Articles
| Open Access |
DOI: Pricing in the Direct Supply of Construction Components
Elmurat Erkin uulu , Business Manager , Commercial Director at Opes Trade LLC Bishkek, Kyrgyzstan.Abstract
This article aims to conduct a comprehensive study of the economic and logistical factors that determine the formation of the final price when abandoning multi-stage intermediary chains in favor of the factory-to-site model. The relevance of the work is due to the high level of cumulative markups in the classical supply scheme, especially for developing landlocked markets, where transport and warehousing costs multiply the price of building materials and hinder the introduction of innovative solutions in infrastructure projects. The novelty of the research lies in combining quantitative analysis of marginal markups (using the Lerner index and PPI data), logistical assessment of hidden costs (according to UNCTAD and SCFI data), modeling of currency effects based on historical exchange rates, and practical case analysis of pilot projects in Kyrgyzstan, during which empirical confirmation of the claimed savings was obtained. As a result of a comparative analysis of the traditional and direct supply models, it was found that eliminating national distributors, wholesale warehouses, and retailers ensures a reduction in the final cost of supplies by 30–40 % through the removal of the accumulated markups at each link. Additional savings are achieved through factory cutting of materials to order size, just-in-time delivery, optimization of warehousing and installation operations within a lean approach, as well as the use of currency risk hedging instruments. The factory-to-site model demonstrates high transparency of cost structure and scalability of the methodology to neighboring markets, which is confirmed by an increase in annual turnover from $0.5 million to over $6 million with supply volumes increasing up to 100,000 m². The article will be useful for procurement managers, logisticians, investment analysts, and government specialists in the regulation of the construction market.
Keywords
direct supply, pricing, supply chain, construction components, marginalization, lean production, logistical costs, currency risks
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