Navigating Surcharge Creep: How Shippers Can Adapt
While the U.S. parcel delivery market has been rapidly evolving over the last several years, recent shifts are reshaping the industry in ways that demand attention from shippers. As e-commerce continues its steady rise and market competition intensifies, parcel delivery companies are adjusting their strategies to balance competitive pricing while protecting their margin.
Major carriers like UPS and FedEx dominated the carrier landscape coming out of the COVID-19 pandemic when parcel volume surged at unprecedented levels. In the years since, however, the market has shifted in favor of shippers, who now have leverage as Amazon and alternate carriers become increasingly prevalent. Even medium-sized shippers have been able to negotiate favorable discounts in return for committing package volumes to the major shippers. The dynamics of the current shippers’ market are discussed in detail in Parcel Delivery Spotlight 1, and Parcel Delivery Spotlight 2.
Alternate carriers continue to grow in popularity as they present shippers with appealing parcel solutions that provide increased flexibility and cost savings. Despite the recent demise of Pandion due to its unsupportable capital structure, alternatives to large carriers continue to present themselves. While typically focusing on niche regions, several alternate carriers, such as OnTrac, GLS, and T-Force Logistics, are growing their networks and capabilities to expand geographic coverage while maintaining competitive pricing. In response, and in the face of lukewarm financial performance and excess capacity over the past year, UPS and FedEx have sought creative ways to improve their bottom line without the perception of increasing prices. Major carriers have added new fees, raised existing surcharges, or reconfigured service options to manage their networks under increasing competition and economic pressures. While these fees are increasing, UPS and FedEx have begun to aggressively discount pricing for medium and smaller accounts, a move once exclusively reserved for their largest clients.
Without a detailed understanding of how total shipping costs are impacted by changing surcharges and fees, shippers can see their costs increasing despite greater discounting.
Major Carrier Moves: Pricing Structures
The parcel market is changing as major carriers recalibrate fee structures and service models to adapt to the demands of a highly competitive and cost-driven environment.
In 2025, both UPS and FedEx announced general rate increases (GRIs) averaging 5.9%. These adjustments are accompanied by significant changes in surcharge structures, particularly affecting additional handling, oversize, and delivery area charges. Additionally, both carriers continue to adjust their fuel surcharge matrices multiple times per year, often increasing markups to preserve revenue per parcel despite fluctuations in diesel prices. This trend has widened the gap between fuel surcharges and actual spot rates.
The imposition of changing surcharges by major carriers is introducing a new level of uncertainty into parcel cost planning for shippers.
Source: U.S. Energy Information Administration, UPS, FedEx
Major Carrier Moves: Strategic Developments
FedEx is undergoing a major reorganization by integrating its Ground and Express networks. Historically operated separately, this integration aims to eliminate redundancies, reduce costs, and enhance efficiency. The reorganization involves consolidating facilities, reducing staff, and optimizing logistics technology, with expected completion over the next few years at a cost of $1.5 billion.
UPS is leaning full tilt into its “Network of the Future” transformation, recently announcing the temporary closure of several U.S. facilities. While the closures are expected to impact 1,600 employees, UPS says they will not disrupt customer service. The facilities are expected to reopen in 2026 with enhanced capabilities and productivity improvements. Additionally, UPS plans to make significant reductions to the volume of Amazon packages it delivers, expecting a decrease of more than 50% by late 2026. Despite being their largest customer, UPS seeks to prioritize higher-margin shippers and reduce its dependence on Amazon for revenue.
Exploring Alternative Carriers as an Option
As major carriers add complexity to pricing, alternative carriers are emerging as viable options for shippers seeking flexibility and competitive pricing. Companies like OnTrac, T-Force Logistics, and Veho are positioning themselves as competitively priced, regionally focused solutions that can meet specific delivery needs, often with higher service levels than their larger competitors.
These alternative carriers present several compelling advantages. Lower base rates and fewer fees mean that shippers can reduce their costs, especially for regional or last-mile deliveries where national carriers’ premium surcharges do not align with the shippers’ cost structures. Additionally, the regional focus of many alternative carriers often translates into faster, more predictable delivery times within those areas. For shippers focused on competitive delivery costs, integrating one or more alternative carriers could be a cost-effective way to diversify delivery options and achieve more stable pricing throughout the year.
That said, shippers need to assess a few critical factors when considering alternative carriers. Coverage and capacity vary across these smaller players, and service levels can be inconsistent if they lack the scale of the national networks. They may not have off-the-shelf integration with some warehouse management systems. Historically, service levels were inconsistent. Most carriers have improved and can be highly effective within their specialized range of services and geographies.
Shippers should ensure that alternative carriers can meet current and future volume demands, especially if they are used to managing seasonal peaks. Pricing complexity requires a detailed understanding of a shipper’s profile to identify the critical pricing elements and surcharges impacting total cost.
Adapting Shipping Strategies for a New Era of Parcel Delivery
For shippers, adapting to this evolving market means re-evaluating carrier partnerships and considering a multi-carrier approach that leverages both traditional and alternative options. With surcharges, fees, and service guarantees shifting frequently, a flexible data-driven approach enables shippers to balance costs and maintain service quality by matching each shipment’s needs with the most suitable carrier.
Key to this strategy is the integration of multi-carrier shipping software, which allows shippers to route parcels dynamically based on destination, urgency, and cost factors. This technology can streamline decision-making and provide more control over shipping budgets by automatically adjusting routes and carrier selections based on real-time data. Regularly evaluating carrier fees and surcharge structures can also help shippers avoid unexpected cost spikes, especially during peak demand periods.
Another factor shippers must consider is capacity planning. As the market’s structure shifts, securing carrier capacity well in advance, especially for peak seasons, can help avoid the impact of last-minute fees and ensure that critical shipments reach customers on time. Preparing early allows shippers to secure the most cost-effective options and distribute volume effectively between their primary and alternative carriers.
The Road Ahead: Flexibility and Proactive Planning Are Key
In a parcel delivery industry increasingly impacted by nuanced surcharges, fees, and rising expectations, shippers need to stay flexible, responsive, and proactive. Major carriers are likely to continue adjusting fee structures and services in response to market pressures, while alternative carriers will refine and expand their offerings as they carve out a larger role in the industry. For shippers, a willingness to experiment with a diversified set of carriers and invest in the right technologies will be essential to controlling costs and maintaining high service levels.
As the market continues to evolve, shippers who proactively manage their carrier relationships and integrate alternative solutions are well-positioned to thrive. By exploring new options, understanding the complexity of rates and how that impacts costs, and preparing early for peak periods, shippers can not only mitigate rising costs but also deliver a better experience to customers.
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© Copyright 2025. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
