Coping With Costs

Business has slowed down and costs are through the roof. It's a challenging time for channel relationships.

For every equipment rental, there are at least three major players involved. There is the manufacturer, the rental company and the end user. To be successful, each of these three must work in partnership and harmony, and each must get its needs met. Although a partnership approach is in everybody's best interests, every business must survive, which can be challenging even in good times, but especially so in times like these.

The cost of steel, copper, rubber for tires and numerous other components have, in the past year or two, faced double-digit increases and in the case of fuel, the increases have ventured into triple-digit territory. Manufacturers' margins have been seriously squeezed in recent years. At press time for this issue, CNH Global announced a 5-percent fuel surcharge. Other manufacturers have recently done the same and many more will raise prices to help defray their rising cost structure.

Rental companies understand these issues, but many still pressure manufacturers to avoid raising prices, or to give them better terms. Many rental companies would like to raise their rental rates, but with demand slowing down and too many machines in play for too few jobs, raising rates could risk losing customers. It's an endless circle and an uneasy partnership that must find a way to transcend the immediate price pressure and help one another to cut costs.

In the following pages, RER takes a look at the current cost environment and the strain it is putting on supply chain relationships.

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