Are Surcharges Sinking Your Ship?
You see it at the gas pump every day. The cost of fuel is stubbornly high. Even efforts to tap into the Federal Oil Reserve have not made a dent in the high fuel cost. The recent announcement by OPEC+ of its agreement to cut crude production is also no help. But wait, there’s more. According to some industry analysts, the global stockpile of diesel and other fuels continues to decline. As with almost any commodity, when supply goes down the price goes up. And unfortunately, there is no rational prediction of where the price of fuel will settle.
As my teachers used to say, “So what and who cares?”
So What?
Imagine visiting an upscale, elegant fine dining establishment. Of course, there are no prices on the menu. This is not your local all-you-can-eat buffet, you are not quite sure how much the final tab will be. Oh, and you are not going to get the bill for several months. And did we mention that the price can change at any time before you see that final bill?
Switch the prime rib and wine for diesel and shipping containers and you get a sense of how things are going for many retail suppliers.
In early July, Walmart began charging some of its suppliers’ pickup and fuel fees “…due to increased transportation costs.” And Walmart is not the only company implementing such changes. Amazon added a “5% fuel and inflation surcharge” for third-party sellers using their fulfillment services. Many other major transportation companies such as FedEx, UPS, CSX, Union Pacific Railroad, and @Nippon Cargo Airlines (NCA) have fluctuating fuel surcharge rates.
According to Walmart, these changes are part of its overall “Collect Pickup Program”. This means if you are using Walmart to handle the shipment, pickup, and delivery of your merchandise to its huge logistics system, the company will send you a bill at some point for those services. However, do you know how much those services will be? Do you know what they cover and for what time period? The exact numbers and details seem to be elusive for many we have spoken with in recent months.
Nevertheless, according to a recent corporate statement, the [collect pickup] program will allow Walmart to “meet our everyday low-price commitment to our customers.” That sure sounds like costs are getting squeezed out of the system somewhere. But who is paying for it?
Who Cares?
We do and think you should care about it as well. Let’s be honest, the high cost of moving products by road, sea, rail, or air is not likely to get better anytime soon. By strict definition, the cost of goods is everything that goes into the manufacturing of the product. It does not include shipping or transportation costs, though these are critical in determining your overall profit margin. Your final cost of goods will depend on your existing contractual agreements, product characteristics, and shipping and warehouse locations.
We hope you see that who you pay and what you pay to ship your product is an important question that requires further analysis. Does it make sense for you to work with a large-scale facility like Amazon or Walmart to handle your shipping and distribution needs? Or does it make more financial sense to send your product order pre-paid and have less uncertainty about your final cost of goods?
We Care
We believe everyone’s situation is different and deserves a proper analysis. Let’s look at your situation and talk about your options.
HRG helps suppliers who want to recover money due to them from retailers as a result of invalid deductions, fines, or underpayments by carefully auditing event results, related activities, and agreements. Unlike our competitors who rely on catching obvious mistakes with computer programs, HRG uses proprietary technology and highly experienced auditors to fully evaluate and process our clients’ claims. HRG is unlike any other competitor in that we represent all categories across all the major retailers.
To find out more about HRG, please contact sales@hrg-audit.com.
