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Understanding LTL General Rate Increases

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As 2024 comes to a close, LTL shippers are preparing for the General Rate Increases (GRI) that carriers will implement in early 2025. These annual rate adjustments are essential for carriers to keep pace with rising costs, including labor, fuel, equipment, and regulatory compliance. Understanding and planning for these GRIs is crucial for maintaining competitive supply chains in the coming year.

What Are General Rate Increases (GRIs)?

LTL GRIs are carrier-initiated increases to base freight rates, typically effective in January or February. These increases are often driven by various factors, including:

  1. Economic Pressures: Inflation and sustained demand force carriers to adjust pricing to offset rising operating costs.
  2. Fuel and Energy Costs: Base rate increases, even with fuel surcharges, help absorb long-term volatility in energy prices.
  3. Labor and Regulation: Rising wages and compliance with industry standards, like emissions goals, contribute to higher costs.
  4. Sustainability Investments: Carrier investments in greener, more efficient fleets are passed on to shippers.

What to Expect in 2025 LTL General Rate Increases

For 2025, most carriers are expected to implement average GRIs of 5.9%, a slight consistency with the previous year. Historically, GRIs have averaged around 4.9% until 2021. The pandemic caused a significant shift, pushing GRIs to the range of 5.9% to 6.9%. As a result, shippers are facing higher rates than in previous years, and planning ahead is crucial.

One notable update is from Old Dominion, which announced that their GRI for 2025 will remain at 4.9%, effective December 2, 2024. This marks them as the only carrier holding their yearly GRI at 4.9%, providing some stability in an otherwise volatile environment.

How GRIs Could Impact Your Supply Chain in 2025

LTL GRIs typically create significant effects throughout the supply chain, especially for those who haven't planned for the impact. Here are some of the potential consequences:

  • Increased Transportation Budgets: Higher shipping costs can force companies to adjust their transportation forecasts or reallocate funds from other areas of the business.
  • Higher Prices for Customers: Passing these costs onto customers could impact your pricing strategy, potentially diminishing market competitiveness.
  • Disruptions for Non-Contract Shippers: Shippers without negotiated contracts are more vulnerable to steep spot rate increases, as they lack the ability to lock in rates.

Preparing for 2025 LTL GRIs: Steps to Get Ahead

  1. Understand the Impact on Your Business
    Begin by analyzing your shipping data to determine which lanes, volumes, and shipments will be most affected by GRIs. Identifying your vulnerable areas will help you adjust accordingly.
  2. Evaluate and Optimize Your Freight Network
    Use this time to optimize your supply chain. Consolidating shipments, exploring alternative modes like intermodal, and revising route planning can help reduce overall transportation costs.
  3. Negotiate Carrier Contracts
    Reach out to carriers now to negotiate or renew contracts that can help mitigate GRI impacts, such as locking in fixed rates or capping annual increases.
  4. Leverage Technology for Greater Visibility
    Invest in freight visibility tools that allow you to track inefficiencies and make data-driven decisions that can help offset the increased costs during GRI season.
  5. Partner with a 3PL for Strategic Support
    Consider partnering with a 3PL like FreightPlus to provide expert guidance through the GRI process. We offer tailored strategies for contract negotiations, freight data analysis, and operational optimization to help mitigate GRI impacts.

Taking Proactive Steps for 2025 GRIs

Shippers should expect GRIs to range between 5% and 8% in 2025, with average increases hovering around 5.9%. The focus on accessorial fees and surcharges is likely to increase as carriers attempt to incentivize more efficient shipping practices. Old Dominion's 4.9% increase is an anomaly, but it offers a sense of stability for those relying on this carrier.

By taking proactive steps now, you can prepare for these changes, mitigate costs, and maintain operational efficiency as we head into 2025. The more you plan, the better equipped you’ll be to handle these increases and protect your bottom line.