Hi Herbert, I see this is a high-emotion subject... ;-)

Let me relate a little of my past... I did a temp job when I was 
studying (about a decade ago in South Africa) at a "warehouse". What 
Digikey is to people in the electronics field, this warehouse was to 
people who run pharmacies. They bought bulk merchandise of everything 
you would expect in a pharmacy (from Coke (the pop) to chocolate, to  
shampoo, to tweezers to OTC drugs and prescription drugs).

Their model was: The customer is quoted the raw cost (from the bulk 
supplier) of the goods + markup + s&h. The markup depended on the 
"loyalty" of the customer with bigger customers having a lower markup. 
The markup is essentially the profit the warehouse makes.

S&H consisted of a complex formula. It was a statistical/analytical 
composite based on the combination of the cost of shipping from the 
supplier to the warehouse, as well as the shipping from the warehouse to 
the customer. The cost of the warehouse facility (rent, inventory 
management (conveyors, forklifts, etc), wages, depreciation, *loss* and 
*damages* and other overheads (advertising, catalogs, etc.)) was also 
incorporated in to the "handling" part of S&H. This S&H component was 
expressed to the customer as a delivery charge plus a non-negotiable 
percentage of the invoice total, with some exceptions (bulky but 
low-value items like toilet paper - where shipping  and storage are the 
main costs associated with the distribution...). One other cost to 
mention is the cost of invoicing and invoice tracking. It is not free to 
maintain a customer.

For tracking purposes, the "preferred" clients were able to get itemized 
billing where the item cost (raw + margin) and s&h fees were reported 
separately, together with a delivery charge that depended on the 
mechanism and volume of the delivery.

The warehouse set it's handling fees such that in aggregate, the 
handling fees covered the business operations each year. The accounting 
thus was quite simple... Shipping covers incoming and outgoing 
shipments, handling covers  all the capital and operational expenses, 
and the "markup" is *profit*.

Most customers were unaware that this is how the warehouse operated, 
instead, they placed an order, and were quoted a price + S&H. The price 
was always really good, but the S&H sometimes came as a shock. A little 
explanation went a long way though.

This is not to say that the target of your complaint operates in the 
same way as the warehouse I worked at, but, from a business perspective, 
the breakdown of where your money goes is substantial.

A place like Digikey must have considerable warehouse overheads. It's 
handling costs must be substantial. I don't believe for a moment that $8 
Canadian covers the actual cost of  managing and maintaining the 
inventories that they must do in order to get next-business-day 
turnaround on most of their stock.

So, the bottom line is that the real costs of handling products are 
considerable. How the supplier/distributor wants to charge you for that 
handling is their choice, but, at some point the final customer (you) 
has to absorb that cost.

You have to understand that the costs are real, the profits are 
mandatory, and that different distributors will present their costs in 
different ways.

One thing is certain, the distributor has to cover *all* their costs, 
how they do it is what changes though.

You need to go with the distributor that meets your expectations though, 
whatever those may be.

Rolf

Herbert Graf wrote:
> On Mon, 2007-01-08 at 15:56 +0100, Wouter van Ooijen wrote:
>   
[snipped]
>>> charges to pad the bottom line.
>>>       
>> the 's' might have been a third, but who are you to know and decide what
>> the 'h' part of their fee should be?
>>     
>
> Simple, competitors and personal experience in the industry.
>
> I know roughly how much s/h SHOULD cost, both based on my own experience
> deriving those costs, and from what competitors charge for the same
> services. 
>
> I guess it boils down to dishonesty, in my book, if you're going to call
> a fee s/h, that's ALL it should be covering.
>
> TTYL
>
>   


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