The General Rate Increase (GRI) or as I like to call it, the Annual Small Package Shipping Cost Increase (ASPSCI) has come and gone. I know that ASPSCI is long winded, but I really don’t want to keep calling it something that is just general because it hurts shippers’ bottom line. We have all heard about this year’s 5.9% cost increase. It does not sound that drastic but by the time this takes effect in January, shippers will have experienced over a 20% increase on certain packages in just 25 months.
If you are using the ground network to ship packages that are less than 15 pounds, the list rates will have increased by over 20% from December 2021 to January 2024. If you have have a discount program in place, you won’t feel the full $2.24 increase for a one pound package, but you will feel the the 22.6% increase on your current costs. FedEx and UPS roundup weights so a one pound package is basically the lowest weight that can be shipped. If you have a package that is .01 pounds, then it will get rounded up to one pound.
There has been a 22% increase in costs on items like t-shirts, a bag of coffee beans, a paperback book, clothes, cereal, a towel, gloves…the list goes on and on. At the end of the day, if you ship any package regardless of the size or weight, your increase will be close to 20%. That is a huge change over a 25 month period.
Usually as a shipper, you have a handful of choices. You can absorb those costs (which will really hurt your bottom line). You can pass them along to your customers (which can decrease sales). Or, you can find a way to mitigate those increases. It’s important to work with experts in the field to help navigate the consistent annual cost increases that will continue to hurt your profits. Both carriers announce these increases in the third quarter, and they have announced the exact same increase for years.
It is very important to know what your shipping profile is and what your cost increase will be so that you can budget and forecast accordingly. Most shippers’ increase will be more than 5.9% depending on their shipping profile and the transportation services they use. The increase for 2-Day and 3-Day deliveries from zones five to eight is 7.9%, so the 25-month increase will be higher than 22%.
Check out our recent blog If you want more background information on the GRI.
-Micheal McDonagh, President of Parcel