01 Nov GRI Analysis – Get A Clear View Of Freight, Parcel Rate Increases
GRI analysis is an indispensable service offered by SSI for supply chain, transportation, logistics, operations, and finance executives. Our solution answers the perennial question: How much is this really going to cost me? At SSI, our experts provide straight answers so you get accurate insights on how each of your parcel, trucking, ocean and air-freight carrier’s general rate increase will impact next year’s freight spend.
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. Many intelligent people make the mistake of underestimating how a general rate increase will impact their business.
While most high-volume shippers have carrier contracts, the discounts they receive are often negotiated off of the annual GRI. So, whatever you are paying today, you can be sure that in most cases, the carrier plans to raise your rates next year.
Contact SSI to get a real-world understanding of how the higher rates from each of your carriers will impact your freight spend. Well informed and armed with data insights, you can negotiate terms based on your own business needs, not the carrier’s.
GRI ANALYSIS FOR PARCEL SHIPPERS
As reported by Modern Shipper, UPS recently announced a record 6.9% GRI that matches the previously released FedEx GRI (also a record 6.9%). This figure far exceeds the typical increase by these carriers of 4.9% or even last year’s 5.9% jolt.
As part of the 2023 changes, UPS will increase their late payment fee from 6% to 8%. In addition, the word, “peak” will be dropped from delivery surcharge references. Those levies will instead by referred to as “demand surcharges” which eliminate any seasonality connotation. 1 Some may infer this terminology provides UPS great leeway to levy the fee whenever they please and as long as the market will bear it.
In related parcel news, the latest Cowen/AFS Freight Index reveals useful insights about the FedEx rate increases.2 According to the report, the expected net impact to shippers will actually exceed 8.3% on average rather than 6.9%. Here are some key takeaways:
- Additional cost increases will be implemented via higher accessorial charges such as Delivery Area (8.2%), Residential Delivery (7.9%), and Additional Handling (16.2%)
- Although FedEx didn’t announce any changes to fuel surcharge tables in January, 2023, almost all rate changes will be compounded by the 3.5% net fuel surcharge increases that took effect in November, 2021
- Various peak/demand surcharges levied in 2022 by FedEx and UPS reflected YOY increases that ranged from 5% to 60%, adding a significant burden for shippers
According to a recent Wall Street Journal article, rising shipping costs are likely to squeeze profits for businesses of all sizes, which is prompting parcel shippers to get creative with their shipping and delivery processes. Some companies are removing bulky or heavy goods from their online stores. Other businesses are buying their own delivery vans.3
For your convenience, we are providing links to the latest published U.S. shipping rate changes by FedEx and UPS. However, the details are a lot to absorb and are difficult to analyze. Contact SSI to request a GRI analysis tailored to your real-world parcel shipping needs.
GRI ANALYSIS FOR TRUCKLOAD & LTL SHIPPERS
As reported by DC Velocity, Q3 truckload & LTL carrier rates have fallen less than volumes, “indicating surprising resilience in the market and the long shadow of truckload contract rates”. Of note, LTL accessorial charges per shipment jumped 8.4% in Q3 compared to the previous quarter.4
Most trucking carriers will announce their GRIs later in the year, which provides you precious little time to prepare for 2023 rate increases. Last year, when demand was hot, carriers were able to enact steep rate increases on many shippers.
To some extent, these carriers are dealing with many of the same economic and operational concerns as the parcel companies. Per the AFS/Cowen Freight Index, “truckload carriers are likely to face more challenges in maintaining their revenue growth in the next several quarters.”5
As your freight carriers announce their GRIs, let’s talk. We can provide you precise figures on what each of your carrier’s proposed rates mean to your business.
GRI ANALYSIS FOR GLOBAL SHIPPERS
For global shippers, there remains a cloud of uncertainty hanging over 2023. Fortunately, ING’s 2023 trade outlook provides relevant insights. As you may have heard, ocean container-shipping spot rates are plummeting. Yet, Maersk reported recently that 71% of their shipments were fixed in long contracts. Other maritime carriers also locked in long-term contracts while rates were at record highs, which means many shippers will not benefit from the lower spot rates. 6
Demand for global air freight is declining in much of the world and so are rates. However, airlines continue to cancel flights due to labor shortages, which is reducing capacity. Surely, some shippers who turned to air cargo amidst recent supply chain disruptions will return to ocean shipping. Yet, for those shippers with hefty long-term ocean contracts, air cargo may become a relative bargain, especially when speed is essential. Further, shippers encountering unexpected supply chain disruptions in the year ahead may boost demand and rates for air freight. 7, 8
While seaport congestion and air freight volumes are currently declining, inland freight transportation delays across your supply chain may not abate until 2023. Further, factors such as high inflation, labor issues, the war in Ukraine, and fuel price/supply concerns may work together to influence rate and accessorial adjustments by ocean carriers and international air cargo providers. 9
SSI provides global, multi-modal freight audit services. We also provide global freight payment services and process freight bills from multiple languages, in the world’s most traded currencies. As such, many of our customers have complex global supply chains. So, if you need a multi-modal freight cost analysis on a global scale, contact SSI.
OTHER SSI SERVICES
SSI is committed to helping our customers save money and improve efficiencies. Ask about these valuable services available from SSI.
- Freight audit
- Parcel audit
- Global freight payment
- Freight rate benchmarking services
- Post-audit verification services
- LTL cost management
- Transportation management services
- Service level optimization analysis
- Claims management
1. Mark Solomon, “UPS hikes 2023 GRI by 6.9%, matching FedEx”, October 23, 2022, as published by Modern Shipper.
2, 5. “Cowen/AFS Freight Index”, October, 2022, AFS Logistics.
3. Esther Fung, “Rising Shipping Costs Prompt Businesses to Get Creative With Deliveries”, October 24, 2022, as published by The Wall Street Journal.
4. “Q4 Cowen/AFS Freight Index projects transportation market in flux”, October 18, 2022, as published by DC Velocity.
6, 9. Rico Luman and Inga Fechner, “Trade outlook 2023: slow steaming in rough waters”, October 13, 2022, as published by ING.
7. “Putzger perspective: Air cargo’s descent to normal”, September 5, 2022, as published by Air Cargo News.
8. Rebecca Jeffrey, “Putzger perspective: Air cargo’s tricky navigation”, October 5, 2022, as published by Air Cargo News.