The holiday season is here. It’s the time for shipping carriers to announce their General Rate Increase (GRI). Major shipping carriers like FedEx and UPS have already announced the GRIs for 2024. Well, what does this mean for e-commerce retailers or small companies? This blog will discuss the concept of General Rate Increase, its impact on businesses, and the strategies adopted by them. Further, we give a comparison of FedEx and UPS rates for 2024.
General Rate increase
General Rate Increase or GRI is the annual percentage increase in shipping rates by shipping carriers. This rate hike is across all services offered by parcel and freight carriers. GRIs announcement is usually in the fall of the previous year. The percentage hike is generally between 4-6%. The GRI announcement allows businesses to plan the shipping costs of their packages.
Many factors influence GRI, like labor shortages, operating costs, and insurance. In addition, rising inflation, market demand, supply chain disruptions, and government regulations can influence GRI. Moreover, various challenges to shipping carriers’ distribution networks have influenced GRIs this year. Shipping carriers mention service enhancement, technology innovations, and fleet maintenance for the annual General Rate Increase. These rates vary between shipping carriers. Understanding the GRIs of different parcel carriers is essential for shippers to manage shipping costs.
GRI: its significance in the shipping industry
Companies with domestic and international shipments can’t take rising GRIs lightly. The shipping rates also include surcharges or value-added services. In addition, the fees of different shipping carriers rise annually. Companies can calculate shipping costs based on service levels, distances, package weights, etc. The increase in shipping rates is responsible for the rise in shipping costs to various destinations. Shippers have to plan their shipments according to the impact of GRIs.
Impact on General Rate Increase on shippers’ packages.
GRI percentage is higher for packages going a longer distance. Moreover, express packages or air freight rates are high. Usually, GRI is more economical for ground packages than express ones.
The impact of GRI is less for companies that have negotiated a rate cap in their shipping contracts. They can further ask for discounts from the shipping carriers. However, companies with no contracts pay extra with the rise in GRIs annually. However, the rate cap does not apply to surcharges.
Our earlier blog has discussed about impact of GRI. Here, we will discuss the new shipping rates in 2024 of the premium big carriers, FedEx and UPS.
Comparison between FedEx and UPS rates
FedEx GRI will come into effect from January 1, 2024. UPS GRI will be effective from December 26, 2023. GRI varies from the surcharges or value-added services levied by FedEx and UPS.
The U.S. domestic, export, and import services, FedEx Express shipping rates have increased to 5.9% on average, as per the FedEx website. According to the UPS website, the rates have increased to 5.9% for UPS Ground, air, and international services. Both FedEx and UPS claim that GRI 2024 is lower than last year’s GRI. However, their demand surcharges for the holiday season are moving northwards. These rates also do not include fuel surcharge.
The annual rate guides of FedEx and UPS help shippers decide their shipping strategies. We will try to understand the figures in service and preview rate guides for 2023 and 2024.
- Daily rates of UPS and FedEx
The UPS service guide consists of the domestic daily rates for packages weighing 1 lb to 150 lbs within 49 contiguous States. Daily rates for packages weighing less than 150 lbs for international shipments are under different UPS Worldwide, UPS Standard from Canada and Mexico, export, and import headings.
The UPS service guide contains domestic rates for services like UPS Next Day Air Early, UPS Next Day Air, UPS Next Dy Air Saver, UPS 2nd Day Air A.M., UPS 2nd Day Air, UPS 3 Day Select, UPS Ground for shipping Zones 2-8 within the 50 states. Chart 1 compares between 2023 and 2024 daily rates for the UPS express and UPS ground package delivery services.
Chart 1: UPS list rates
Chart 1 will focus on list rates of : UPS packages of 1 lb within the U.S. daily rates for services in Zone 102 (Next Day Air), Zone 202 (2nd Day Air), Zone 2 (Ground), Zone 242 (2nd Day Air A.M.) for Destination ZIP codes starting with 004-005. For further details on all the daily rates of UPS, check their website.
FedEx service guide provides information about the list rates of FedEx Express packages within the U.S. and the international package rates for export and import. The guide consists of the FedEx ground rates within the U.S. and Canada. UPS Ground and FedEx Ground services are cheaper than Express Services.
The FedEx U.S. express packages cover FedEx First Overnight, FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day A.M., FedEx 2Day, and FedEx Express Saver services. It includes Zones 2-8 in the contiguous U.S. for packages weighing less than 150 lbs. Further, Chart 2 covers the U.S. express packages of 1 lb in Zone 2 (within 150 miles) across service levels, including Ground. It compares the 2023 and 2024 rates and their GRI percentages.
