Hi there, thank you again for your support of SCS this year. We really appreciate the opportunity to serve your business.
I am writing to let you know that unfortunately on the first of July 2017 we have to pass on a general rate increase of 2.25%. This is slightly higher than we would have liked and were hoping to come in well under 2% like we did last year however if you’re close to the market you’ll know this is at the bottom end of the scale with many competitors closer to and in many cases over the 3% mark. A key contributor this year was minimum wage again pushed up circa 4% in April this year (this compounds on last years increase which was also 4% ).
Couriers appear to have increased around the 2.6 % mark and I was surprised to learn some well known courier companies increasing their SI rates 9% earlier in the year citing increased costs related to the earthquake plus they are now adding an APA of circa 3% this year. I’m pleased to report that Courier Post did not do this (there was no increase related to the earthquake) and elected to absorb related costs to help NZ businesses which was really decent. A good demonstration of why we love working with and supporting CP.
A timely reminder that last year we were able to deliver a 0% increase on freight to SCS clients which we understand was unique in our industry and last year our APA was 1.25% excluding freight so an effective general rate increase of only 0.8% (last year) therefore over the last two years the effective/normalised increase has been circa 1.5%/annum or 3% over the 2 years, most people agree this is excellent considering the 8% increase in base labour (legislative minimum wage increases), a 4-6% in freight increases across the industry and 4% on rent (rent increases 2% per annum).
My expectation is that in 2018, despite forecast increasing pressure and probably another wage increase of similar levels we expect we will be able to manage below this years APA due partly on our ability to negotiate based on reasonable growth again, this year we are poised to grow another 20%.
We know that increases are never welcome and that there is continuing pressure on margins everywhere, especially in retail, we never take an increase lightly and there is a lot of work done before doing this. I will be releasing another blog shortly to explore some solutions I am working on regarding robotics and AGV’s (Autonomous Ground Vehicles) which will provide some hope in this area that SCS clients will find interesting, the goal is to reverse years of labour increases by > 10%, the quid pro quo will be “term” commitments to help support the investment. Stay tuned!
Once again we thank you for your support for SCS, our staff and partners.