Glaziers Speak Out: On Fuel Surcharges
The rising costs of transportation and fuel have had a profound impact on the
glazing industry and brought about yet another challenge for today's glass and
glazing professionals. The advent of the "fuel surcharge" has had a
trickle-down effect from the manufacturer to the consumer. When manufacturers
incur additional costs, those costs are passed to the fabricators, who pass them
along to the contract glazier who has no choice but to pass it along to the consumer.
There was a time when prices would escalate a company would have to make a
decision on whether or not to pass additional costs along. Today, it's no long
a matter of "if" that additional cost will be passed along but "how
much" of that cost will be passed along down the line. The surcharge issue
has fueled debate and brought about much discussion among industry professionals.
Kevin Forman, project manager for W & W Glass, a large contract glazing
company serving the greater New York City metropolitan area, says surcharges are
something they are certainly seeing more of. Rising fuel and energy costs have
made these types of charges commonplace today. "Fuel surcharges have become
a part of the supplier's cost structure and they are passing them along as an
added line item to their invoices," he says. "We mostly see the charge
in the form of a percentage but some companies charge a flat fee to cover their
Operating from a small, rural area in southern Indiana, Larry Rodgers gets
hit with his share of surcharges because most of the companies from which he orders
glass and aluminum products are out of state. "We order a lot of glass from
Louisville Plate Glass in Kentucky for our commercial projects and have fuel surcharges
with every order," says Rodgers, president of Linton Glass Company, a full
service glass company in Linton, Ind. "The costs we are assessed depend upon
the cost of the fuel at the time of delivery. What I appreciate about Louisville
Plate Glass is they will lower their charge to us if their costs drop, unlike
a lot of other companies who don't lower them once they have been raised.
"However, a bigger problem that I face in my area that directly relates
to the surcharge issue is with my competition," continues Rodgers. "We
have a lot of mom-and-pop type operations that don't factor in these additional
costs to their bids nor raise their prices in a timely manner. I have to compete
against companies that haven't raised their prices in over a year. When they are
awarded the job because of the lower bid it hurts both of us. They may get the
job but they then operate at a loss and struggle to stay afloat. Meanwhile, we
lose the bid simply because of the difference in price in some cases. We have
to work harder for each and every job because our bid reflects the accurate costs
involved in doing the job. When it gets down to the pricing issue, we must emphasize
our reputation and quality so that we not only get the job but can also make a
little profit to stay alive."
"We have had to implement more increases this past year than we have in
the history of our company," adds Rodgers. "Typically, we increase prices
twice a year. This year, we had to raise prices six times on aluminum and four
times on glass to keep up with the escalating prices and surcharges. While glass
will fluctuate, once aluminum goes up, it never comes back down."
Jim Conley, president of Accent Glass & Mirror, a small glazing contractor
that focuses on renovation and rehabilitation throughout the state of Ohio and
contiguous states, feels fuel surcharges are an interesting way to get prices
up. "I personally see it as a way to raise your prices on your customers
without saying you are raising your prices. We handle the issue of surcharges
by factoring in the percentage we feel it will cost us during the time of the
initial bid and hope we are close in the end. Sometimes we are right on and sometimes
we fall short. If we fall short, we lose money and have to eat the shortfall."
"Surcharges are a way of life and consumers are getting hit with additional
surcharges for goods and services across the board," adds Conley. "Currently,
the surcharges on glass are at about the lowest [between 7.5 and 8.5 percent]
they have been for some time. They were really high over the summer months. The
bottom line is we look at surcharges as just a part of doing business today and
hope we can recoup that added cost with each job."
"We don't like surcharges any more than anyone else in our industry,"
says Fred Harter, branch manager of Royal Glass in Sacramento, Calif., a large
glazing contractor. "We don't like to pass those costs along but we can't
afford to absorb them either. It was difficult when 'surcharges' were first introduced
to us. For the estimates we had already quoted, we had to eat the additional costs.
While these surcharges [for energy, transportation, fuel, etc.] can fluctuate
up and down depending upon the economy and other market conditions, they have
been averaging around 7 percent lately. They are a necessary evil that has become
an accepted practice in our industry."
How are fuel surcharges affecting your operations?
Visit the USGlass/USGNN message boards at www.usglassmag.com/phpBB2
and tell us.