In modern freight transportation services, GRI stands for General Rate Increase. The GRI shipping term refers to the usual increase in fees that are applied to container shipping rates. As a shipper, it’s impossible to avoid rate increases at times, and while freight invoice audits help to catch errors, not knowing the facts behind GRIs will only open the doors to risk. However, there are measures, such as preemptive invoice auditing and strategic carrier management, that can help to minimize the impact of rate increases. This also helps with budgeting for unexpected costs to ensure your finance team isn’t caught off guard. To help your company keep total costs in check, this blog will dig into the fundamentals behind GRI shipping increases, what a GRI surcharge is and a few other things to know.
I. What GRI Stands for in Shipping
Before beginning any discussion on GRIs, it’s important to recognize the definition of and GRI meaning in shipping, A GRI can be applied by carriers that choose to apply the rate increase to their contract agreements. U.S. regulation requires that carriers notify shippers and other partners of a GRI at least 30 days in advance. This means most carriers choose to announce the rate increase on the first of the month so it takes effect the following month. For example, a GRI for shipping services that is announced on the first of June would go into effect no earlier than the first of July.
GRIs have historically been implemented on an annual basis. But over the past 18 months, GRIs and surcharges have become nearly synonymous with freight costs as a whole. Thus, it is important to remember that the GRI may vary significantly from month to month or at other time frames throughout the year. Some carriers choose to update rates only once or twice a year to keep things simpler for everyone involved. Other carriers want to stay as current and up to date as they can and update on a monthly basis if needed.
GRIs for 2021 and Prospects for 2022
The state of GRIs has proved to be anything but usual since early 2020. There has been a continuous expansion of e-commerce that has given rise to new surcharges and GRIs that fall outside of the typical plan for such increases. While understanding what a GRI stands for in shipping is great, it’s important to understand how these charges are shaping up for the remainder of 2021 and 2022. A few notable increases include:
- Higher-than-usual peak season surcharges for FedEx and UPS, ranging across service levels and with values of up to $62.40 per package for large packages or $250.00 for oversize UPS packages and $350 for oversize FedEx packages.
- Increased surcharges based on peaking factors, which are continually changing and subject to new strains on the industry. To date, current rate increases for GRIs and surcharges range from $1.15 to $6.15 per package based on February 2020 volume for FedEx.
- GRI surcharges for FedEx also have a similar range-$1.15 to $6.00 per package.
With the exception of FedEx, major carriers have yet to release data on expectations for annual GRI for shipping in 2022. With that in mind, FedEx has announced plans to increase fuel surcharges, add out-of-delivery or -pickup-area surcharges, as well as additional oversized packaging handling surcharges through Q1 2022.
The Difference Between a GRI and Surcharge
GRI serves as an adjustment of freight rates across trade routes, can be a specific trade route, or all available shipping lanes that are set for a specific time frame. GRIs most often rise in response to demand and supply within the supply chain. Local markets and global trade lines have a tremendous impact on rates and fluctuations within the network. The defining characteristic of a GRI is that it lasts for a longer period of time and continues for that entire established time.
On the other side of the coin is the well-known freight transport surcharge. These are short-term and often one-time fees applied to a specific order or shipment to cover extraneous expenses and costs. They can be based on a variety of factors such as the size of the load, how much a pallet weighs, how far a cargo container has to be carried, and where the final delivery destination location lies. These fees vary by shipment and can rise and fall more randomly than GRI rate changes tend to flow.
Regardless, the best way to look at the difference is to determine if there is a timed duration for which a surcharge or GRI is applicable. Most often, surcharges come with a set time frame, such as FedEx’s peak season fuel surcharge, while the GRI is listed as a broad stroke of increases, as reported by FedEx:
“FedEx Express shipping rates will increase by an average of 4.9% for U.S. domestic, U.S. export and U.S. import services.
FedEx Ground and FedEx Home Delivery shipping rates will increase by an average of 4.9%. FedEx SmartPost shipping rates will also increase.
FedEx Freight shipping rates will increase by an average of 4.9% for customers who use FXF PZONE and FXF EZONE, and by 5.9% for customers who use FXF 1000 and FXF 501 for shipments within the U.S. (including Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands) and between the contiguous U.S. and Canada. FedEx Freight shipping rates will also increase for shipments within Canada, within Mexico, and between the contiguous U.S. and Mexico.”
