The Yellow companies, including Reddaway, Holland, YRC Freight, and New Penn carried out a 5.9% general rate increase (GRI) in base rates for non-contractual shipments in Canada and the US.
Effective November 8, 2021, this GRI aims to balance the economic impact of rising supply costs and new rules across the shipping and transportation sector. It also helps support enhancements to capacity and customer experience.
The international freight industry is highly competitive, so when it comes to standing out as a company, a shipping carrier must offer the best routes and prices. In many cases, competitors may follow suit. This trend continues until rates drop and shipping lines decide to recover and increase their rates.
The larger, more established carriers will determine their rates first. Other carriers often follow suit to stay competitive. In some cases, there will be some outliers that may set their rates slightly lower or higher. But the majority will mirror the prices of the larger carriers.
Shipping and freight companies also raise their prices to improve their services and adjust to increased business costs. The increase allows them to fund investments in new technology, machinery, and driver training and recruitment. In turn, these investments will allow them to exceed customer demands and stay competitive in an ever-evolving marketplace.
Given the effects of costly shipping rates on the revenue of retailers and merchants, firms must learn how to manage GRIs effectively. In this guide, we walk you through the impact of GRI on trading and what businesses can do to prepare for changes in shipping costs.
What is GRI in shipping?
A GRI is the average increase of base shipping rates of parcel and ocean carriers across all or certain trade routes during a specific period. The average GRI in the shipping sector is around 4-6% each year and is often influenced by the supply and demand chain.
GRIs are typically announced in October-November of the previous year. This way, shippers have ample time to prepare for the increase. GRIs remain consistent across the industry except for some minor differences between several carriers for competition.
Common factors that contribute to the GRI include increases in driver wages, insurance costs, and other operational expenses. Replacing older equipment such as trucks, computers, and tracking and communication systems can also drive prices up.
General rate increases to expect in 2022
The U.S. Postal Service stuck to a modest 3.1% increase in shipping services that took effect January 2022. FedEx also announced a 5.9% increase that’s bound to hit the profit margins of many merchants and e-commerce brands.
The General Rate Increase will affect shippers in different ways. Shippers who have been customers for years will typically forecast a 4-6% price uptick every year when creating their shipping budget. In doing so, they may be less impacted by the GRI.
New shippers are usually the ones who are unprepared initially. Smaller and medium-sized companies that do not have contracts in place with larger carriers also face the greatest impact from GRIs.
It’s critical to understand where GRIs are going to impact your business in 2022. For instance, brands that are regularly shipping large parcels will likely see a significant rate increase this year. It may be wise to consider a flat-rate shipping model or other ways to pack and streamline your parcels.
To protect your profit margins, factor in the following areas when optimizing shipping rates for both speed and cost:
- Rural delivery
- Residential delivery
- Priority service levels
- DIM weight
The difference between general rate increase and peak season surcharge
Unlike a GRI, a Peak Season Surcharge (PSS) is a short-term growth in base shipping rates to aid carriers with increasing demand and operational costs. Unlike GRIs that take the form of percentage increases, a PSS is a flat fee applied to each parcel.
PSS is typically implemented during the holiday season, when more retail sales add short-term pressure on shipping networks.
However, the COVID-19 pandemic has triggered a continuous wave of peak season surcharges. Amid rising e-commerce growth, supply chain disruptions, and high parcel volumes, it’s best to expect temporary surcharges throughout the year.
Minimize the impact of GRI with Reveel
When carriers implement rate increases, it’s hard to forecast how badly it will hurt your profits.
With Reveel, you’ll gain access to a parcel shipping intelligence platform that alerts you to when General Rate Increases are coming and how much to expect. It transforms complex shipping data into clear, actionable steps to help you save time and costs.
With simulation and rate modeling features, you can track the actual effect of rate increases, surcharges, and spend changes to your parcel shipping.
At Reveel, we remove the guesswork out of critical shipping decisions. We help you streamline processes and maximize potential savings wherever you are in your carrier agreement cycle. Book a demo now and take control of all your shipping needs and profit margins.
The Reveel App uses AI and machine learning to provide an unparalleled look into what’s impacting your bottom line. Through invoice audits, AI and Machine Learning technology, and rate modeling/simulations, you can see the health of your operation and assess pricing changes from parcel carriers like FedEx and UPS. Sign up for a free Reveel account today to see how you can leverage automation to synthesize your data, ship more for less, and reduce the time needed to identify issues and action items.
