Dow's new pricing policy gets mixed reviews
By Staff -- Purchasing, 2/12/1998
In January, Dow Chemical began using new distribution policies that the company believes will improve customer service. Some distributors, however, are not thrilled with the change, and say it has created confusion in the market."The new policies, which will be implemented in first quarter, 1998, will improve efficiency by removing past complexities surrounding pricing and logistics," says Pat Lovell, Dow Chemical's director of chemicals distribution.
The 28 businesses in the company's Specialty Chemicals and Chemicals & Metals departments plan to institute the new policies. By mid-January, only a few of the businesses, including glycols and ethers, had actually begun using the new program, according to a distributor.
The new policies are designed to simplify shipping and pricing. "We are focusing on delivery options to identify and utilize the most efficient method for getting our products to distributors and customers," says Lovell. "In addition, a simplified pricing structure--including net pricing in many cases--will make it easier for distributors to calculate and quote prices for Dow products."
What are the benefits for buyers? According to Lovell, the policies should improve customer satisfaction in terms of getting the product as well as provide better role definition for both Dow and distributors.
Some distributors, however, don't expect buyers to get any delivery/reliability benefits from the program. "The end-result benefit will be that pricing could go down an extra cent or two per pound," says a distributor. "With Dow going to net pricing, we will make a little extra money from all of the business we previously had at the schedule price." That little extra money evens out to about 1cent-2cents/lb.
Most likely, consumers will eventually get that price benefit. Why? "Historically, distributors have trouble keeping a little extra money in their pocket," explains the distributor.
But the new policies also are creating a fair amount of confusion within the CPI. "In the past, fob net pricing hasn't worked," says the distributor. One reason may be the fact that Dow's net price is lower than the delivered price from other competitors, so it's causing a problem for other producers.
That same distributor points out another pending problem for small- to medium-sized distribution locations. Under the new policies, Dow plans to start charging a fee for combination delivery loads beginning April 1.
Talkback
Related Content
Related Content
Sponsored Links
View All Blogs
Now Playing:
