New white paper: Understanding General Rate Increases.

A GRI, or General Rate Increase, is the average amount a less-than-truckload (LTL) carrier will increase their base shipping rates. Typically, industry leaders are the first to announce a GRI. When they do, others quickly follow. General rate increases happen for many reasons and the impacts can vary. Let’s take a look at why they occur and what you can do to avoid the effects.

Why general rate increases happen. 

The driving force behind recent GRIs is yield management. GRIs are intended to offset any increase in costs that carriers incur.

One cost area that has been a recent focus is the increased competition for drivers. In an effort to attract enough drivers to keep up with demand, carriers offer better pay and benefits, thus driving up their overhead. In turn, those costs get passed along to shippers through GRIs.

The impact of GRIs on freight shipping. 

In stable markets, GRIs typically happen only once a year in the fourth quarter. These annual rate increases typically fall between four and six percent, making them relatively easy for shippers to anticipate and plan for.

In volatile markets, however, GRIs can happen more often and with less notice. In recent years, multiple GRIs in a 12-month period have become standard. When such a GRI happens, shippers are left scrambling to adjust.

Avoiding the effects of GRIs. 

While many large shippers often negotiate long-term contracts that are not subject to GRIs, carriers are rarely willing to enter such negotiations with small- and medium-sized shippers. 

The easiest way for small players to avoid the headaches of a GRI is to work with a freight service provider. Freight service providers negotiate agreements with the major LTL carriers that are unaffected by GRIs (and often far lower than standard LTL rates) and can therefore offer shippers pricing predictability.

Working with a freight service provider not only offers the greatest pricing predictability, it also offers access to their expertise in navigating all the other factors that go into LTL shipping – like correctly pulling out bills of lading, efficiently packaging your goods, and more. Additionally, many freight service providers offer multiple carriers to choose from and will provide guidance on selecting the LTL carrier that is the right solution for each shipment. 

Final thoughts.

Read our Understanding GRIs white paper for an in-depth look into the world of GRIs. Learn why GRIs exist, along with their impact on the freight shipping industry and how you can better prepare yourself to withstand these effects.

Image credit: iStock