Freight charges: A heavy load

Tuesday, January 31, 2006

LONGMONT, Colo. - Sunrise Medical has joined a growing list of HME manufacturers that have either raised their free-freight minimum or increased product prices to help offset the high cost of fuel.
As of Jan. 9, 2006, Sunrise increased is free-freight minimum on all non-Web orders from $250 to $1,000. (See related story for a detailed outline of the Sunrise changes.) Also in January, Nova Ortho-Med increased its free freight minimum from $600 to $800. And late last year, Shoprider added a $20 shipping fee for single-unit orders and boosted the price of its products by $20 to $30.
"If you think about our industry, it is a bunch of bulky bent metal and plastic and there is nothing more expensive to ship," said Nova CEO Sue Chen. "It has really hurt us so much on the bottom line absorbing these freight costs."
Invacare created a stir in August by raising its free-freight minimum for standard products from $1,000 to $1,500. For orders less than $1,500, Invacare charges a 5% shipping fee. (Invacare provides free shipping for custom manual chairs, seating and parts--products where providers typically have a difficult time meeting the minimum.)
Bundling orders to meet larger minimums reduces the total number of orders. In turn, that drives down substantially the costs associated with order processing, say manufacturers.
"At first, when Invacare announced that, there was some disappointment from customers," said Lou Slangen, Invacare's senior vice president of worldwide market development. "However, I think everyone now, including our competitors, realizes that we have to be in this (together) with our providers and figure out a program where we can minimize the freight costs for both of us."
Across the board, manufacturers have begun seeking out creative ways to minimize the burden of rising fuel/freight costs for themselves and their customers. In addition to rising its minimum, Nova Ortho-Med provides customers with tips intended to help them meet the minimum, such as adding accessories and rounding out product lines to improve sales, Chen said.
Other manufacturers have begun reconfiguring products and packaging to fit more goods in a smaller or same-size box. That allows manufacturers to pack more product into shipping containers, said Tom Tucker, Medline's vice president of sales for DME and respiratory.
"We've repackaged our line of suction catheters, getting them into a much smaller box and 100 per case vs. 50," Tucker said. "It may seem like a small thing, but it does add up."
To offset the rising cost of plastic, a petro-chemical product, Medline also has selectively increased the price of products that require a lot of plastic, Tucker said. Medline's free freight kicks in at $750 for most, but that can drop to as low as $350 if a provider allows the company to schedule deliveries--for example, every Monday.
Ideally, manufacturers said, they'd prefer not to raise freight fees and product prices, but in today's environment of high fuel costs, that's difficult if not impossible to do.
"We held off as long as we could," said Shoprider President David Lin. "We still invest heavily in R&D, and that is how we come up with new technologies that we think will benefit everyone involved. We don't make enough profits to be able to absorb the fuel costs."