While distributors appreciate their channel partners recognizing the impact of rising costs by way of the adjustment, many say it falls well short of making up for the significant dent rising costs have placed on the profitability of buy-back business.
Although the actual numbers differ by geography and other variables, many distributors say the combined cost of fuel, driver wages, and truck maintenance moved up by to 25% to 35% since the start of the year. Of concern is that the 10 cpg temporary adjustment represents only about half of the actual increases. Further, there are other costs (i.e., business insurance) associated with buy-back business that extend beyond fuel, driver wages, and truck maintenance and these costs too have increased.
With that, lubricants distributors remain perplexed as to how the majors that implemented the 10 cpg temporary adjustment arrived at that same seemingly arbitrary number.
At the same time, distributors say the move shows that some majors are making an effort to respond to the rapidly changing market conditions impacting distributor costs associated with national account business. Recognition of these realities is a welcome change and, in their views, potentially a good start to collaboratively developing more realistic, equitable and sustainable buy-back business models.