With 2024 underway, it's time to assess the most recent annual increase in shipping rates and determine what it means for your company's bottom line. The short takeaway about the 2024 general rate increase (GRI) is that while it is high when compared with historic precedent, it is at least lower than the historic high number reached in 2023. It's also valuable to remember that companies typically end up with an actual cost increase higher than the average figure that ends up in headlines.
It's worth taking a closer look at the GRI, as well as the factors that go into parcel carriers' decisions. It's also important to note that while parcel rates rise every year, your business has some ability to fight back and negotiate with your carrier partners. This is a key way to lock in supply chain savings for the year ahead.
General Rate Increase for 2024: What To Know
Both FedEx and UPS increased their general shipping rates by 5.9% at the end of 2023. This follows the standard parcel industry trend in which both carriers raise their costs by the same amount, staying in close competition with each other. While 5.9% is a large increase, it does represent a decline compared to the record-breaking rise of 6.9% imposed by the carriers as 2022 became 2023.
The 5.9% rising cost figure doesn't apply evenly to all shipment types and characteristics. As Supply Chain Dive noted, the actual rates charged for various types of shipments differ based on characteristics like the distance a package travels, the weight of that package and the types of service offerings a company uses.
Just as FedEx and UPS move in lockstep on their basic price increases, they take similar approaches to these more specific and granular rate changes. For example, both carriers have similar rate changes for packages weighing 11 pounds or more, and they're closely aligned on charges for next-day airmail and similar services.
GRI Is Just the Beginning
Parcel magazine explained that the net result of these uneven charges is often extra costs for companies. While 5.9% may represent an average increase across the board, the most-used services will often receive the highest rate hikes and additional handling fees.
Based on an analysis of the various rate increases, Parcel projects that the actual rise in spending won't be the stated average increase of 5.9%. Due to extra surcharge use, it will likely be closer to 8.17% for FedEx customers and 7.72% for businesses that use UPS. The increase may be even larger for companies that specialize in heavy parcels or long-range deliveries.
There are extra factors that influence shipping rates — for example, the recent labor deal between UPS and the Teamsters.
Saving on Shipping Costs Despite GRI
Rising rates affect companies of all descriptions, across industries. You can turn this fact to your advantage if you take an aggressive approach to monitoring and renegotiating your organization's parcel carrier contracts.
Parcel magazine explained that even relative to recent years, UPS and FedEx are more open to negotiation today. These two leading carriers' hold on the industry has loosened slightly due to the rise of small and regional carrier options. Companies that engage in well-informed renegotiations can earn valuable discounts.
Negotiations in a Digital World
Today's supply chain environments are heavily digitized. This affects the shipping cost optimization process for your business. To effectively renegotiate a parcel contract, you'll need access to in-depth metrics and up-to-date data from your logistics processes, down to the delivery level.
Today, the ideal approach to shipping carrier rate optimization includes both high-tech access to the data and an expert point of view so your team can truly understand the opportunities for improvement. Working with a partner organization that combines industry know-how with the latest in technology is the surest way to make an impact on your shipping rates.
Informed by rich data and direct advice on each offer and counteroffer, you can enter the bid process with confidence. Whatever it takes to achieve optimal rates — changing carriers, revising your contract with your current parcel carrier or expanding your network — the process is broadly the same.
Once you've completed the negotiation step, it's important to keep monitoring and maintaining the contract. Terms can change between annual rate hikes, and there's a need to make sure the agreed-upon service levels and prices are being met. This means parcel cost optimization is an ongoing process.
See how parcel rate negotiations can help you safeguard your bottom line.
Keep Costs Low Year After Year
Parcel spend management goes beyond negotiations. There are multiple steps a modern, digitally enabled company can take when monitoring and overseeing parcel spending.
A parcel audit, for example, allows you to discover the actual performance of your shipments in detail. Many companies discover potential savings when they apply this lens to their fulfillment data. Possible sources of value include improper surcharge applications and unclaimed reimbursements due to missed service levels or delivery speed.
In addition to audits and contract negotiations, your company can also unlock the day-to-day value of business intelligence and analytics. Viewing your data from a company-wide view or breaking the numbers down by shipping carrier, region or time frame allows you to optimize your processes in effective, targeted ways.
Parcel spending can feel like it's out of your control, especially when facing issues like the GRI and accompanying service fee increases. However, digital parcel spend management can put you back in the driver's seat.
Discover the ongoing value of parcel spend management.
Ready to Level Up Your Renegotiations?
Choosing Zero Down Supply Chain Solutions as your parcel spend optimization partner allows you to stay efficient and effective in the face of persistent rises in parcel shipping costs. Our combination of supply chain experience and industry-specific technology is calibrated to give you the upper hand when dealing with carriers.
Our proprietary FreightOptics transportation spend management system allows you to keep a close watch on your parcel contract terms and costs. It also encompasses freight rates and spending, allowing you to handle both sides of logistics through a single interface for added efficiency.
Having a total view of your supply chain is ideal for controlling your costs, and you don't have to use it alone. Zero Down Supply Chain Solutions experts are available to consult with your team at every step, from a parcel audit through contract negotiations and ongoing analysis of your chosen carrier's performance.
The GRI is a familiar event for any business that relies on parcel shipments. While it brings rising cost figures, it can serve as a reminder that there are ways to counteract price increases. Effective, data-aided negotiations with parcel carriers, supported by industry experts, can drive down your costs and keep you competitive.
Contact us now to get started optimizing your shipping cost.
