The new trend for the transport industry is Factory Gate Pricing. This is a huge change for the transport operators, not so much in the way they work but in who they work for. Just for the sake of explaining Factory Gate Pricing I will use Tesco and Coca-Cola as an example. Before Factory Gate Pricing companies such as Tesco would buy their goods from Coca-Cola delivered to their door, so the transport company would work directly for and get paid by Coca-Cola, not Tesco. Factory Gate Pricing means that Tesco will no longer buy their goods from Coca-Cola with the haulage paid for; instead they will buy the Coca-Cola at the "factory" gate and arrange their own haulage. In other words the haulage companies will now all be working directly for Tesco and not Coca-Cola. Companies like Tesco will become the haulage buyers for all of their suppliers.

Of course, the idea behind this is to reduce the haulage charges that the likes of Tesco are now paying. This is a big trend and most of the large haulage users are looking at Factory Gate Pricing to reduce their costs.

Now there are three differing opinions regarding this. Four if you count mine, but more about that later.

• The Tesco point of view is that they can make the haulage companies more efficient. Tesco think that by adopting Factory Gate Pricing methods they can reduce their own haulage costs because the new efficiencies that they can impose onto the hauliers will also make the hauliers more profit. Hmm.
• Some of the hauliers say that rates are already at rock bottom so there is no room for any more reductions and therefore they refuse to entertain Factory Gate Pricing methods.
• Other hauliers are willing to accept the Factory Gate Pricing model and are willing to give it a go.

The problem is that there is also a snob factor involved in this argument. The proponents of Factory Gate Pricing are dismissing the opinion of those haulage companies who say that prices are already too low. They are saying that these companies simply don't understand Logistics, they are dinosaurs and the world will change whether they like it or not. There is a new world that involves supply chain optimisation and these hauliers are simply not up to speed on the subject. They are also telling the hauliers who are willing to go with Factory Gate Pricing that they are forward thinking go ahead companies and much better to work with than that other lot. The flattery seems to be working.

Now who is right? Is Factory Gate Pricing a great idea that will make hauliers rich again or is this just another classic divide and conquer play from the haulier's customers? Over to the fourth opinion.

The problem is that everyone does have a valid point and there needs to be a compromise by all parties.

• The proponents of Factory Gate Pricing need to stop being so snotty about their supply chain optimisation theories. After all its not really a new idea, hauliers have been optimising their work amongst themselves for decades. The only new thing about it is the trendy "supply chain" language they are using. They need to get real and stop thinking that they can do a better job than someone who has many years of haulage experience behind them and just accept the plain fact that haulage rates are already too low.
• The hauliers who are dismissing Factory Gate Pricing methods do really need to wake up to the fact that there are benefits for them in some of the e-commerce methods that are involved in this kind of co-operation and optimisation.
• The hauliers who are going along with Factory Gate Pricing should not allow it to reduce rates.

The point is that, if adopted properly, everyone can benefit from the better e-commerce and co-operation involved in Factory Gate Pricing. The haulage users (Tesco if you like) will benefit by reducing their own overheads and improving overall efficiency in their own organisations. There is simply no need (other than greed) to impose price reductions on their hauliers just because they have thought of a different way of working. Why can't everyone win?

If we can forget the snobbery and trendy new language for a moment we can look at the future in a realistic way. The future is not just supply chain optimisation methods and e-commerce, the future also involves things like a massive driver shortage and a future 25% reduction in our current driver base due to the Working Time Directive. The average age of a driver is now over 50 with hardly anyone coming into the industry because wages are too low. If anyone wants to get clever and look at the future they should try getting their head out of their arse and realise that if rates don't improve to allow hauliers to pay better wages to their drivers there won't be anyone left to optimise anything. E-commerce won't drive a truck into an RDC and that's a fact. Now does that statement make me a Luddite as well or is it simple common sense.

I'm on the side of adopting the benefits of Factory Gate Pricing along with e-commerce but without reducing haulage rates. Now if the snob factor wants to put me in the Luddite camp as well then they really do have a problem. I designed the very first Internet Transport Exchange and Internet Transport EDI system. I did it five years ago! I have been developing computerised transport systems for 17 years but I haven't seen the need to invent a new language to sound clever and I can still see the wood for the trees.

I have already had one major altercation with a "supply chain expert" because I dared to suggest that Factory Gate Pricing can still benefit everyone without reducing haulage rates. In fact this is the second time with this particular "expert". The last time he accused me of not understanding the problem was after he attended one of the year 2000 seminars that I ran during 98 & 99, where we described the workings of a CMOS chip and explained why there will not be a major year 2000 computer problem. He disagreed with me even though he wasn't quite sure what a CMOS chip was and spent the rest of the year running round his organisation telling them that after the 1st Jan their toasters will stop working. Worryingly he is still an "expert" and he is now working on Factory Gate Pricing for a major organisation. Well what does that tell you? It tells me that Factory Gate Pricing along with the associated e-commerce systems will happen whether it's right or wrong and whether you like it or not.

The real world for new methods and e-commerce is that everyone is supposed to benefit not just the customer with a big stick. It is naive beyond belief that e-commerce methods are just a one way street for the customer to obtain price reductions. E-commerce is a benefit for all parties. We can all win out of this. So what to do: Get with the program; adopt the e-commerce systems and work together to keep the rates up.