What is Happening with General Rate Increases in 2015
What is happening with General Rate Increases in 2015?
In years past when an LTL carrier announced a general rate increase they would put out a press release, especially if the company was publicly traded. LTL carriers would also put the information up on its news section and a quick google search gave you all the information you needed to know. Nowadays that is not the case. Finding information on a GRI is a much trickier endeavor. From the carriers standpoint they are in a position that, despite an improving economy, they still are challenged with increasing their profitability. This is especially true with the largest national carriers whose investor briefings show growth but very slim margins. Now it seems that while they certainly need to increase pricing to keep up, they do so very quietly. Sometimes it takes weeks or months for SMB’s to notice the price difference as discounts stay the same but pricing is higher.
A general rate increase does not affect all shippers directly, mainly small to mid sized businesses on non contractual rates. This pushes even more business away from carrier direct pricing to 3PLs whose consolidated buying power makes them more attractive to SMBs. The cycle of GRI’s is getting shorter and shorter- from a full 12 months, down to 2 GRI’s in the same year for some carriers.
Effective October 19th, Con-way (recently required by XPO logistics) announced a 4.9% increase matching that of last year’s GRI announced in Oct 2014. This is an average increase. One zone might see an increase of over 10% while another might be only 2%, all depending on how the carrier is balancing volume in and out of certain lanes. When an LTL carrier announces a GRI the first things they look at are minimum charges for lighter shipments and supplemental charges.
The LTL carriers will announce several reasons why the general rate increase is justified. One of the main reasons we are seeing as of late is the driver shortage. Several carriers, Con-way included, announced they will increase their drivers pay to attract and retain the best drivers. They also found themselves in the same position as FedEx, where several terminals were voting whether or not to unionize, however the majority of terminals voted to stay non-union. In addition to the driver shortage, carriers are frankly in a much better position with the economy on the recovery. They can also be more selective with their freight, in addition to increasing rates so they can purchase new equipment and replace aging fleets.
Technology is also becoming a key driver in LTL carriers’ GRIs as more customers are seeking data integration and up to the minute tracing. The drivers have better technology at their disposal now to image paperwork right from the truck. Customers appreciate that they can see when they are the next stop on a drivers route and how far away the driver might be. More and more carriers are adopting technology that measures the dimensions faster, images the freight, and forklifts now even have built-in scales. This is especially vital to carriers success as they push toward dimensional pricing and away from the dated NMFC model. While all these features help carriers work faster and increase efficiency, all this new technology comes with a price.
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