This time of the year often brings the hassle of general rate increases (GRI) For shippers, this is an average increase of the base shipping rates provided by carriers. This season has the expectancy to have a hectic shipping season as we near the holiday times. However, this time of year brings stress for shippers with parcel general rate increase and deciding which carrier to use. To combat the rising rates for this season, shippers can take the steps to prepare for the higher than usual rates and save in some areas. Looking at the market as a whole, “Global Courier, Express, and Parcel market size is estimated to grow at CAGR of 7% with USD 141.05 bn during the forecast period 2021-2025.” To see less of an effect from these increasing transportation spend fees and market size, shippers can prepare with proper data insights, visibility, and parcel shipping advisors. But first, it’s important to understand what these increases mean for the industry.
What Are Parcel General Rate Increases?
General rate increases (GRI) often begin in September or October every year; the rate usually increases from 4 to 6 percent annually. Such increases are expected and usually coincide with other business cost increases. For example, rising costs for products in retail stores or manufacturers raising the price for raw materials. Factors that can also increase rates include driver wages, insurance costs, maintenance, and other business operational costs.
Shippers must know that fuel costs do not play into general rate increases; however, they play a part in the carrier’s fuel surcharge. Certain carriers will often determine which rates become known first. Carriers see this as a competitive advantage to get their rates to shippers quickly. The companies that will have the worst experience with GRIs are usually small or medium-sized shippers due to not having contracts with the inclined competitive carriers.
Why New Parcel Increases May Still Occur in the Run to Christmas
As companies have already had a busier year than usual, Christmas and peak season will bring even more stress. Such factors that can affect the rise of parcel general rate increase can be replacing older equipment, trucks, computers, communication systems, and tracking systems. Despite the slowdown of volatility that will likely occur, shippers must still prepare and adapt to new changes through e-commerce. An example may pertain to the global shipping crisis already occurring with most shipments, affecting other costs. Pricing for services such as cost to transport, supplies for packages, and labor are all on the rise.
How to Prepare for Additional Parcel GRI
Around this time of year, shippers often face the difficulties of GRI and higher transportation spend from carriers. Most companies often think they must pay the parcel GRI without any other option or thought. However, shippers have the opportunity to have the best parcel rate for the frenetic season with the proper preparations.
1. Know What GRIs Affect Your Shipment
To have the best idea of which carrier to work with this season, shippers must keep an eye out for the shipping rates to become known. Once they know the rates, shippers can decide which carrier to work with based on their rates and the types of deliveries needed. Although rate increases are top of mind, remember that other accessorial fees will also be applied to some or many of your shipments, thus adding another level of complexity to understand full actual costs. With knowledge of the carrier’s rates and the services provided, shippers can fully understand who can best help their peak season be less stressful and provide them with the optimal delivery method.
2. Aggregate and Normalize Data
With ready access to accurate and complete data, shippers can compare carriers, work ethics, and rates side by side. During such an important season, having end-to-end visibility and data insight into the carriers can make or break the shipper’s season. Additionally, shippers can look at the carrier’s reliability, services offered, capacity, days in transit, delivery times, exceptions, and much more. With the constant need for deliveries and a wide range of capacity, working with the best carrier allows shippers to manage loads. Furthermore, understanding the carrier’s records regarding reliability and time can show how efficient they are for various destinations. Having such information can help shippers make an advanced decision on who to use during such a vital season.
3. Use Analytics to Track Parcel Spend by Carrier, Mode, and Market
Shippers can use proper predictive and prescriptive analytics to evaluate the capabilities of a variety of carriers. This data can provide the information to see how the carrier can operate with different modes and what products they ship in various markets. Such information can help see parcel shipping carriers, service level, modes available, cost per unit, and so much more. Shippers must remember to have proper technology for data analytics that can be centralized and properly cleansed.
4. Track Performance of Parcel Carriers
It is important to track the performance of the parcel carriers and decide which one to use for the important season. As parcel general rate increase occurs at this time of the year especially, shippers need carrier performance information. Shippers must look at information about the carriers in real-time such as:
- Monitor driver performance
- Routing guide compliance
- Capacity issues
- Amount of damage claims
- On-time performance
- Invoice accuracy
- Accessorials as a percent of freight
This data can allow shippers to get the best value for their money and see opportunities to improve other carriers.
5. Stay on the Lookout for Money-Back Guarantee Savings Opportunities
Moneyback guarantees can provide shippers with a way to make back some of their money during the surge of higher transportation spending. Incorrectly billed accessorials, freight charges, volume discounts, and more are all data points to look out for. In addition, this includes chargebacks, which are fines or penalties that can affect the vendor. Chargebacks occur with failing to meet freight or warehousing standards through retailers or shippers. Examples include failure to meet same-day shipment or freight terms and even for unauthorized air freight. Such penalties for proper freight demands can help shippers earn back some of the money they lost due to the rise of GRIs.
6. Consider Other Creative Fulfillment Strategies
Streamlining order picking and packing with advanced automation through robotics can lead to greater efficiencies. Robotics can provide a significant addition to the process by providing faster counterparts than humans. Additionally, all robot activity data can go toward high priority network goals for supply chain and inventory management. Another option to improve fulfillment procedures can be with AR technology. AR-enabled mobile apps could allow customers to visualize different products that spark their interest. This can reduce the need for returns or exchanges of products and cause less hassle during the fulfillment delivery process.
7. Take Advantage of Zone Shipping to Lower Parcel Transportation Spend
Zone skipping allows shippers to combine parcel distributions and ship the packages together to the destination region. As transportation spending continues to become higher the closer we get to the holiday season, shippers can leverage the parcel carriers’ assigned rates based on different zones. The strategy of zone skipping works best when the cost of a truckload (TL) or less than truckload (LTL) plus the expense related to the local delivery of the packages is lower than the cost of all packages shipped from the point of origin to the parcel carrier.
8. Diversify Your Carrier Mix
Diversifying with different carriers can open the opportunity for a variety of different rates and services to use. This advantage can help shippers work with carriers they may not normally use or gain improved benefits for such a stressful time of the year for shipping and delivery. This can provide shippers with more options for capacity, rates, services, and carriers with advanced performance. When shippers have the proper information and data to back up their decision to work with new carriers, this could result in promising profit margins and improved driver performance during the peak season.
9. Work With a Parcel Shipping Advisor Like Intelligent Audit
Working with a company that can provide parcel advising assistance can help make this season a little easier for shippers with parcel general rate increases. Shippers need to understand the data points available for reference and might need assistance seeking detailed insights on carriers. Parcel shipping advisors like Intelligent Audit can help with data points, carrier pricing analysts, and data modeling to ensure shippers have all the information needed to make a knowledgeable decision on which carriers to use.
The Bigger Picture: Choose the Right Supply Chain Analytics Partner to Mitigate Parcel GRIs
Shippers can use an analytics partner to make the most out of this season with parcel general rate increases and the expected struggles surrounding this shipping season. Shippers need to fully understand how to prepare for higher-than-normal rates and the options for avoiding some of them. Shippers have options and leverage with carriers; they don’t just have to go along with the higher rates and potential lack of service. It’s time to partner with experts who can help you prepare your business to navigate GRIs and find the best carriers for your services. Contact Intelligent Audit today.