Wednesday, April 30, 2008

Freight Allowances and Fuel Surcharges for Beverage Distributors

Freight Allowance or Fuel Surcharge? I find these terms going through my head twenty-four hours a day. A freight allowance is usually passed down to beverage distributors from their suppliers to alleviate the financial burden of high freight rates. Freight Allowances are also used to equalize FOB’s for beverage distributors located long distances from where the products are produced and shipped. A fuel surcharge is an incremental charge added to the total invoice from a beverage distributor to a retail establishment. If your company is not receiving freight allowances or passing on a fuel surcharge to your customers, you need to ask yourself some serious questions.

Freight Allowances

Many beverage distributors receive freight allowances from their suppliers. If you are not receiving them, you need to demand an allowance from your suppliers. I have heard and seen instances of beverage distributors in California, Texas, and Florida receiving substantial freight allowances from many well-known suppliers. If your suppliers are doing this for one distributor, they should be doing it for all.

Fuel Surcharges

Some distributors, including myself, have added $1.00 and $2.00 fuel surcharges to retail invoices. There has been some backlash from the suppliers and major chains, but overall many retailers have come to expect a fuel surcharge. I am considering changing my surcharge to a percentage of the total invoice. It will probably be 2% to 2.5% of the total invoice cost.

With rising diesel and gasoline costs to beverage distributors, make sure you start asking for freight allowances and adding fuel surcharges now. Fuel for our trucks will never be cheaper than it is now. And that causes many sleepless nights for me.

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