Fuelling a rise in delivery costs

Ingram Micro's plans to pass on rising fuel costs via a freight charge come into effect this week. Sara Yirrell digs deeper

Despite the government relenting to increasing consumer pressure and cutting the price of fuel, the channel will unavoidably be hit with higher delivery bills as distributors try to offset the rocketing cost of freight.

Last month Ingram Micro became the first broadliner to publicly admit that it will be passing fuel charges onto its
customers (Channelweb, 15 July), and the charges come into effect this week. Details of the exact changes have not been released.

Jay Forbes, president of Ingram Micro for EMEA, said: “IT distribution in Europe has had a history of absorbing freight costs on behalf of resellers and their customers. However, fuel prices are at a record level and we have been able to minimise that impact in the past given our size and place in the market. But we will be implementing policies and procedures this month.”

Forbes said that one way resellers could avoid being hit too hard by the rising costs would be to bundle shipments, or look at direct fulfilment methods such as the distributor delivering orders directly to the customer.
“There is a variety of ways that we can help to lessen the impact on the reseller community,” he added. “But the cost has to be passed onto the user ­ that is ultimately the right course of action and we will work with resellers to facilitate that.”

A necessary move
Research carried out on Channelweb.co.uk revealed that 63 per cent of readers felt that Ingram, and in fact any distributor, had
little choice in its actions. A total of 21 per cent said other distributors were also doing the same and just 16 per cent said the extra charges were unfair.

Graeme Watt, president of worldwide distribution at Bell, said: “Ingram appears to have been the first to address what we are all suffering from, which is the fact that fuel charges are up.

“For most distributors, freight costs are the highest outside staff costs. Distributors can either absorb it because they are so profitable that it does not make a difference, or more realistically they must pass it on. We have been working on a
similar initiative and we intend to do something with freight charges very soon. Fuel price rises are something that affects all businesses in the channel.”

Joe Hemani, chairman of Westcoast, said: “This is a necessary move by Ingram. Energy costs across Europe have gone up by 17 per cent and are still rising. How can our industry absorb these costs? Someone has to pay. Sadly we are making people who have nothing to do with our economy very rich.

Hemani continued: “We have been looking at freight charges since the start of the year and we have, where necessary, asked our customers to pay for transport. We are in this together with customers, resellers and vendors. No one is exempt from this.”

Freight charging
Andy Gass, managing director of Computer 2000 (C2000), said: “Everybody in the UK
is charging for freight to some extent. We see the same pressure on freight that Ingram is seeing. There are two main
reasons ­ one is the cost of fuel and the other is the pressure of the average selling price of a product, which is going downwards very rapidly.

“We at C2000 are also close to revealing our own charges for freight. I cannot see a way of avoiding it. Distribution has been slow to pass on the overall price increase of deliveries, but we cannot continue at current levels of freight charging.”
However, Mark Hatton, managing director of Sphinx, said the size of the distributor was a factor.

“If your business ships high numbers of low-value orders, delivery charges are bound to be more expensive,” he said. “But if you ship small numbers of high-value orders, transportation becomes a minor element. I would say this situation would have more of an impact on the larger distribution player.”

James Ward, managing director of Hammer, said the increased fuel cost would not make a difference.
“At Hammer, we have not experienced an increase in our courier costs, so we have no reason to be passing on extra delivery costs to our customers,” he said.

“We are frequently in discussions with our freight provider and do not anticipate any additional costs for the rest of the year.”