Parcel shipping is cyclical in many critical ways. Supply chains that fail to stay ahead of market changes and trends risk falling behind competitors or, worse yet, losing touch with customers. Some of the cycles small package shippers face are predictable, while others happen erratically. Either way, being prepared for what’s coming next can make or break your business.

An example is how the market is entering its most important annual cycle, heading quickly towards the peak holiday season. If you think it’s too early to think about this, know that FedEx has already announced its 2025 “Peak” Demand Surcharges, which will run from September to January. Other years-long macroeconomic cycles exist that impact rates, services, and market demand. This year has been busy in that regard, with FedEx and UPS being aggressive with new fees and surcharges at a time when demand is weak, despite it clearly being a buyer’s market.

Positioning yourself to deal with such contradictions, and for the future, must start with an understanding of where things stand today, along with a vision and plan to address what’s to come. The market is in a period of rapid shifts, with frequent and substantial adjustments to rates and surcharges likely to continue (visit our blog for updates on all new rate adjustments, fees, and surcharges). These changes will continue to drive up costs and make it harder to ensure your parcel shipping operation is as efficient as it should be.

This article explains what these developments mean right now and how shippers can create their best parcel operations to finish 2025 strong.

Where is the Parcel Market Today?

In the first half of 2025, rising costs and newly introduced surcharges have affected every company to some extent. Entire supply chains are under pressure, starting at the point of sourcing (e.g., tariffs) and extending through final-mile delivery (e.g., the aforementioned increased parcel fees and surcharges). The challenges reflect more than just higher prices. They require a fundamental transformation in your small parcel operations, which must be managed to stay flexible and keep your company profitable.

From the carrier’s perspective, operational costs are also increasing for several reasons. Inflation, higher labor and equipment costs, and rising fuel prices are forcing them to pass some of the expense onto their customers. Volatile market conditions, including fluctuating demand and general economic uncertainty, are as impactful for carriers as they are for you, their customers. As a result, base shipping rates continue to climb every year with historically high General Rate Increases and new fees and surcharges inflating carrier invoices.

*Note: FedEx and UPS will be announcing their 2026 GRIs soon. Sign up here to receive TransImpact’s expert analyses when they’re published.

Parcel Carrier Tactics are Changing

What’s notable is that the carrier trend is to increase its reliance on surcharges as a way to grow revenue in the face of weak demand, rather than relying solely on base rate increases. This makes it harder for shippers to forecast and control their expenses because many customers’ contracts do not prohibit such increases. At the same time, the ability to raise base rates and other costs is more limited. This tactic points to the importance of keeping your contracts up-to-date and current because rates change faster than most agreements are renegotiated.

Another growing portion of carrier revenue now comes from fuel surcharges, which are not typically capped. Updating fuel tables has become a common tactic from FedEx and UPS, with more than 10 increases combined since the beginning of 2024. Taken all together, these rate changes turn each invoice into a puzzle of unpredictable charges. Shippers are often surprised by costs that were not included in their budget. Effective management now requires constant oversight and adjustments, making it critical to monitor expenses and adapt shipping strategies in real-time.

Where Do Rising Parcel Costs Leave Shippers?

Like the carriers, shippers need to decide how to deal with the higher costs. This can include passing the expense on to customers, absorbing it, or finding new ways to remain competitive. This changing environment presents clear challenges for cost containment beyond simply carrier rates. To adapt, businesses also need to focus on optimizing their packaging, routing, and consolidation of shipments. And, of course, the best approach is to use data and technology to support those types of planning and decision-making.

At the same time, companies should also reconsider their pricing strategies and place greater emphasis on the customer experience. This is particularly complicated with FedEx and UPS, which prioritize reliability for standard shipments while making non-standard or remote deliveries more expensive. This means if your business ships to rural areas or handles unusual items, it may be time to consider alternative carriers or new fulfillment strategies.

Carriers are being intentional about how they change their fees and surcharges, so with strategic planning and using your parcel data, shippers can target specific cost drivers. For example, an area of emphasis can be identifying and then creating a plan to reduce where you’re paying the most in surcharges. Remember, carriers reward efficiency by charging less for compact, dense, and standard-sized packages, while penalizing bulkier or oddly shaped items. Therefore, rethinking product packaging and routing choices is an effective way to reduce exposure to excessive fees.

The competitive landscape is also evolving in ways that shippers may not immediately realize. UPS and FedEx are in a pattern of raising prices in near lockstep, so switching between the national carriers alone may not offer significant savings. But opportunities often exist to find lower rates and better service with regional carriers. Just don’t forget that the carriers you work with must be evaluated based not just on cost, but also on reliability and service quality.

How Parcel Shippers Can Prepare for the Rest of 2025 and Beyond

As we’ve highlighted, the parcel market is constantly impacted by multiple cycles. Here are five strategies to help companies stay competitive though year-end and into 2026:

1. Companies need to monitor the news (and their invoices) carefully for changes in fees and surcharges.
2. Take every opportunity to optimize packaging, reduce shipment volume through consolidation, and evaluate carriers that may offer better rates for specific needs.
3. Remember, renegotiating your contracts is always an option. Shippers always have the right to seek better terms, and we’re in a buyer-friendly market.
4. Data should also play a central role in managing logistics costs, so leveraging business intelligence will help identify inefficiencies and track performance in ways that lead to actionable savings.
5. Lastly, as the peak shipping season approaches, shipping managers can expect the general rate increases for 2026 to be announced in the coming months. Be prepared to digest and account for those increases in next year’s budget.

The supply chain environment is growing more complex and expensive, which makes understanding these challenges essential to maintaining profitability. With the right strategies, every shipper can turn shipping pressures into a competitive advantage.

Take the Next Step with TransImpact

As shipping costs increase and surcharges become more widespread, companies need every advantage to stay competitive. TransImpact provides expert Parcel Contract Negotiation and Parcel Spend Intelligence solutions to help businesses take control of their logistics spending. Through the use of advanced analytics and proven negotiation tactics, TransImpact identifies hidden savings and secures better rates, enabling companies to navigate the current supply chain market with confidence.