What is General Rate Increase in shipping and how online service providers can assist.
July 21, 2017
Yes, it’s still summer, but fall is on its way, which means General Rate Increases (GRIs) will soon follow. A General Rate Increase is the average increase of base shipping rates from carriers. Although some may consider the increase unnecessary, it’s all dictated by the supply and demand chain with the average increase around 4-6% each year.
Who do GRIs impact the most?
First, a GRI has to be established. Carriers raise their rates for many reasons, often times fuel, equipment, technology and demand of drivers play the biggest role. Typically, the bigger carriers will determine their rates first and in order to stay competitive, other carriers must follow suit. Occasionally, there will be a few outliers, with some setting theirs slightly lower or higher, but the majority will equal that of the larger carriers. Small and medium sized shippers who do not have contracts in place with the more competitive carriers will experience the greatest impact from GRIs.
On the other end of the spectrum, most LTL freight shipments that are moved through large shipper contracts are not impacted to the same degree by GRIs. Large customers and online service providers will often negotiate special rates that lessen the blow of GRIs significantly. Companies that choose to ship with an online freight service provider such as Freightquote will be much less impacted by GRIs.
Why do carriers raise rates?
GRIs were first established decades ago as a solution for carriers to balance their profits and losses in a specific manner. Freight shipping has always been in high demand, but with the latest advancements in the shipping industry, along with an ever-growing ecommerce network there has never been a more prominent time in the freight shipping industry. This has led to steady and annual increases from carriers resulting from the global trade market and supply and demand.
Carriers will inevitably attribute GRIs to their increasing costs, which include higher wages to drivers, as there is a shortage of nationwide drivers and escalating expenses for factors that include compliance, insurance, and maintenance.
According to numerous carriers, the rise and investments of new shipping technology have also considerably raised costs on equipment. One such piece of technology carriers are looking to adopt is a way to measure dimensions and weigh freight quicker. LTL carriers must meet the increasing demand for data integration and up-to-the-minute tracking. Haulers can expect to see lower costs down the road, but the upfront investment in these technological capabilities comes at a steep price.
Unfortunately, those hoping that the recent decline in fuel costs would ultimately result in a smaller GRI this year will be disappointed. The flux in fuel prices are reflected in carriers’ fuel surcharges, not their GRIs. The base rate charged for shipping is not typically not affected by the price of fuel.
How to minimize the impact of GRIs.
Small and medium sized companies that work directly with LTL carriers will often have to budget for GRIs every year. A simple and easy method for these companies to minimize the impact of GRIs is to work with an online service provider that already has pre-negotiated contracts with all of the carriers whose GRIs don’t adhere to the standard set by larger shipping lines. Freightquote works with numerous carriers and has agreements in place with many LTL carriers in order to provide the best possible shipping rate.
This years’ GRIs will soon be upon us. If you’re serious about reducing LTL carrier GRIs while also creating greater pricing predictability for your freight transportation, partner with Freightquote and find out how you can avoid GRIs.
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