25 Oct Freight Cost Analysis – Prepare Now For Freight Rate Increases
Freight cost analysis is an indispensable SSI service that answers the perennial question: How much is this really going to cost me? You need an accurate answer to this question now more than ever. After a year of unprecedented disruptions and delays, leaders who are responsible for supply chain, operations, logistics, shipping, and finance are finding it particularly difficult to plan for the year ahead. Of note, an industry expert at Moody’s Analytics believes that supply chain problems will get worse before they get better. 1
Demand across all modes of shipping remains high and capacity is unusually tight. So, if your carriers have not already announced their general rate increases (GRIs) for next year, they almost certainly will soon.
Unfortunately, the vast array of fees, surcharges, zone charges and other accessorials that carriers tack on to a GRI makes it difficult for shippers to know the real-world impact of these costs. That’s where SSI comes in. Upon request, our industry experts can create for you a thorough cost analysis for your parcel, trucking, ocean or air-freight programs.
FREIGHT COST ANALYSIS FOR PARCEL SHIPPERS
According to a Wall Street Journal article, shipping rates are rising faster now than they have in nearly a decade. FedEx already announced a 5.9% GRI that will go into effect in January. 2 Strikingly, this FedEx GRI is 20% higher than last year. DHL Express also recently announced a 5.9% GRI and UPS is expected to make a similar announcement soon (we will keep you posted in our blog after the UPS declaration is made).
Back to FedEx – SSI provided an overview of the carrier’s GRI in a previous SSI blog post. In summary, the carrier announced plans to increase its Express and Ground prices by an average of 5.9% in 2022. In addition, FedEx will make an adjustment to its Fuel surcharge table trigger points that will result in a 1.75% Fuel surcharge increase for both of these services. FedEx also announced logic changes that will create a zonal structure for Additional Handling and Oversized packages, while adding a new surcharge for Ground Economy packages.
Further, Priority and Standard Overnight shipments for zones 2-4 will increase by 7.1% or more. Express Saver rates for zones 2-4 will increase by as much as 9.8%. Ground service rates will increase by about 6.0% across all zones. And the ground minimum will change from $8.76 per package to $9.36 per package – an increase of 6.8%. 3
The summary alone is a lot to absorb, isn’t it? Contact SSI to request your parcel shipping cost analysis.
FREIGHT COST ANALYSIS FOR TRUCKLOAD & LTL SHIPPERS
As reported by Transport Dive, the “rate per mile in the TL market is set to grow through the end of 2021, according to the recently launched Cowen/AFS Truckload Freight Index. On the LTL side, the report projected that rate per pound will grow sequentially in Q4, despite the fact that weight per shipment has been decreasing since March.” 4 To learn more, download your own copy of the Cowen/AFS Truckload Freight Index.
Contract freight rates from U.S. trucking carriers are expected to continue a steady upward climb in 2022. Remarkably, the delta between spot rates and contract rates is closing. Some contract rates in Q4 are up an astonishing 20% year-over-year. 5
Old Dominion recently reported a 17.3% increase in LTL shipments year-over-year while recording a daily revenue increase of 29.1% in the same timeframe. 6
Of note, 75% of truckload carrier leaders are anticipating at least a 5% increase in rates of 2022. However, only half of shippers are expecting rate increases that high. Why are the carriers so confident? Because even after significant percentage increases last year, capacity remains tight. 7
Unfortunately, with demand high and capacity full, the carriers are in the proverbial driver’s seat before you even get to the negotiating table. Most shippers know they need to lock in contract rates, because there really is no telling how high trucking spot-market rates will rise next year. However, before you sign on the dotted line, we can provide you with precise figures on what each of your carrier’s proposed rates actually mean to your business.
Contact SSI to receive your Truckload and LTL shipping freight cost analysis.
CONNECT WITH SSI FOR EXPERT FREIGHT COST ANALYSIS
For most shippers, determining for themselves the actual cost impact of each of their carrier GRIs is confusing, complicated, and time-consuming. In fact, many intelligent people make the mistake of underestimating how a general rate increase will impact their business.
With an SSI freight cost analysis, you will receive a real-world understanding of how each GRI will impact your freight spend. Gain a competitive edge by being well informed and armed with data insights so you can negotiate optimal carrier terms based on your own business needs, not the carrier’s.
Contact SSI to connect with one of our freight cost analysis experts today.
FREIGHT AUDIT & FREIGHT PAYMENT FOR GLOBAL SHIPPERS
SSI provides global, multi-modal freight audit services for global shippers. We also provide global freight payment services and process freight bills from multiple languages, in the world’s most traded currencies. Many of our customers have complex global supply chains. To learn more about our full capabilities or to get pricing for these services, contact SSI.
1. Holly Ellyatt, “Supply chain chaos is already hitting global growth. And it’s about to get worse”, October 18, 2021, as published by CNBC.
2. Paul Ziobro, “FedEx, UPS Rate Rises Are Making Online Shopping More Expensive”, September 20, 2021, as published by The Wall Street Journal.
3. “FedEx Announces Its 2022 General Rate Increase (GRI)”, September 29, 2021, as published by AFS.
4. S.L. Fuller, Editor, “Trucking expects LTL, TL rates to soar through 2021”, October 15, 2021, as published by Transport Dive. Note: You may download the latest Cowen/AFS Freight Index report here.
5. Tony Mulvey, “Carriers firmly grasp pricing power as volume levels slide”, October 15, 2021, as published by FreightWaves.
6. Jim Stinson, Senior Reporter, “Old Dominion update indicates LTL is off like a rocket in Q3”, September 10, 2021, as published by Transport Dive.
7. Todd Maiden, Finance Editor “Up 5% may not be enough for truckload rates in 2022”, September 15, 2021, as published by FreightWaves.