WTN Services- Further Fuel Surcharge increase Advisory for June 08 and mitigation factors 5_21_08
As further follow-up to the competitive long term outlook and pricing pressure with wine shipping and fulfillment. FedEx and UPS has announced that the Express Fuel surcharge will change from 25% in May 08 to 28% for June 08, which is a 9.5% Increase since March 08.
More than ever the need for a bi-coastal solution comes to play, due to the cost of fuel causing a significantly negative impact on the cost of doing business. These cost pressures will have negative impact on margins for clients that do not act further eroding wine club retention rates, if wineries do not take mitigation factors. As a partner concerned about our client margins, we’d strongly encourage you to help us get wine club products into WTN Services sooner and take advantage of mitigation efforts of our bi-coastal fulfillment solution. Let’s work on a co-ordinated proactive plan, so that we can fulfill most clubs UPS ground via the bi-coastal method saving you from margin erosion. The benefit is 75% of the consumer base can flip to UPS ground for delivery within two days to the consumer and the difference in fuel surcharge is 17.55% verses the 2 Day air rates. However, the responsibility you our valued client or prospect has, is coordination and pre-planning to get products to us, so we can cross country the wine economically via refrigerated trucks or refrigerated rail to our east coast distribution center for timely fulfillment.
On Monday May 19th, Goldman Sachs predicted that Oil would average $141 or higher a barrel for the second half of 2008.”Goldman analyst Arjun N. Murti wrote in a report earlier this month that “the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.'’ Our internal 1- 1800Flowers supply chain leaders have suggested that “The fastest way to mitigate this is to transition packages from Air to Ground– Based on industry standards, conversion from Express to Ground, can decrease packages cost by a minimum of 26% per package.”WTN Services is concerned about the long term implications on the wine industry due to these pricing pressures. We believe that our clients that can best manage their supply chain and take advantage of the opportunity for bi-coastal mitigation sooner, will be the clients that survive the storm of these increased pricing pressures with margin neutrality and less club member erosion.Please let’s meet and review how we can fast track opportunities for bi-coastal logistics services to mitigate the risks. On a side note, not sure if you saw our press today, but WTN Services is working hard in partnering with sustainable product suppliers…
Let’s catch up soon,
Chris
Chris Edwards
Vice President & General Manager
WTN Services™
a division of 1800Flowers
2545 Napa Valley Corporate Drive Ste F
Napa Ca 94558
707.265.2934
cedwards@winetasting.com
www.wtnservices.com
www.winetasting.com
www.1800flowers.com
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