seller offers a price that includes transportation of the product to the buyer. In
other words, the transportation cost is not specitied as a separate item. There are sev-
eral variations of delivered pricing.
Single-Zone Pricing. Under a single-zone delivered pricing system, buyers pay a
single price regardless of where they are located. Delivered prices typically reflect the
seller's average transportation cost. In actual practice, some customers pay more than
their fair share for transportation while others are subsidized. The United States Postal
Service uses a single-zone pricing policy throughout the United States for first-class
letters and parcel post. The same fee or postage rate is charged for a given size and
weight regardless of distance traveled to the destination.
FIGURE 4-7
Terms of sale and corresponding responsibilities
I Ternls of Sale F.O.B. Shipping Point, FREIGHT COLLECT
Freight charges paid
4 Buyer bears freight charges.
4 Buyer owns goods in transit.
4 Buyer tiles claims
4 Terms of Sale F.O.B. Destination, FREIGHT COLLECT
Title passes to buyer.
I 1, Buyer pays freight charges. 1
j '
pcharges paid by buyer. I
4
4
, Buyer bears freight charges.
4 Seller owns goods in transit.
4 Seller tiles claims (if any).
Single-zone delivered pricing is typically used when transportation costs are a rel-
atively small percentage of selling price. The main advantage to the seller is the high
degree of control over logistics. For the buyer, despite being based on averages, such
pricing systems have the advantage of simplicity.
2 Ter~ns of Sale F.O.B. Shipping Point, FREIGHT ALLOWED
Multivle-Zone Pricing. The practice of multiple-zone pricing establishes different
prices for specific geographic areas. The underlying idea is that logistics cost differen-
tials can be more fairly assigned when two or more zones-typically based on dis-
tance-are used to quote delivered pricing. Parcel carriers such as United Parcel Ser-
vice use multiple-zone pricing.
5 Terms of Sale F.O.B. Destination, FREIGHT PREPAID
Base-Point Pricing. The most complicated and controversial form of delivered pric-
ing is the use of a base-point system in which the final delivered price is determined
by the product's list price plus transportation cost from a designated base point, usu-
ally the manufacturing location. This designated point is used for computing the deliv-
ered price whether or not the shipment actually originates from the base location.
Figure 4-8 illustrates how a base-point pricing system typically generates different
net returns to a seller. The customer has been quoted a delivered price of $100 per
Freight charges paid by seller.
Title passes to buyer.
4 Seller bears freight charges.
4 Seller owns goods in transit.
*. Seller files claims (if any).
3 Tcnns of Sale F.O.B. Shipping Point, FREIGHT PREPAID
AND CHARGED BACK I I , Seller pays freight charges.
4 Seller bears freight charges.
, Buyer owns goods in transit.
4 Buyer files claims (if any).
6 Terms of Sale F.O.B. Destination, FREIGHT COLLECT
I ANDALLOWED I , Buyer pays freight charges.
, Seller bears freight charges.
4 Seller owns goods in transit.
m' IBYYC' , seller files claims (if my).
Freight charges paid by buyer, then charged to
seller by deducting amount from invoice.
