General Rate Increase (GRI) Season is officially here and is top of mind for most Less-than-Truckload (LTL) shippers. The GRI season occurs on an annual basis and is when Less-than-Truckload carriers commonly increase rates. So, what should LTL shippers be aware of in order to control transportation costs?
GRIs are typically applied on a percentage basis. The percent increase is then added to the current rate contracted between the shipper and the LTL carrier. Over the past five years, the average GRI increase across the industry has been 5.9 percent. However, the final GRI percentage applied will vary depending upon the current market conditions, shipper, carrier, lane, weight, freight class, fuel, accessorials or any combination of these factors.
If your LTL rates are on a carrier’s current rate base and governed by their rules tariff, then you may be impacted by an annual GRI. Carriers are also required to provide notice to LTL shippers 30 days prior to implementation.
If you pay the freight charges for products that you sell to customers, GRIs will impact your profit margins. To help mitigate the GRI increase to the bottom line, some LTL shippers choose to increase the cost per unit or renegotiate terms of sale to shift the responsibility of transportation costs.
During the annual GRI process, carriers will also often update their general rules tariff, which defines and quantifies additional fees and surcharges for services that may be requested or required as part of the shipment.
Additionally, changes in the carrier’s General Rules Tariff could alter the surcharge responsibility specifications. For example, if the consignee makes a special request at the time of delivery, a change in the General Rule Tariff could alter who is responsible for paying the additional fee. A surcharge that previously was the consignee’s responsibility may now be the responsibility of the paying party. Examples include but are not limited to:
If you request an LTL quote before the day a GRI increase occurs, but schedule the shipment for pickup on or after the GRI implementation date, the freight bill is likely not to match the quoted amount and instead reflect the increased rate.
Fuel surcharges apply to all standard LTL shipments. This cost typically changes weekly on a sliding scale and is predetermined by the carrier. Carriers have the right to adjust this sliding scale/matrix at any time throughout the year. When planning and estimating transportation costs, as well as GRI impacts, shippers should also understand that fuel surcharges can drastically impact overall costs.
With the help of the Ascent team, you can benefit from industry experts who specialize in negotiating freight rates and mitigating GRIs. Our Carrier Negotiations solutions can help you reduce or eliminate rate increases through leveraged buying power. Contact our team to learn more about our Managed Transportation solutions.