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GTS Blog

What Is A General Rate Increase?

Posted by Ascent Global Logistics on Mar 31, 2017 10:12:53 AM

Group Transportation Services

Each spring, and sometimes multiple times per year, freight companies like UPS Freight release financial updates called general rate increases (GRIs).

 

What is a GRI?

A GRI occurs when a carrier announces an increase in freight rates within a given trade lane. Carriers raise their rates because of many reasons – gas prices often being the most prominent. This has a snowball effect on the rest of the transportation industry (think inflation). In order to stay competitive, other carriers need to increase their rates as well.

GRIs were first created decades ago to balance carrier profits and losses in a lane-specific manner. The following were taking into consideration:

- Fuel

- Equipment

-Technology

- Driver administration

Gone are the days when GRIs could impact up to 75% of a carrier’s client base. The current-day market warrants carrier clients more control; many have independent contracts which excuse them from any “general” rate increases. This means that as low as 30% of carrier client bases are impacted by GRIs.

Not only are clients not paying the GRIs, but carriers now have to spend additional time putting these special contracts together. Each one must be independently managed in regards to base pricing, accessorials, changes in base tariffs, and annual rate negotiations. This is a drain of time and money to carriers.

As GRIs become financially irrelevant to carriers, they must invest in analytics and dynamic costing models to protect their long-term sustainability.

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Topics: Freight