‘The shared challenge of risks and costs’

    The battle to obtain, or hold on to, lines with retailers in 2022 has recently begun again. Which supplier will take the highest risk, or is willing to work against an insufficient contribution margin even?

    In a world that’s changed dramatically during the past few years, we’ll all have to do our bit to meet the challenges and be sympathetic towards all players in the chain.

    Everything is scarcer and, as a result, more expensive. How are we going to pay this bill? Can we save costs by joining forces? Could we increase the price of a bouquet of flowers in the shop a little (fair pricing), instead of keeping price levels for bouquets the same while everything in the chain is getting more expensive?

    Where exactly does the cost increase come from? International, and especially intercontinental, passenger travel is still limited, which means that the airfreight capacity is staying behind as well. Airfreight costs for the Nairobi – Amsterdam route have gone up, and it seems like the capacity is still decreasing even more, probably also because of the worldwide demand and supply.

    The resulting price increases, especially for freight from Asia to Western countries, are caused by a shortage of ocean containers. The goods will have to reach the market somehow – if not by sea, then by plane. In addition to the shortage of airfreight and ocean containers, all sorts of other costs within the chain are increasing too. Think for example of raw materials, packaging and labour.

    Some growers suggest there should be more direct flights to the distribution countries, without going via the Netherlands. However, it would require more wide-body aircrafts and more volume per destination for this to be viable. Growers who ship to the auction will be keeping a close eye on the market prices and air cargo costs, among other things. As long as prices are okay, they’ll continue to fly to Amsterdam. The supply is actually self-regulated otherwise.

    For the direct markets, where we, as service providers, pay the freight costs, it’s a matter of finding the right balance, but also of good communication within the chain. What are the rates and how can we share these costs, all the way to consumer level?

    For retail suppliers with annual contracts, it’s a matter of calculating the risks. It’s always best if you can meet and chat over a cup of coffee. And thankfully, this has been getting easier again lately.

    Tom Vermeer,

    Managing Director at Xpol

    Click here to read more blogs from Tom.

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