Bohman on Pricing: A closer look at 2009’s GRIs
-- Logistics Management, 5/1/2009
Late every fall, as sure as the leaves change color, the shipping public has come to expect UPS and FedEx to announce the general rate increase (GRI) that they’ll implement shortly after January 1 on both ground and air express package shipments.
In October of 2008, UPS announced, earlier than usual, that it would raise its Ground Service package rates by 5.9 percent effective January 5, 2009. As it always does, FedEx matched the UPS rate increase on its Ground and Home Delivery services, adopting the same effective date.
Shortly thereafter, FedEx gave notice that it would be raising its Air Express rates and UPS quickly followed suit.
The big surprise came in October when UPS announced that its LTL unit, UPS Freight, would hike its LTL rates by 5.9 percent to become effective on January 5. After mulling the early date for a few weeks, UPS Freight’s competitor, FedEx Freight, decided to go forward with a general rate increase of its own, only slightly lower at 5.7%, but adopting the same effective date.
Since then, a number of other LTL carriers have boosted their rates. Here’s a small sampling:
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Old Dominion Freight Lines with an overall impact of 5.6 percent effective February 16;
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New England Motor Freight at 5.9 percent;
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Milan Express at 5.9 percent;
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Southeastern Freight Lines at 5.9 percent effective March 2;
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Even SMC3 raised rates in its Czar-Lite tariff by 5 percent.
One big exception was Averitt Express which announced in February that it would forsake a rate increase in 2009. I should also mention that Pitt-Ohio Express hasn’t taken a GRI in the last two or three years. What they do is review each individual account annually and adjust rates where warranted.
One trend that seems to be evolving is that fewer and fewer LTL carriers are publicly announcing their general rate increases; rather, they’re notifying individual customers of the effective date and percentage increase of their GRI. With that move it’s becoming harder to track what’s happening on the rate increase front.
Just because a carrier went forward with a GRI this year doesn’t mean every increase is sticking. A number of customers, adversely affected by this economic downturn, have forced their carriers to scale back their increases or drop them altogether. There’s some tough bargaining going on out there.
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