Wednesday, December 5, 2007

Transport Costs. Money making racket or cost covering excercise?

At a recent Green Forum meeting in KZN, the topic of transport costs was raised, & what various members in the industry do or work when it comes to this issue.

Make no mistake, transport has become a huge issue in all of our businesses, & there seems to be no industry standard when it comes to this.

An example:
If a landscaper purchases a truck load of 1000 3L groundcovers at a rate of R5.00 each, & the transport cost is 10% of the load (Fairly industry standard it seems), then the cost incurred for transport is R500.00.
This seems fine, until the same landscaper buys 1000 3L groundcovers, that now have Plant Breeders Rights on them, & cost an extra say R5.00(Ficticious figure because maths is not my strongpoint!). This means that the plants now cost R10.00 each, & the transport cost is now suddenly DOUBLE!
The supplier has not incurred any other additional costs in the delivery of this material, but yet he stands to pocket an extra R500.00 for nothing! Surely this is not ethical?

Some suppliers work the cost of transport into the cost of their material, & offer a "free delivery". In some instances, they actually penalise themselves by being more expensive than some other suppliers who charge transport separate to the cost of the material.

We all have our favourite suppliers of products, & in some instances we may overlook the cost of material or transport, because we know we are getting good service, & are therefore prepared to pay a little more.
To say; "Ag it doesn't matter, because we just build the cost into the resale price of the product", or, "The client pays for it.", is in my opionion extremely shortsighted.

We as an industry need to look into this, as part of an industry standard, because if we don't, we will forever be wallowing in the "This industry is going to the dogs" camp, & roll over & play dead.