I am a executive of a specialty distribution business, in a effort to pass on additional handling costs we credit sales 3% then adjust inventory as needed. Proper policy?

Victor, need more info.

What do you mean by "additional" handling costs, vs normal handling costs?
What business and/or accounting problem are you trying to solve?

Your website indicates your company may take raw lumber and convert it into specialty wood products, so I guess there is a yield factor to account for (i.e. you lose some timber when you machine/mill it to produce a finished product).