Chart 2: FedEx list rates
Chart 2 will focus daily rates of FedEx packages of 1 lb within the U.S. for services in Zone 2. For further details on the service levels of FedEx, check their website.
Shippers can explore the services that deliver their parcels faster and economically. Further, companies can explore the list rates of other services to suit their shipping needs.
- Surcharges or Value-added services offered by FedEx and UPS
Alternatively, companies know about the surcharges levied by FedEx and UPS every year. Below Charts (3 and 4) compare FedEx and UPS surcharges for 2023 and 2024.
The value-added services of UPS will be effective from December 26, 2023. Domestic charges like additional handling, address correction, delivery area surcharge, remote area surcharge, Pickup fees, and more have seen an upward trajectory. The below chart 3 gives an overview of a few value-added services from 2023 and 2024.
Chart 3: UPS Surcharges
UPS website gives information in detail about the value-added services and other charges. In addition, it also provides the changed zip codes, where the delivery area surcharge is in 2024.
According to the FedEx authorities, there will be an assessment of Additional Handling charges and Oversize charges of packages for multi-piece international shipments. FedEx Ground and Express services will face an increase in surcharges from January 1, 2024. The customs clearance service fees on imports are also increasing in 2024.
Chart 4 depicts the increase in the percentages of surcharges in 2024 compared to 2023.
Chart 4: FedEx surcharges
Zones 3-4 also include U.S. Ground Zone 22 (Intra-Alaska), U.S. Ground Zone 14 (Intra-Oahu), and U.S. Express Intra-Hawaii.
FedEx freight shipping charges are also changing from January 1, 2024.
Not just the daily rates, companies are facing the brunt of high demand surcharges and fees levied by UPS and FedEx. Businesses need to devise shipping strategies to circumvent the impact of increasing GRIs year-on-year (YOY).
- Effect of Minimum Charges and the necessity of rate caps
Minimum charges are the lowest fees a shipper will spend on any package. Carrier package minimum charges are the fees for a Zone 2 one-pound package. Minimum charges apply to shippers even if they have existing discounts.
Chart 5 compares the UPS Minimum Net Charges for some services in 2023 and 2024.
Chart 5: UPS Minimum Net Charges for package with 1 pound weight for UPS Ground – Zone 2, UPS Next Day Air-Zone 102, UPS 2nd Day Air- Zone 202, UPS Next Day Air Saver – Zone 132
Fedex sets minimum charges for all services. It is usually for a Zone 2 one-pound package for all services. The comparison between the services in 2023 and 2024 is in Chart 6.
Chart 6: FedEx Minimum charges for zone 2, 1-pound packages
Shippers can get discounts on low-weight packages with FedEx minimum change reductions in their contract agreements.
Moreover, companies with rate caps can limit any increase to a value close to a negotiated rate cap. Hence, companies must include rate caps in their contract negotiations to keep rate increases in check.
Ways to offset the impact of GRI on businesses
It’s not possible to avoid the impact of GRI on businesses. However, there are ways to reduce shipping costs effectively. A few ways to offset the GRI impact are:
Shippers can revise their contracts if they have not renegotiated for many years. Further, parcel carriers face competition from new entrants and fluctuating shipping volumes. It gives shippers a chance to negotiate for better shipping rates.
- Intelligent use of shipping data
Companies can use their historical shipping data to plan their shipping strategies. The data helps shippers understand their shipping operations. A deep knowledge of the shipping profile, service levels, distance, and package weights helps keep shipping costs down.
- Diversifying carrier network
Shippers can use alternative carriers, regional carriers, and postal services at competitive rates. Packages can be sent to various locations easily through different shipping carriers. It helps in reducing the impact of shipping rates substantially.
- Focus on packaging
Oversize packages are expensive to ship for companies. So, shippers have to focus on packaging goods to minimize space and save money.
Businesses need to understand the different aspects of GRI. In addition, its impact on shippers’ shipping profiles will help companies reduce shipping costs. Conducting an audit of the shipping operations allows companies to negotiate better with shipping carriers. Further, partnering with Audintel gives shippers valuable insights into their shipping profile. It helps them to prepare cost-effective shipping strategies to reduce GRI impact.
Audintel is a technology-first and customer-focused organization that optimizes logistics and shipping costs. Our trustworthy solutions help clients gain deeper insights into their logistics spending. For more information about GRIs and their impact on your business, contact us at +1 (619) 354 8539 or visit our Audintel website.