"Because the combined Rheem and Ruud network of independent distributors represents the largest number of stocking locations in the industry, it was imperative that we acted quickly to help distributors handle shipments quickly.

"Rising fuel prices have also been another cost driver this year. A couple of years ago, we were paying motor carrier fuel surcharges in the range of 3 to 4 cents per mile. We are now routinely experiencing fuel surcharges of 13 cents and higher per mile. This is a cost that we cannot control, but we must seek efficient methods to manage their impact."

Sinkler added that consolidation of the trucking industry has also had a negative impact on

the number of dependable, high-quality motor carriers with available power units, trailer fleets, and qualified drivers. But he said Rheem and Ruud have been fortunate to develop solid partnerships with major North American trucking companies.

"Rheem is dealing with the logistical and raw material factors that have challenged the entire industry this year," he said.

"We have had to leverage our organizational nimbleness to quickly review, decide, and respond with effective solutions; and although unfortunate, increased fuel and raw material costs have caused price increases within our industry. It's a reality that we all must manage and control. We have tried to be proactive by providing our customers with the right information at the right time.

"Therefore, we have been actively communicating with our customers to ensure their awareness and understanding of the potential impact of these factors on their businesses.

"However, we continually strive to improve communications to our distributor, contractor, and vendor partners - and we rely on their good counsel to better our communications to them."

Trane's Dave Pannier said that one way of fighting the rising cost of transportation is to ensure that all truck space is fully utilized. Shipping partial loads not only wastes freight, he emphasized, but it also increases the risk of in-transit damage.

"We try and optimize our shipments by utilizing full trucks - and not ship out a lot of air," he said. "Recent trucking regulations aggravate the situation. We are feeling the increase in transportation costs. Instead of using traditional over-the-road haulers, we have started using more rail shipments. We carefully studied this option ahead of time to ensure that products arrive at their destination damage-free.

"Freight is a much smaller part of the cost pie than the direct material costs. Direct materials represent up to 20 times the cost of transportation for a typical system. This is a big problem because steel that used to cost $400 per ton is now costing $800-plus per ton."

Publication date: 11/22/2004