How to save on freight
The most enduring channel slogan, apart from the "trusted adviser", is being a customer's "one-stop shop" for all their IT hardware, software and services.
Drop shipping and pre-delivery configuration by value-added distributors made it easier for resellers
to fulfil the promise of the one-stop shop.
"When drop shipping came in it definitely opened the doors for us being that one-stop shop for our customers. The introduction of the higher freight fees means we have to rethink that," says Mansfield.
For resellers that don't want to warehouse stock, they have to accept higher freight costs or abandon cheaper products.
"We in effect have to represent what is a fairly confusing freight matrix to our customers or we walk away from that part of the business and only deal with big ticket items," Mansfield says.
X Central now does take combined orders from several customers to its own premises, and then working in delivery with its four staff who are on the road most of the time, says Mansfield. "It's definitely an inconvenience to us," he says.
Warehousing may be an inevitable direction for resellers who deal in low-value consumables.
PCS Australia's Borg says warehousing through his distribution business is essential to minimising the cost of freight for his systems integration business.
"If I was just a retail outlet or a small reseller without my warehouse and without my logistics, I'd be a lot worse off. You'd be really hurting," says Borg. "Those charges, they really, really add up."
"Business sense would say [warehousing] would be the way to go," agrees Express Data's national distribution manager, Fernando Gutierrez.
"The reseller you buy from should carry run-rate items. And for the backorders that you do have, the cheaper the freight along the supply chain.
"Businesses these days want to run so lean and they are ordering things last-minute and paying for freight more and more times."
Ordering 20 cartridges instead of 10 may cost more up front and increase risk, but it could also save money, says Gutierrez. "You may think it's a bit of a gamble but it's there on the shelf and you pay the freight only once instead of two or three times," says Gutierrez. "If you can keep the freight under your 3-4 percent value of goods you're doing really well."
However, managing inventory adds a whole new dimension to a business; requiring forecasts, monitoring usage and history, and so on, not to mention extra office space.
It's worth minimising freight at every step in the supply chain. Although everyone expects next-day delivery, sometimes a customer is happy to wait a day and pay for a cheaper method of transport.
Express Data's Gutierrez says he reduced the distributor's reliance on air freight when he joined three years ago. The company was using Australian Air Express for land and air freight, and consequently Express Data was "paying a little bit too much at the time" for freight.
Gutierrez kept Australian Air Express for air freight and brought on Allied Express for road. He also preferred road deliveries for the east coast which reduced costs without extending delivery windows.
"Anywhere along the eastern seaboard can be serviced out of Sydney overnight on a road service a lot cheaper than an air service within the same delivery time," he says.
Other states such as Western Australia and South Australia require air freight for overnight delivery, but if a customer can wait two days he prefers to send by road.
"It's a matter of asking the reseller or customer whether they can wait," says Gutierrez.
Another option is to join a buyers' group and/or distribution specialist such as InterSell. InterSell provides resellers with e-commerce engines that plug directly into Ingram's backend systems and uses its 400 members to get better prices on common business expenses.
The company claims its resellers can ship freight up to 15 kilograms anywhere in the Sydney metro (including from Ingram to a customer) for just $7.50 through its deal with Australian Express.
One thing to watch out for are extra freight costs on backorders. If a reseller places an order for five NAS boxes but only two are in stock, some distributors will charge a freight fee for each single NASbox as they come into stock and are sent out.
Dicker Data doesn't charge for backorders as a general rule - but it reserves the right to do so.
Sales manager Chris Price says some resellers have ordered one item that is in stock and five that are out of stock to hit the free freight threshold (over $500). Once the in-stock item has been delivered they go online and cancel the order for the five out of stock items.
Charging for backorders "pisses a lot of small guys off", says Price. He says at other distributors the backorder charges are optional per customer - "there's just a screen that the account managers turn on and off". Larger customers don't pay freight on backorders, Price claims.
Pro Integration's MacNeill says that despite having several HP distributors to choose from, he has started placing more orders with Dell. Dell ships direct from the manufacturer with free freight for all orders, which makes the total price more competitive with vendors operating two-tier channels, according to MacNeill.
There are several truisms when it comes to freight. No-one likes to pay for it and there will always be protests when it rises. However, freight itself is only one element in using a distributor and Dicker Data's Price doubts whether freight increases at one distributor will cause it to lose a significant amount of business.
Price compares the ongoing freight debate to Australian politics. "There are a large amount of people are going to stay with Labor and a large amount of people that are going to stay with Liberal and then those people in the middle are the ones who are going to swing and it's the same with freight charges," he says.
"We'd be Labor because we're for the people. We're fighting for the small resellers," he laughs.
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