Thursday, March 12, 2009

Floating rates ?

While signing cheques for various service providers I noticed the fuel surcharge in courier invoices . These were raised when the oil prices shot up in 2008 . No sign of decline after the prices have plummeted thereafter to sub 50 $ a barrel . 


A bit like the interest rates on loans from the world's local bank .

If the idea is to share the risk and costs of underlying costs - then it must work both ways . Increase prices when costs rise . And reduce them proportionally when the costs decline. 

Interestingly none of these companies - the courier companies , the world's local bank attempt to increase value or the quality of customer experience in lieu of premiums over market prices and the underlying costs to which the rates are ostensibly linked .

Increasing prices and then holding on to them desperately is a quick way to boost short term profitability. A lousy way to build long term term relationships.

2 comments:

RAHUL AITHAL said...

What relationships????

kitchu said...

good article & we too going to take up this matter with our International couirer folks /same in the case of airlines cargo