The True Impact of a General Rate Increase (GRI)

Posted by George Muha on Nov 10, 2015 10:48:27 AM

I feel the need to apologize for my industry's apparent obsession with lack of transparency.  Call it maturity (it's not that trust me), but the older I get the less patience I have for shams and shell games - something I can't stand about the logistics and transportation space I've worked in for nearly 20-years.  One flaming hot example of this is the general rate increases (GRIs) the less-than-carriers announce every ten or so months.  

Con-way just broke the seal with their announcement of their 4.9% increase on October 19th - and now you can count on all the others to follow suit.  Okay Muha, 4.9% isn't awful - especially when you consider the lack of capacity, economy, driver shortage, etc.  Yes, I would agree that 4.9% isn't that horrible of a rate hike considering the above.  However, it's likely that 4.9% general rate increase is a fraction of the real impact to every shipper reading this. 

How the GRI's Work

Please allow me to help you understand how these GRIs work - so you can know how this increase really impacts your business.  When a less-than-truckload carrier takes a GRI what they are really doing is taking a "weighted average increase".  Basically a carrier evaluates their entire network to tweak their rates based the profitability of particular lanes and weight breaks. 

Then the carriers adjust their base rate and announce their GRI.  However, if you ship to a consuming market (like a city, where everyone lives and works - basically where you probably do must of your shipping), your increase might be 15% or 25% or whatever the carrier feels it needs to be as profitable as possible.  Sure, the carriers will implement no increase on areas where they have equipment that is needs to get returned.  So it averages itself out into a benign sounding 4.9%.

How KDL Helps Its Clients Avoid These Obscene Increases

You don't have to be a victim to the GRI.  Typically when its GRI time, you'll get a call from your local rep telling you that they are taking a 4.9% increase (or whatever it may be) and not to worry because your discount won't change and your minimum will go up a little bit.  RED FLAG ALERT:  The fact that your discount doesn't change yet your rates are going up should alert you to something fishy, don't ya think?  Think about that one for a minute.  Talk about lack of trasnparency.  

KDL would never allow it's clients fall prey to this game.  One of the many things we are proud about is the transparency to all aspects of freight carrier pricing to clients we provide freight management services for.  

Because of our buying power, expertise and relationships with less-than-truckload freight carriers, we are able to negotiate on our own tariff rates and keep rates locked in for an extended period of time.  Of course carriers are entitled to increases when the market dictates, but we would not allow one of our clients to take a general rate increase with no visibility of what the true impact is.  

Allow KDL Help Your Company 

In summary, the average mid-market company has a lot to keep up with besides freight rates.  Unfortunately the freight carriers use shippers' lack of expertise in this area to their benefit.  By managing pricing agreements, KDL helps shippers not only lower transportation rates but keep them low for years to come by keeping the spot light on the shady areas of the industry.  

Contact Us Today 

Go out our Contact Us page to schedule an introductory conversation with a KDL logistics expert today to understand how parntering with KDL can benefit your company.  

Topics: General Rate Increase, GRI

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