Parcel Shipping Costs continue to rise for parcel shippers, especially those most reliant on UPS and FedEx. Despite market competition being greater than ever, and the carriers fighting for market share, both keep finding ways to drive new revenue by adding fees and surcharge updates year-round. It’s become a death by a thousand cuts situation for many companies.
There are strategies that can help, however. Higher costs can be offset with tactics such as using data analytics, advanced parcel-specific BI tools, and carrier diversification.
Here we’ll explain what’s happening in the market and offer a comprehensive list of actionable ideas shippers can use to mitigate the impact they’re facing from the constant (and often low-key) drip of additional costs.
Parcel Shipping Costs keep going up
UPS and FedEx used to lean most heavily on their annual General Rate Increases (GRIs) as their time to raise rates. In recent years, however, they’ve added the practice of using smaller, more focused cost increases throughout the year to supplement their drive to create more revenue.
A great example is the carriers recently introducing a new Minimum Billable weight for packages that are subject to Additional Handling, regardless of the actual weight.
This change mimics how Large Package Surcharges are calculated and can significantly increase shipping costs, especially for dimensionally large but lightweight boxes. In addition to the new 40 lb. billing floor, another impactful change is that fuel surcharges and zone-based fees now apply to these packages.
As we noted, FedEx and UPS have moved from predictable annual increases to off-cycle pricing changes, often mid-year, to offset declining revenues.
These frequent, unexpected changes are usually announced with little or no fanfare. This makes it harder for shippers to forecast costs and protect margins, much less understand the full cost impact to their specific shipping budgets.
How Shippers can respond Parcel Shipping Costs Rise ?
Of course, shippers do not need to accept everything the carriers throw at them. There are several tactics companies can employ to deal with the new and higher fees and surcharges.
Here are some ideas:
1. Renegotiate your contracts
There is never a bad time to renegotiate your parcel contracts. And when the rate changes are coming as fast as they are these days you are always within your right to do so. When you see any rate change that concerns you, engage directly with a partner like TransImpact or your carrier reps to discuss relief or renegotiation.
2. Leverage your data
Parcel shipping is a data-rich function, and it can offer a lot of answers. Taking the time to understand your shipment profiles, dimensional weights, zones, and historical spend allows you to make better tactical and strategic decisions in your parcel operations.
3. Use Parcel BI
Employing a tool, like TransImpact’s Parcel Spend Intelligence platform makes it possible to perform independent cost impact analyses that can offer next-level actionable insights. Word of warning: the carriers offer data tools, too. But their interests contradict yours, so don’t rely solely on their technology to make data-driven decisions for you.
4. Right-size packaging
Package weights and dimensions directly impact shipping costs. And as the earlier example shows, subtle changes to weight and dimensions can trigger big surcharges. Tactics like reworking packaging or splitting larger shipments can reduce costs greatly.
5. Consider multi-carrier strategies:
UPS and FedEx (and USPS) are not the only options anymore. Shippers should evaluate regional carriers like OnTrac or Amazon to reduce costs and improve delivery speed, but should do so strategically to avoid volume-related penalties in national carrier contracts.
While diversifying carriers can reduce costs, it can also jeopardize discount tiers or trigger penalties in national agreements if minimum volume commitments aren’t met. Effective execution requires technology, internal alignment, and real-time analytics to isolate and route packages properly.
Here are more actionable suggestions and notes for shippers
- Shift Mindset: A new perspective on how you view shipping costs can also help companies better align priorities in the face of rate increases. Using a data tool, this is possible and an effective way to shift from a “price per package” to a “profit per package” mindset.
- Audit Invoices Diligently: Invoice audit remains an important way to ensure your parcel costs are accurate and not overbilled. More complex rates will inevitably lead to more billing errors, and you’ll need to be the one to point them out to the carriers.
- Optimize Fulfillment Locations: Companies are having success relocating fulfillment/ distribution centers closer to end customers to reduce zone-based costs.
- Engage Third-Party Advisors: Many shippers find leveraging third-party advisors or technology partners is a lower cost, fast ROI way to fill internal resource gaps and stay proactive in a dynamic rate environment like the market is in right now.
- Watch for Expanding Surcharges: It’s worth mentioning again that carriers are applying fuel surcharges to more areas, including pickup fees. And expect more domestic revenue-generation strategies from carriers in response to international tariff pressures.
- Leverage Emerging National Players: Amazon and OnTrac are becoming serious national players, creating pressure on UPS and FedEx to maintain competitiveness and avoid alienating customers. While Amazon may not be fully nationwide yet, shippers can already leverage their regional strengths strategically.
Conclusion
To manage rising parcel shipping costs in 2025, shippers need a combination of carrier negotiation, analytics, packaging optimization, and strategic diversification. Being reactive is expensive, but shippers who proactively manage data and carrier relationships will be best positioned to protect their margins and adapt to ongoing market changes.
TransImpact can model your shipping costs based on all the current rate updates so far in 2025. It’s a great, no-obligation way to set a baseline as you move towards peak shipping season and give you time to do something about it. Email sales-info@transimpact.com to learn more.
Want to go deeper on these strategies?
Watch our on-demand webinar, Beyond Rate Hikes: How Smart Shippers Are Beating Additional Handling Fees, to learn how to analyze your shipping data, mitigate surcharges, and negotiate smarter contracts.