It’s that time of year when shippers are beginning to see the effects of General Rate Increases (GRI). This year, both FedEx and UPS are raising their rates by 5.9%, both of which increases are now in force.
General Rate Increases help carriers account for the rising cost to serve shippers, year over year, similar to inflation. Other factors that account for GRIs is the rising cost of wages, equipment maintenance, technology innovations and improvements, and operational expenses. General Rate Increases have also become the industry standard between UPS and FedEx.
GRI vs. Surcharge
One area that shippers need understand that any surcharges or accessorial fees added by carriers throughout the calendar year are not reflected in the 5.9% increase. Meaning that each additional surcharge or accessorial fee adds to the 5.9% increase. Therefore, only budgeting for a 5.9% increase for shipping expenses will come back around. Some shippers have experienced actual yearly increases upwards of 25% when the GRIs as well as all surcharges and accessorial fees implemented throughout the year are accounted for. This undoubtedly leads to operational and financial issues for shippers.
Although regional carriers, such as Lone Star Overnight, do implement a standard GRI of 5.9%, their overall shipping costs can be more affordable than major carriers.
Regional carriers like OnTrac and LaserShip, which are now merged via LaserShip’s $1.3 billion acquisition of OnTrac late last year, are also implementing their own GRI and surcharges to handle increasing costs to serve customers.
Shippers should always keep the possibility of bringing on a regional carrier, or two, as an option as they can be more responsive and economical.
Although exactly what surcharges and accessorial fees that carriers will announce throughout the year is unknown, historical data, specifically the shipper's own historical carrier invoice data is essential for determining what to expect in the future.
Rate charts, shipping agreement jargon, and overall verbiage from the carriers can be difficult to navigate, making expertise on carrier agreements very valuable to a shipper trying to navigate the arena.