Coming Soon: Increased Freight Charges From Distributors

Ingram Micro plans to raise the minimum requirements to qualify for free freight on orders placed with the Santa Ana, Calif., distributor, effective Sept. 2, 2008.

On that date, the distributor will increase its thresholds by $200 and $600, bringing the new minimums for Web order or non-e-commerce Choice Advantage orders to $1,000 and $2,800 for free freight. In a letter to solution providers, Ingram Micro said it was the first increase in the free-freight thresholds in more than two years.

In addition, Ingram Micro plans to add a $2 handling fee to all invoice orders, regardless of size. The new fee covers processing and added transportation management costs, according to Ingram Micro. Orders for non-physical goods, such as software licenses and warranties, will not be subject to the new handling fee.

"The operational cost of doing business in North America, and around the world, is steadily increasing -- especially when it comes to freight and transportation," explained Ingram Micro in a letter sent this week to customers. "This economic reality makes it necessary for Ingram Micro to globally adjust current freight and sales terms and conditions to allow for rising fuel, freight and handling costs.

"We recognize these are added costs, which you may choose to absorb or pass along to your customers, and that is why we will continue to offer multiple shipping options," the letter continued. "Ultimately, our goal is to address the rising cost of freight and use our core logistics expertise and scale to help you manage your costs as best we can. This was a difficult decision, but a necessary one. Ingram Micro remains committed to ensuring your shipments reach their destinations in a timely and efficient manner."

Ingram Micro implemented similar charges in Europe as of Aug. 1.

Other distributors are also facing the same challenge -- trying to offset increased fuel and transportation costs without significantly impacting their solution provider customers.

DandH Distributing Co., Harrisburg, Pa., recently switched primary carriers, to FedEx Ground from UPS Ground, as a means to reduce its own costs and not increase -- yet -- its free shipping minimums.

"As you are aware, the cost of fuel has impacted many industries," said Jeff Davis, DandH senior vice president of sales, in a letter to customers. "In an effort to protect our customers from freight price increases and to maintain our low minimum free-freight thresholds, DandH has moved its primary default small package carrier from UPS to Fed-Ex Ground effective immediately."

Davis said DandH would add a surcharge effective Aug. 11, 2008, for customers wanting to keep UPS. The surcharge will be between $.60 and $1, depending on the order.

"If your shipment qualifies for free freight, DandH will ship via FedEx Ground, although you will still have the option to select UPS as your carrier of choice along with the up charge," Davis said in the letter.

Tech Data, Clearwater, Fla., plans to implement changes to its freight cost strategy this fiscal quarter, ending Oct. 31, but the final numbers have not been determined, said Ken Lamneck, president of the Americas at the distributor. "We have been evaluating this for quite some time as well. We've had some IT projects underway to make sure. We have as little disruption as possible. We're still going to talk to customers as well before the definitive numbers are worked," he said.

In addition to increased fuel and freight costs, Lamneck said another challenge has been the falling average selling price of IT products. So in addition to increased costs to ship an order of say 10 PCs, there's less revenue generated from that order as well, he said. "The logistics costs have increased substantially on us," he said.

It's hard to interpret how solution providers will react to increased freight charges, Lamneck said.

"Some will look at it as a cost increase and nobody's going to be completely comfortable with that. Many resellers pass freight charges on to their customers, now, or include it in their cost. That's why it's important we talk to customers and give them as much as advance notice as possible," Lamneck said.

Synnex likewise has not finalized any freight changes, said Bob Stegner, senior vice president of marketing for North America at the Fremont, Calif.-based distributor. "Everybody is reviewing it. It is our intent to remain as competitive as possible. We continue to negotiate hard with our freight carriers to strive for what's best for our customers," Stegner said. "One key enabler for us is our warehouse footprint. We're closer to more customers. The key is having the correct product in the correct warehouses."