UPS started it and others followed.
Estes Express just announced it will raise less-than-truckload (LTL) rates by an average of 6.9 percent. They are the latest in a line of LTL carriers who are trying to keep pace with rising costs by implementing a general rate increase (GRI).
Identical 6.9 percent increases took effect on Monday, August 1, for LTL carriers UPS Freight, YRC Worldwide and Con-Way Freight. ABF Freight System’s 6.9 percent increase took effect a little earlier – July 25. Estes Express’ increase kicks in on August 8.
These GRIs only apply to non-contract freight, which is a small percentage of cargo hauled by carriers. However, the increases come into play during contract talks and ultimately raise pricing for most shippers.
In a letter to customers, Paul J. Dugent, vice president of pricing for Estes Express, echoed the sentiments of his fellow competitors who raised their rates before him.
“Equipment costs have skyrocketed in 2011, spurred by higher prices for raw materials such as metal, lubricants and rubber,” Dugent said.
It reminds me of a quote I read in a recent article in Logistics Management magazine. Lana Batts, a partner at Transport Capital Partners said, “Carriers today are not interested in adding capacity, because rates today are about equal to what they were in 2006. The price of a truck has gone up from $80,000 to $120,000 and fuel is up, too. Everything is more expensive, and the industry is still charging 2006 rates. It is not sustainable. Trucking is not as easy of a business to get into as it was before.”
Industry consultants contend that the increases are a good thing; LTL carriers need to become more profitable. We know what happens when carriers don’t make money – they close their doors. Fewer carriers lead to less capacity and less capacity leads to significant rate increases.
To a shipper’s ears, these GRI announcements are a bit painful. But I believe it’s important to address the issue now rather than down the road when the stakes, and GRIs, could be higher.
LTL Price Increases: Less-than-Desirable Yet Necessary
UPS started it and others followed.
Estes Express just announced it will raise less-than-truckload (LTL) rates by an average of 6.9 percent. They are the latest in a line of LTL carriers who are trying to keep pace with rising costs by implementing a general rate increase (GRI).
Identical 6.9 percent increases took effect on Monday, August 1, for LTL carriers UPS Freight, YRC Worldwide and Con-Way Freight. ABF Freight System’s 6.9 percent increase took effect a little earlier – July 25. Estes Express’ increase kicks in on August 8.
These GRIs only apply to non-contract freight, which is a small percentage of cargo hauled by carriers. However, the increases come into play during contract talks and ultimately raise pricing for most shippers.
In a letter to customers, Paul J. Dugent, vice president of pricing for Estes Express, echoed the sentiments of his fellow competitors who raised their rates before him.
“Equipment costs have skyrocketed in 2011, spurred by higher prices for raw materials such as metal, lubricants and rubber,” Dugent said.
It reminds me of a quote I read in a recent article in Logistics Management magazine. Lana Batts, a partner at Transport Capital Partners said, “Carriers today are not interested in adding capacity, because rates today are about equal to what they were in 2006. The price of a truck has gone up from $80,000 to $120,000 and fuel is up, too. Everything is more expensive, and the industry is still charging 2006 rates. It is not sustainable. Trucking is not as easy of a business to get into as it was before.”
Industry consultants contend that the increases are a good thing; LTL carriers need to become more profitable. We know what happens when carriers don’t make money – they close their doors. Fewer carriers lead to less capacity and less capacity leads to significant rate increases.
To a shipper’s ears, these GRI announcements are a bit painful. But I believe it’s important to address the issue now rather than down the road when the stakes, and GRIs, could be higher.