How would you handle this?

John Richards

MGF, Master Grumble Framer
May 21, 2001
Richfield, MN 55423
This probably would make a good poll but I'm interested in opinions - open ended please.

Three years ago when we went through the first rounds of increasing fuel costs, we (the company) added a $1.25 inbound fuel surcharge to each invoice. (Lowered later to $0.75 and then eliminated.)

We explained (100's of times) that this was to offset the fuel surcharges that trucking companies were charging to bring items in, it was not a fuel surcharge to bring items to the customer. (Although that could be justified as well.)

Well here we are again. Recently a shipment of glass incurred a $700.00 fuel surcharge and a truck of foam incurred a $600.00 fuel surcharge. This is at a time where at least in our area there is extreme downward pricing pressure for both foam and glass.

Would you rather see a price increase in the COG or a fuel surcharge? Keep in mind most price increases don't go away while a fuel surcharge can be eliminated when fuel prices become more reasonable.
The obvious answer is I would rather see no increase!

But, I do understand that as a supplier you need to make money too. How you "categorize" it seems irrelevant. How I categorized it would be based on how I wanted to analyze my data later and on a year to year basis. Which means I would want it clearly labeled and listed separately. Obviously I would want it to go away as soon as it could.

OBTW, I would treat it as a price increase and compare it to my other suppliers and continue to buy from the cheapest. Today, I factor in specials, early payment discounts, shipping and anything else that effects the true COGs. For many supply purchases time involved in the purchase/decision/searching/etc. and ease of acquisition play a critical role, so fluctuations in price don't usually (there are exceptions) effect where I purchase them. For moulding, mats, foam, and glass I pay a lot more attention to weekly specials and "pennies" because they represent the overwhelming % of my COGs. A surcharge not being charged by another supplier could well swing my purchase the other way.

P.S. I would expect to be notified BEFORE the surcharge happened. "Finding" it on my invoice would really Pi** me off!
Fuel surcharge seems the most equitable for the wholesale customer. I've seen it in the past on sheet goods and imagine, given the current circumstances, will be seeing it again on that and more.
It seems the best way to handle the problem would be to add the extra fuel charge only to the invoices of the customers using the products that are charging extra for fuel. That way those who are not using the products do not pay for what they are not using.
I like Buffy's way of thinking. To take it a step farther - if there were, say, 200 cases of Foam core on a truck (I have no idea how many there would really be or what the size of the truck is)and you were charged a surcharge of $600 then add a $3 gas surcharge to each case. Glass could be calculated the same way - on a per case basis.

Of course I would expect to know of the surcharge policy in advance (or when I placed my order) and I would hope for it to go away as soon as possible. If gas rates don't come down in a reasonable amount of time then you should make a product price change.

On a personal note - I would like to thank John for the truck delivery. It's probably not the most cost effective thing that TC has done but it is certainly extremely effective customer service!

Reasons that company truck delivery is so appreciated -
1. It is cheaper than Speedee and UPS
2. Product arrives in better condition
3. Less wasteful packaging is used therefore it takes up less storage space and is less to recycle etc.
4. Really nice and friendly delivery driver (Rob)!

Thanks again!

I would prefer the fuel surcharge. I suppose either way it costs me the same but it is nice to know what I am paying for and why. Plus, it would be nice to see it go away when the prices go down. That would be the up front approach I think.

P.S. Buffy, I notice you are from Cottage Grove, what a pretty name for a town. I seem to recall P. Kotnour of Attach Eze fame is from the same town, can't forget a pretty name like that. Just wondered if your town is small enough, maybe you know each other. Just curious.

Sorry, back to the subject.....
Less HATES any extra charges on his invoice!

Average it out and blanket raise all of your prices. You will have to soon anyway.

I won't notice if a case of glass or foam goes up a buck or two.

