5 Tips to Mitigate Carrier General Rate IncreasesPosted on January 02, 2019
As 2019 begins, so do the latest carrier General Rate Increases (GRI). As we discussed in an earlier blog, the announced U.S. carrier GRI is averaging 4.9 percent, or 2 times the inflation rate, making it more important than ever for shippers to utilize a multi-carrier shipping strategy.
While general rate increases in this range are nothing new to shippers, there are some things that shippers need to be aware of as they enter the new year.
“Going back to 2010, the U.S. carrier rate increases have been somewhere between 3.9 percent and 5.9 percent. So, this one coming in at 4.9 percent is right in the middle,” says Shipware CEO and Co-founder Rob Martinez. “The other big news here is that both [carriers] aren’t just raising rates at the first of the year. Historically the GRI has been a front-of-the-year situation. What they're doing now is they're actually increasing rates throughout the year.”
Many of these ongoing increases come in the form of surcharges and accessorial fees, and that is a shift in how carriers have historically changed rates.
“If you go to a rate page on carrier websites, you'll see that throughout the year they've announced various rate increases such as changes to the fuel surcharge, and I'm not talking about the weekly fluctuation in the Department of Energy prices,” says Martinez. “They've raised the cost of accessorial fees throughout the year, they have implemented a peak surcharge that shippers are still paying for, and shippers need to understand the collective total of all of these fees and charges on their costs.”
According to Martinez, a multi-carrier strategy needs to have a multipoint mitigation plan that includes the following:
Carrier rate negotiation: “Most shippers are just absorbing these rate increases because they don't know if they have a recourse. They can’t push back if they don't know that they can negotiate. If you look at the 20 percent of shippers who do 80 percent of the volume, those folks typically have a strategy in place that involves ongoing rate negotiations and trying to get the carriers to provide some economic relief and discounting some of these increases.”
Invoice auditing and benchmarking: “I think it's important that shippers gain access to their shipping invoice data and run a lot of analytics to really understand their costs. Many shippers lack the basic ability to do that, to understand which surcharges are most impacting them, to understand how minimum charges, dimensional charges, residential surcharges, and other carrier discount mitigation strategies are adversely impacting them.”
Look for shipper error: “In any given week, I'll see 1 percent to as much as 5 percent of invoices can be wrong. Wow. Everything from billing errors to overcharges to missing discounts. Even something as simple as printing a label and not sending the order will cost you money if you aren’t checking. Also, carriers offer money-back guarantees, so if shippers aren’t auditing for on-time service performance, they're leaving a lot of money on the seat.”
Using multi-carrier parcel shipping software: “Multi-carrier TMS is a great way to mitigate some of these increases by using least-cost routing software as well as rate shopping. Shippers need to multisource carriers and not rely on one. They need to make them earn their business every time they ship.”
Managing returns: “I read a statistic the other day that as many as one in three eCommerce deliveries this holiday season will come back. And a lot of organizations that are focused on getting the best rates work on the outbound and they don't focus on the inbound or return. That would be another low hanging fruit opportunity to offset carrier increases.
While there will always be costs—and growth in those costs—focus and diligence throughout the year on controlling transportation spend can help shippers not only keep up with cost changes but save some money in the long run.
Learn more about how a multi-carrier shipping system can help you keep costs in line.