Diesel is costing some distributors tens of thousands more dollars each month.
Surging diesel fuel prices, which have frequently climbed beyond $5 per gallon, are saddling flooring distributors with price increases of tens of thousands of dollars each month, driven by renewed tensions in the Middle East.
Prices jumped by roughly $0.23 per gallon in a single week recently and sit nearly 33% higher than they were before the war with Iran began. Diesel prices rise faster than regular fuel because diesel is the backbone of global commerce. When disruptions occur, demand remains rigid while supplies tighten rapidly.
The volatility in fuel cost has created more uncertainty in the market and forced distributors into deciding how to mitigate the impact—manage the increases as best they can or pass the costs along?
“The cost of fuel and transportation are very real and ultimately need to be passed on to the end user of the flooring,” said Scott Rozmus, president and CEO of FlorStar Sales, Romeoville, Ill. “We have worked to absorb rising expenses by a variety of means and also resisted passing on a knee-jerk increase to the marketplace in the spring in hopes that fuel and transportation input costs would abate.
However, given the sustained level of especially significant diesel fuel prices, we have raised our freight-related charges and also are passing along supplier-related price increases to the channel. We also are working with our customers to help them best mitigate the impact of these costs on their operations.”
Top 5 distributor Tri-West Ltd., Santa Fe Springs, Calif., has heretofore chosen to take a path of patience by not adjusting pricing or logistic fees. But that could soon change, according to Aaron Rhoderick, the company’s vice president of sales. “With this now looking like it will be a prolonged concern, we are starting to consider what we may need to do to address it,” he told FCNews. “It has been a 2%-3% hit for us so far.”
On the East Coast, Fairfield, N.J.-based Apollo Distributing Company has worked to absorb the impact of rising fuel costs rather than pass those increases along to its customers. “We’ve made every effort to maintain consistency and protect our customers from additional costs wherever possible,” said Keith Slobodien, president. “We don’t know exactly what the future holds as market conditions continue to evolve, but we will continue monitoring the situation and do everything we can to support our customers while navigating these challenges.”
One Midwest distributor who requested anonymity said it recently raised its delivery charges while also increasing its standard fuel surcharge as well. “We’ve also made adjustments to who qualifies for ‘free delivery,’ putting some standards in place and eliminating free delivery for accounts that are not meeting the threshold,” the distributor executive said. “That’s how we’ve addressed the issue at this point.”
Significant costs
NRF said it plans to optimize truck routes, maximize delivery loads and consolidate shipments to improve efficiencies.
Owings Mills, Md.-based Elias Wilf uses more than 20,000 gallons monthly, which at this point translates to over $30,000 in cost increases in just one month— and still climbing. To make matters worse, the company is hit with almost immediate fuel surcharges on incoming material. “So distributors are getting it both ways, in and out,” said Jeff Striegel, president, Elias Wilf. “We are currently evaluating how to mitigate this unexpected situation; however, it simply isn’t possible to fully pass this level of increase onto our customers this quickly. It certainly helps that we are running as highly efficient delivery system as possible, along with aggressive integration of technology, to be able to absorb it at the moment.”
NRF Distributors, based in Augusta, Maine, acknowledged that rising fuel prices have had a significant impact on its transportation costs. “While we’ve worked hard to absorb as much of these increased costs as possible, we’ve had to adjust our freight charges to customers to reflect the higher cost of transportation,” said Terry Gray, senior vice president of marketing. “Despite these challenges, we remain committed to providing the reliable delivery service and exceptional customer support our customers have come to expect.”
In the same vein, Top 5 distributor All Surfaces is weathering the storm by focusing on service. “While market conditions may fluctuate, companies that invest in their people, infrastructure and execution are best positioned to navigate these challenges,” said CEO John DeYoung.