Krprinted wit11 prrrniscitm Irnn~ The Pur-chasing Handbook, N~JI~JJI~~ As.nn.i

Hasil (Bahasa Indonesia) 1:

Bagian 1 Lngistics dalam rantai pasokan Managemen1 e-commerce sedang berjuang untuk menemukan yang paling tepat logistik dan pemenuhan mulai- EGI untuk perusahaan mereka. Harga dan logistik Harga adalah aspek lain dari strategi yang langsung berinteraksi dengan logistik pemasaran operasi. Syarat dan ketentuan harga menentukan pihak yang telah responsibil- ity untuk melakukan kegiatan Iogistics. Tren utama dalam strategi harga telah de- bundel harga produk dan materiaIs sehingga bahwa layanan seperti transportasi, yang secara tradisional yang termasuk dalam harga, sekarang diidentifikasi sebagai item terpisah. Pric- praktek-praktek ing memiliki dampak langsung pada waktu dan stabilitas operasional logistik. Dalam bagian ini, beberapa dasar struktur harga yang ditinjau, diikuti oleh diskusi Harga dampak daerah. Tidak usaha untuk meninjau berbagai ekonomi dan masalah psikologis yang berkaitan dengan harga keputusan. Fokusnya adalah pada hubungan antara harga dan logistik operasi. Harga dasar Harga keputusan secara langsung menentukan dimana pihak dalam transaksi bertanggung jawab untuk kinerja logistik kegiatan, Bagian dari judul, dan tanggung jawab. Asal-usul F.O.B. dan de- Harga livered adalah dua metode yang paling umum. F.O.B. harga Istilah F.O.B. teknis berarti gratis On Board atau Freight On Board. Sejumlah variasi harga F.O.B. digunakan dalam praktek. F.O.B. asal adalah cara termudah untuk quote price. Here the seller indicates the price at point of origin and agrees to tender a shipment for transportation loading, but assumes no further responsibility. The buyer selects the mode of transportation, chooses a carrier, pays transportation charges, and takes risk of in-transit loss and/or damage. In F.O.B. destination pricing, title does not pass to the buyer until delivery is completed. Under such circumstances, the seller arranges for transportation and the charges are added to the sales invoice. The range of terms and corresponding responsibilities for pricing are illustrated in Figure 4-7. Review of the various sales terms makes it clear that the firm paying the freight bill does not necessarily assume responsibility for ownership of goods in tran- sit, for the freight burden, or for tiling of freight claims. Delivered Pricing The primary difference between F.O.B. and delivered pricing is that in delivered pric- ing the seller offers a price that includes transportation of the product to the buyer. In other words, the transportation cost is not specitied as a separate item. There are sev- eral variations of delivered pricing. Single-Zone Pricing. Under a single-zone delivered pricing system, buyers pay a single price regardless of where they are located. Delivered prices typically reflect the seller's average transportation cost. In actual practice, some customers pay more than their fair share for transportation while others are subsidized. The United States Postal Service uses a single-zone pricing policy throughout the United States for first-class letters and parcel post. The same fee or postage rate is charged for a given size and weight regardless of distance traveled to the destination. FIGURE 4-7 Terms of sale and corresponding responsibilities I Ternls of Sale F.O.B. Shipping Point, FREIGHT COLLECT Freight charges paid 4 Buyer bears freight charges. 4 Buyer owns goods in transit. 4 Buyer tiles claims 4 Terms of Sale F.O.B. Destination, FREIGHT COLLECT Title passes to buyer. I 1, Buyer pays freight charges. 1 j ' pcharges paid by buyer. I 4 4 , Buyer bears freight charges. 4 Seller owns goods in transit. 4 Seller tiles claims (if any). Single-zone delivered pricing is typically used when transportation costs are a rel- atively small percentage of selling price. The main advantage to the seller is the high degree of control over logistics. For the buyer, despite being based on averages, such pricing systems have the advantage of simplicity. 2 Ter~ns of Sale F.O.B. Shipping Point, FREIGHT ALLOWED Multivle-Zone Pricing. The practice of multiple-zone pricing establishes different prices for specific geographic areas. The underlying idea is that logistics cost differen- tials can be more fairly assigned when two or more zones-typically based on dis- tance-are used to quote delivered pricing. Parcel carriers such as United Parcel Ser- vice use multiple-zone pricing. 5 Terms of Sale F.O.B. Destination, FREIGHT PREPAID Base-Point Pricing. The most complicated and controversial form of delivered pric- ing is the use of a base-point system in which the final delivered price is determined by the product's list price plus transportation cost from a designated base point, usu- ally the manufacturing location. This designated point is used for computing the deliv- ered price whether or not the shipment actually originates from the base location. Figure 4-8 illustrates how a base-point pricing system typically generates different net returns to a seller. The customer has been quoted a delivered price of $100 per Freight charges paid by seller. Title passes to buyer. 4 Seller bears freight charges. 4 Seller owns goods in transit. *. Seller files claims (if any). 3 Tcnns of Sale F.O.B. Shipping Point, FREIGHT PREPAID AND CHARGED BACK I I , Seller pays freight charges. 4 Seller bears freight charges. , Buyer owns goods in transit. 4 Buyer files claims (if any). 6 Terms of Sale F.O.B. Destination, FREIGHT COLLECT I ANDALLOWED I , Buyer pays freight charges. , Seller bears freight charges. 4 Seller owns goods in transit. m' IBYYC' , seller files claims (if my). Freight charges paid by buyer, then charged to seller by deducting amount from invoice. Krprinted wit11 prrrniscitm Irnn~ The Pur-chasing Handbook, N~JI~JJI~~ As.nn.i<~tion o/'Purchn.it~~ Mntirr,qeriienr.
