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 costs."

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.