Pricing strategic level

Global models are focused mainly on global network design, transfer price and tax optimization on a more strategic level. 

The subject of fermentation alcohol has always been of considerable interest to several tropical countries, but until the oil crisis of 1973, other than Brazil (197), only India appeared to appreciate the importance of fermentation alcohol as a strategic material in its economy. Ethanol prices in India have been maintained at an extremely low level by processing cane molasses, which has been a waste product of negligible value (197). 

In analogy to the demand side, procurement contracts are fixed by quantity and price with the objective to ensure a basis volume of raw materials. Spot procurement supports company s flexibility requirements and the company can decide the spot procurement quantity with certain flexibility around the offered quantity. Price levels for contracts and spot business differ and are volatile in each period. Typically, companies operate with few key strategic suppliers for a respective product or raw material. Therefore, price-quantity models like in sales planning are less applicable. More often is the case that specifically commodity-type raw materials are procured on many-to-many exchanges, which is out of the scope in our case as described in section 3.2.6. If products are supplied by internal business units, transfer prices are applied following the contract procurement principles. 

In an environment of scarcity, offering different levels of availability is a strategic application of supply chain thinking. It recognizes that immediate availability has a value over delivery in six months. A supply chain providing product today at a higher price would solve some customers immediate needs. Other customers could choose to wait their turns in the queue. Of course, the premium for short-term response will... 

This chapter wiU discuss the supply chain logistics planning problem which takes the market price and market demand of finished products as random variables aimming at a three-level strategic alliance supply chain. 

Fig. 4.1 The three-level strategic alliance supply chain under demand and price uncertainly...

In a service level agreement (SLA) all three words carry equal importance. The document should define what services are to be delivered and the levels of performance expected. It is also an agreement between the customer and the supplier and not a unilateral declaration. For simple functions like catering fixed price contracts by SLAs are easy to implement. However, they are highly limiting and inappropriate for strategic parmerships. The agreements (also known as joint service partnerships) should include ... 

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