UPS, Rail Strike and Diesel Fuel - Three Issues that Could Soon Impact Your Freight Costs and Supply Chain
Nov 2, 2022
In our recently released Fourth Quarter Freight Market Update, we addressed several factors that are creating challenging conditions for shippers and carriers.
Well, guess what?
For shippers, the onslaught of issues that could potentially affect their freight costs and create supply chain disruptions continues. Consider some of the recent announcements from the last two weeks.
First, recently UPS announced their General Rate Increase (GRI) for 2023 will be 6.9% “on average”.
FedEx issued the same increase for 2023 just ahead of their announcement. As we have pointed out on numerous occasions, when looking at the “on average” increases from FedEx and UPS, remember this adage: If you place one foot in a bucket of scalding hot water and your other foot in a bucket of ice cold water, “on average” you're pretty uncomfortable. We mention this because when you look at the increases in the accessorial charges for both FedEx and UPS, “on average” you can expect to see your costs increase by more than the 6.9% that they are publishing.
In short, these GRIs and increases in accessorial charges will have a very different impact on different companies based on their shipping profiles. So don’t be surprised if you start seeing double digit increases. We recently interviewed parcel expert Jerry Hempstead, and you can listen to the interview to hear his advice.
Second, another rail union has voted down the proposed contract with the railroads.
The Brotherhood of Railroad Signalmen is the second union to reject a deal with the railroads. The factors that are causing the unions to vote down proposed contracts are not around monetary compensation – they have to do with time off and sick leave. The railroads are in a very tough bind – a bind of their own making. In response to the pandemic they were too aggressive in reducing staff. That is why the STB has conducted hearings over the fact that the railroads “cut too fast and too deep.” In short, since the Class 1 Railroads already have a staffing shortage and are struggling with substandard service levels, granting the unions' demand for additional time off will be very difficult for the railroads as they continue to try and work themselves out of the mess that they created.
Third, it’s important to be aware of what’s happening in the diesel market.
If the numerous reports about the looming shortage in the diesel fuel markets are even remotely accurate, shippers had better brace themselves for higher fuel surcharges. Before dismissing these reports as being too hyped, think about this for a moment: The American Transportation Research Institute, which is an independent organization that’s affiliated with the American Trucking Association, has said that the price of diesel is the number one concern for truckers. And if it is the number one issue for truckers, shippers need to look at the potential impact this could have on their business.
We have a ton of experience in negotiating fuel surcharges. If you would like more information about these issues or how to navigate them, we encourage you to get in touch with us.
Join us for a New Webinar on November 15
We will be hosting our “What You Wish Your CEO Knew About Truckload and LTL Freight" webcast with our friends from CSCMP’s Center of Excellence and the NIT League on November 15th at 10am Central/11am Eastern. During this webinar, Dr. Chris Caplice and Kevin Smith will help you understand how to explain what makes sourcing truckload and LTL unique and how to explain these difference to the C-Level executives at your company.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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