Beginning next month, Ingram Micro (Nasdaq: IM) channel partners around the world will see increased freight charges. Company executives are citing rising fuel and travel costs for the increase.
Deborah Brown, director of marketing at Ingram Micro Canada, said the distributor has decided to change its freight policies across all of its global regions.
“For Canada, we are in the process of developing a fair and equitable policy that will balance our need to address the rising costs of fuel and transportation without compromising service levels,” Brown said. “As part of this policy change, we are reviewing the freight requirements of all customers, regardless of business size or product ordering history.”
The Santa Ana, Calif.-based distributor will be increasing the minimum requirements of orders in order to qualify for free shipping. Thresholds will increase by $200 and $600, and on top of that, a $2 handling fee will also be added on all invoice orders. These changes will take effect beginning Sept. 2.
Michelle Warren, president of Toronto-based IT consultancy firm, MW Research and Consulting, said it’s no surprise that Ingram Micro is adjusting its freight costs to help balance the rising costs of doing business in today’s economy.
“It’s difficult for companies to absorb those extra costs,” she said. “Ultimately I think end-users will end up being the ones paying for increased fuel costs. Even if the cost only goes up by $1, that extra money will still go into the price of the products.”
With added costs and increased minimum orders being introduced by Ingram Micro, Warren said partners may also change their purchasing patterns with the distributor. For example, a partner who normally purchases two times a month, may decide to only make one big purchase each month, she said.
“Resellers are out to provide good business opportunities,” she added. “Resellers will have to either pay a bit more, or they’ll have to increase their order size. I imagine they’ll try to minimize costs as long as they can but probably in January, extra costs will be unavoidable and will get passed down to the customers.”
For distributor D&H’s Canadian operations based in Mississauga, Ont., Greg Tobin, general manager for D&H Canada, said the company will not be changing any of its freight policies.
“While we see the progressively high costs of fuel as having (a) significant impact to the profitability of the channel, D&H Canada will not be passing along any new charges to its business partners,” Tobin said. “Our intention is to hold to our existing terms and conditions regarding freight and handling costs.”
Similarly, Synnex Canada Ltd., will also not be changing any of its freight charges at the moment. Jim Estill, CEO for Synnex Canada, said because the distributor has warehouses in Halifax, Toronto, Guelph, Ont., Calgary and Vancouver, it is able to leverage lower costs since inventory is stocked across the country.
“We are not making any changes at this time as we have seen the price of gas drop back,” Estill said. “Synnex has more warehouses so freight has less impact on us. Our low-cost model is optimized to reduce shipping costs.”
But even still, Warren anticipates that it will only be a matter of time before other distributors start following Ingram Micro’s increased freight charges suit.
“It’s just an increased cost of doing business,” Warren said. “We’re in a climate now where companies can now charge to do business when about five years ago, costs weren’t really being discussed.”