As one who will be placing my first order with your company, the fuel surcharge appears fair. To be honest, what ever is fair is fine with me. The value of your truck service to my area and the frequency of that service is outstanding. Do what you need to do to maintain your present level of service and product diversity.

I must say I commend a vendor that is willing to open this "can" on a free forum such as this. I like that you are thinking as a customer and a vendor. It is hard either way for you. I worked for a wholesaler for about five years, a small operation. We were the neighborly wholesaler.

Well a few years ago when the gas went up we had to make a choice, the fuel surcharge or prices being raised. We went with fuel charge. Of course people were upset and went to other vendors. The worst part is when we took the fuel charge off when the gas prices fell, our distibutor up their prices. So people were even more upset. Bad planning on our part.
In the end I think you have to look and see if your costs will go up in a couple months and make sure you do what is best for you. A customer can cover a couple dollars for gas, they wont be happy, but they can manage. If you up the prices all around I think that would be more expensive on an average customer. My thought...
Hi John;

As a person who will try to make a proper "complete" order for the regular delivery schedule you have, I sometimes have an "oppps" order that I will pick up at the Troy warehouse. For an order of 1-4 sheets of mat board it seemed excessive in the last go around.

I rather see a "general price increase" on the weighty items.

BTY, your route drivers do a fine job.
John: I have been expecting a fuel surcharge for a while. I would rather see this and hope that fuel will go down sometime in the future so it can be removed. I appreciate your delivery truck. Your drop charge is less now than my other delivery truck. Milt does an excellent job.

From a suppliers stand-point it would be a royal PIA to change your COG prices to reflect the higher cost of fuel. A fuel surcharge would be the least painful way to go. Just my two cents worth.

Surely your carriage/fuel costs are just like your accountancy, printing, building repairs etc. etc. costs…… some months/years they are up or down…..I guessing that you don’t put a surcharge on your invoice for all the general costs that I mentioned involved in running your business……the carriage/fuel (to you) surcharge is a variable cost and in my thinking and should be included in the price of the item sold…….its just one of those costs that needs to be factored into your selling prices….I know that if companies over here started to put a fuel surcharge on invoices it would go down like a lead balloon…….though most delivery charges have gone up a little over the last year….
Oh……BTW if you are expecting to see any significant decrees in the cost of fuel it’s wishful thinking…..that’s the message we are getting over here……..a little easing but no way are prices going back to where they were 6 to 9 months ago….this fuel increase is one we better get used to living with….unless governments want to reduce the tax take on petrol/gas…..can anyone see that sort of tax reduction…..not in your dreams……my understanding is that fuel prices are been driven by world demand and that most of the oil producing countries lick Saudi, Norway, Russia, Venezuela, Etc. are at near full production capacity……bottom line is that all those poor countries like China, India, Etc. are now catching up with us and can afford cars……oil central heating….hence the huge demand for oil.
I feel your pain. As a retail framer, just raise my prices across the board. You won't be alone for long, as I have been noticing that some of the "big boys" have been price creeping 3-5 times a year. If you aren't using a constantly updating computer software system, your money is walking backwards weekly. As a independent MFG Rep with a two state territory, the fuel is eating me up, even with a hybid car. So things are going up all over.
Spread out through your entire line a $2 raise on a 20 sheet box of foamcore is still only ten-cents a sheet, and very minor in the scope of things. But a COG to me is a COG, no mater how it is broken down; it still comes out of my bottom line at the end of the quarter.
I have a friend that used to work for Burma-Castrol. He stated that the Oil industries goal is to be at $3.00/gal by 2005.

These are the sort of things that are lowering the discretionary income of our customers. Some recovery huh.
I want to thank everyone for the feedback and in particular those who are customers of TC Moulding. This is a difficult topic around our facilities and it is made even more difficult as manufacturers continue to creep up prices based on raw materials and the fuel / oil based by products they must use to make their finished goods. Once we decide how to handle this I'll let everyone know what we're going to do.