In this instance, FedEx did not specify an end date, but the company also was specific in that it involves all rates. If it had been around a peak surcharge, it would have denoted it as such with the phrases temporary or GRI surcharge.
II. Why Carriers Implement Higher and Higher GRI Shipping Rates
The simple truth behind the implementation of GRI shipping hikes goes back to the basic premise behind supply and demand. During periods of strong demand—for example, e-commerce growth or disruption-fueled buying habits to overstock on household goods— demand for truckers rises. In turn, wages must increase, and carriers are inevitably spending more money to complete transport. Those costs cannot simply be absorbed. As a result, the carrier creates a new surcharge or implements a GRI shipping increase to recoup and rebalance the network. This is especially important in times like today where carriers have almost unmatched control over shipping costs due to the high demand. Ultimately, if a shipper switches carriers, there will inevitably be another shipper ready to pay whatever the carrier is asking.
III. What Questions Shippers Should Ask to Prepare for GRIs
By staying well-informed and planning shipments and budgeting with potential GRI for shipping in mind, it is easier to plan and prepare for distribution capacity changes and rate fluctuations. Several key questions can help shippers prepare for the increased risk of a new GRI for shipping going into peak season and beyond:
- What are your most common service types? Knowing the shipping options a carrier offers can help shippers better prepare for possible rate increases. Certain modes and capacity options naturally are more prone to rate fluctuations and increases, and tracking this data helps shippers understand their exposure to each GRI and surcharge as well.
- Which surcharges are costing you the most? When shippers have a better understanding of where their own weak points are they can better guard against surprise fees. Identifying and monitoring known problem areas can help shippers see early warning signs to prepare for GRI changes.
- Can any costs be controlled operationally? Taking a critical look at expenses and seeing where operational costs can be trimmed and where bleed points lie can help control GRIs. As an example, providing carriers with bad data may result in added charges due to inaccurate data, but avoiding this problem in-house with high-quality data reduces risk of those surcharges and costs.
- Is your distribution network set up well? Knowing what to expect ahead of time can help make GRIs less shocking and surprising when they do occur. Small changes at a managerial level can lead to huge payoffs with fee reduction and stronger budgeting overall.
- Is DIM weight a continual issue? Keeping track of high-profile problems areas, such as DIM fees and other common expenses, can help mitigate the impact small GRI shipping term changes can have on the supply chain.
IV. How Internal and External Data Insights Help Mitigate GRIs
The good news is that even while increases occur, there are several ways that shippers can apply data to help mitigate them. These include:
- Aggregate and ingest a greater data sample set. More data amounts to a greater opportunity to connect the dots between in-house and external resources, finding ways to avoid extra expenses and reduce landed costs.
- Normalize data. Since data platforms and transportation management resources were created for countless different organizations, they’re not intuitively designed for apples-to-apples comparisons. This means shippers need to normalize the data to ensure it makes sense in the full context of the data set scrutinized.
- Analyze. This is perhaps the easiest step to realize as analyzing data helps shippers identify and report on differences in cost by zone, SKU, DC, lane or other granularities.
- Apply analytics to make strategic decisions. The insights gained through analytics give rise to make-or-break decisions with respect to carrier network expansion, consolidation of freight, zone skipping, hub injection and other ways to avoid extra expenses and perhaps lengthen the total transport time in favor of lower costs.
- Remember to audit invoices. Every carrier makes mistakes, and most invoices contain discrepancies that can be isolated and corrected to ensure you get what you expect and only pay for services rendered.
- Helps to hold carriers accountable with performance metrics and data-driven strategies. The last step to mitigating GRI shipping rate increases is using the data insights to hold carriers accountable for both their successes and their failures when necessary.
- Improve network optimization with data-backed management. Aggregating data, normalizing it, analyzing it for insights, and applying those insights can help shippers by modeling scenarios to identify volumes that can be shifted or otherwise changed to eliminate surcharges and added expenses.
Know the GRI Meaning in Shipping and How It Will Impact Your Enterprise by Partnering With Intelligent Audit
Prior to the capacity crunch of 2020, it would be common to see GRIs rise and fall during the validation period. However, general rate increases now tend to hold throughout the month and rates usually just keep going up rather than rising and falling. This point is critical for shippers to remember when budgeting for shipping rate fluctuations. Contact Intelligent Audit today to learn more about monitoring and planning for GRIs with smart freight management and logistics.