Part I Logistics in Supplj Chain Mutztrg~meizt
F~CURE 4-8
Base-point pricing
Plant B
Plant C
unit. Plant A is the base point. Actual transportation cost from plant A to the customer
is $25 per unit. Plant A's base product price is $85 per unit. Transportation costs from
plants B and C are $20 and $35 per unit, respectively.
When shipments are made from plant A, the company's net return is $75 per unit
(the $100 delivered price minus the $25 transportation cost). The net return to the
company varies if shipments are made from plant B or C. With a delivered price of
$100, plant B collects $5 in phantom freight on shipments to a customer. Phantom
freight occurs when a buyer pays transportation costs greater than those actually in-
curred to move the shipment. If plant C is the shipment origin, the company must ab-
sorb $10 of the transportation costs. Freight absorption occurs when a seller pays all
or a portion of the actual transportation cost and does not recover the full expenditure
from the buyer. In other words, the seller decides to absorb transportation cost to be
competitive.
Base-point pricing simplifies price quotations but can have a negative impact on
customers. For example, dissatisfaction may result if customers discover they are
being charged more for transportation than actual freight costs. Such pricing practices
may also result in a large amount of freight absorption for sellers.
Pricing Issues
Pricing practices are also integral to logistics operations in at least four other ways:
potential discrimination, quantity discounts, pickup allowances, and promotional
pricing.
Potential Discrimination
The legality of transportation pricing is an important consideration and must be care-
fully reviewed and administered to protect against potential discrimination. The Clay-
ton Act of 1914 as amended by the Robinson-Patman Act of 1936 prohibits price dis-
crimination among buyers when the practices "substantially lessen competition."
Zone pricing has the potential to be discriminatory because some buyers pay more
than actual transportation cost while others pay less. Zone pricing systems are illegal
when the net result is to charge different delivered prices for identical products to di-
Chqter 4 Market Distribution Strafeg! 123
rect competitors. In recent years, determination of the legality of delivered zone pric-
ing systems has centered around the issue of whether a "seller acts independently and
not in collusion with competitors." The Federal Trade Commission is unlikely to take
action unless there is clear-cut evidence of such conspiracy.
In the past, selected base-point pricing has been found illegal under both the
Robinson-Patman Act and the Federal Trade Commission Act. The concern is whether
it results in direct competitors having differential margins.
To avoid potential legal problems, the majority of firms use either F.O.B. or uni-
form delivered pricing policies. This strategy is generally preferable compared to de-
fending average costing practices required in zone pricing or contending with the po-
tential legal difficulties associated with base-point pricing. The following guidelines
should be considered when establishing geographic pricing:
Some of the geographic pricing strategies . . . may be illegal under certain circumstances.
Three general principles can be used to guide policy in this respect. First, a firm should not
discriminate between competing buyers in the same region (especially in zone pricing for
buyers on either side of a zonal boundary) because such action may violate the Robinson-
Patman Act of 1936. Second, the firm's strategy should not appear to be predatory, espe-
cially in freight absorption pricing, because such a strategy would violate Section 2 of the
Sherman Act of 1890. Third, in choosing the basing point or zone pricing, the firm should
not attempt to fix prices among competitors because such action would violate Section 1 of
the Sherman Act.12
Quantity Discounts
Quantity discounts are generally offered