Industry Decision-Making is Mixed Regarding Transportation CostsMay 29th, 2012 by DWM Magazine
When it comes to high gas prices, it appears to be business as usual, at least for a few companies, while another has had to charge slightly more for deliveries.
Stephen Toth, owner of Cadillac Windows based in Southfield, Mich., delivers to contractors within an average radius of 30 miles, which he deems local deliveries, but says the company frequently goes up to 50 miles for a “few extra dollars” and once in awhile will deliver 100 or more miles. He says the company started charging “slightly more” for all its deliveries in 2011.
“Contractors accept our delivery fees because they know the cost is small compared to the time and gas they lose,” he says. “I didn’t have the guts to raise the delivery prices until last year, but now it would seem to be a reality that is here to stay. I may have to raise them again.”
Toth adds that times have been very tough in the Detroit market, thus a few contractors will drive 25 miles with a trailer to pick up and save $50 or more.
“The contractors who pick up at our facility are clearly gauging the day and time for when they are in the area, to save on fuel,” he says.
With other orders however companies don’t have a choice.
“Large orders or large windows have to be delivered,” he says. “Few contractors have the necessary vehicles to accommodate. We are more cognizant of the deliveries and pickups we do. We try to schedule them more efficiently, rather than just heading out when we know something needs to be delivered or picked up. The tradespeople have been amiable to this mind-set because they face the same inflation. We also try to use smaller vehicles when we can.”
Conversely, Anthony J. Martorana, Sr., CEO and founder of Madison Township Lumber and Supply Co. Inc. based in Matawan, N.J., hasn’t made any changes in the very recent past, but three-four years ago the company instituted a delivery charge.
“That hasn’t covered the entire cost of our deliveries but it has covered some of it,” he says.
So why hasn’t he raised delivery charges to cover his costs?
“We can’t raise prices because business isn’t sufficient,” he says. “We are lucky enough to get business so we have had to eat some of that expense. The other thing that helps is other businesses instill a delivery charge. A customer knows, for example, that the concrete guy does it too so it’s not just us.”
Martorana admits that he has it a little easier than those in other states.
“Jersey is a little cheaper in fuel than other states,” he says. “In Pennsylvania gas is between 10 to 12 cents higher due to taxes.”
So while contractors may be making some changes, are window manufacturers charging their customers for delivery fees or raising prices to cover their costs? At Sunrise Windows, for one, president Gary Delman says no, but this could be because the manufacturer operates its own fleet of trucks.
“The reason we use our own fleet is it drives from one of our key strategies: We want to be the easiest people out there to do business with. That translates down to controlling the shipping from manufacturing to the customer’s place of business. By us employing our own drivers, it gives us a huge amount of flexibility.”
But Toth says companies such as Cadillac are dependent on their window manufacturers and this sometimes affects delivery schedules.
“Some companies have cut back on the number of deliveries to our area, which can delay orders by an entire week,” he says. “We are directly connected to the web portals for many major manufacturers, but the dates are not dependable because they are juggling deliveries at the 11th hour, to be more fuel efficient. It can be a scheduling issue for us, when we can’t depend on the supplier’s delivery schedule.”
Yet, Toth adds that rising gas costs may have had one positive effect on business.
“All said and done, we should have been more efficient before the gas prices went up,” he says. “It is a wakeup call that will likely have staying power.”