Once upon a time, in a magical land called "Parcel Shipping," carriers would change the fuel surcharge tables no more than once a year, the delivery area surcharges were (sort of) logical, handling fees weren’t too much of a handful and seasonal rate hikes were… seasonal. But that was a simpler time.

In today’s world, parcel pricing is a complex, counterintuitive, and constantly shifting landscape. Carriers have changed fuel surcharge tables nine times in less than a year, and the fuel surcharge has gone up even as diesel fuel prices fall. Delivery area surcharges now cover more than 60% of all ZIP Codes in the United States. Handling charges? Their reach has grown, now applying to smaller, lighter boxes and subject to a minimum weight threshold and higher fees. Shippers can also leave behind the quaint idea of seasonal rates applying to the holiday season, as those rates now basically mean fall and winter. Perhaps a rebranding to a “chill surcharge” is in order?

Welcome to the world of parcel shipping, 2024-style, where surprise fees are the only guarantee.

While shippers can't do much to stop carrier rate hikes, they’re not powerless. To soften the impact of what’s shaping up to be an even more surcharge-packed 2025, here are three New Year’s resolutions every shipper should consider.

1. Make parcel analytics a priority, especially if your organization has significant spend.

Understanding your parcel shipping profile – the distribution and physical characteristics of your shipments – is a critical, foundational step toward a smarter, more efficient parcel strategy. With year-round pricing changes by carriers quickly becoming the new normal, shippers need to swiftly and accurately assess the impact and adjust cost forecasts accordingly. Whether you absorb the increases or pass them on to your customers, these subtle but consequential changes can have a major impact on your bottom line.

As parcel cost structures and changes become increasingly fast-paced and complex, having the right resources, skills, and expertise to conduct accurate analysis and build effective strategies is now essential. With the continued proliferation of various fees and surcharges, shippers must optimize factors they can control.

· Optimize service choices. Express services are day and time-specific, while ground deliveries are based on origin and destination. Shippers should use the lowest-cost service option to meet their delivery commitment to customers, and this commitment should be based on delivery time – not service choice. Improvements to ground delivery networks enable shippers to save money without compromising when packages are delivered. For example, if a customer is 150 miles from your warehouse, ground service can reach it in fewer than two days. Why use two-day express service, when ground can slash your cost by at least 50%? To trust but verify this strategy, I recommend working with a company with the empirical data necessary to independently verify carriers’ true service levels.

· Optimize packaging. Size, weight, and packaging type are all important factors when it comes to navigating various surcharges. Dimensions can trigger additional handling charges, oversize or large package charges, plus a demand surcharge for either additional handling or oversize. In 2024, just the oversize surcharge can ring as high as $240, which is followed by an additional $84 to $100 for the demand surcharge. Reducing packaging size by an inch or two might be enough to stay below the threshold for the additional length surcharge. Breaking heavy items into multiple packages could avoid a weight surcharge, but in other cases, consolidating shipments can avoid multiple handling charges. Remember to also keep an eye on thresholds for dimensions and weight, as carriers commonly change the definitions of “over length” and “overweight.”

· Focus on avoidable charges. A lot of penalties are under shippers’ control, and in-depth parcel analytics will pinpoint where unnecessary costs are coming from. Does empty space in boxes have you paying to “ship air?” Are you suffering from late fees? Tightening up parcel shipping execution can avoid paying these and other hefty fees.

2. Build a good relationship with your parcel carriers.

Parcel negotiation is both an art and a science, requiring a balance of strategic planning, market expertise, and effective communication skills. Ultimately, carriers and shippers need each other, and while carriers wield significant pricing power, shippers have some power of their own. Carriers expect some push-back, and it’s incumbent on shippers to pick the right battles. As the classic Kenny Loggins tune says, “you have to know when to hold ‘em and know when to fold ‘em.”

Properly executing this give-and-take requires a fact-based negotiation strategy and external support that can overlay your needs as a shipper with an up-to-date view of the market and pricing changes. This can provide direction on where carriers are most likely to dig in their heels and where there may be some flexibility. For example, if your deliveries are destined for low-density areas, then residential charges may stay stubbornly high despite negotiation. But fuel might be more prone to discounting – especially if the surcharge is up but the actual price of fuel has trended down.

3. It is never too early to plan for next year. Start now.

As soon as this peak season is over, start planning for the next one. Planning to expand with new locations in new regions? Forecasting other changes to your business? Get carriers involved as soon as possible so they can help you plan and so they can prepare for how your change affects them.

Early planning also gives shippers critical time to research their options, explore alternative carrier arrangements and, most importantly, test various options before ramping up to full capacity. The parcel carrier landscape is an increasingly dynamic space, with USPS and regional players offering some advantages over established global players, but also bringing some real limitations. For some shippers, the inherent complexity of using several carriers can make the order fulfillment process too difficult or service may be either inconsistent or simply not good enough, leaving shippers with unhappy customers. But whether issues are deal-breakers or just unpleasant – but fixable – wrinkles, they need to be identified and addressed before busy periods turn up the heat. Test these new processes and carriers early so that the effects of any experiments gone awry are not magnified by peak demand.

Stay Vigilant

There’s no way to accurately anticipate the number and scale of parcel rate increases – only that they will happen. But shippers can effectively manage rates and protect margins by staying informed about carrier policies and surcharges, keeping track of and optimizing internal processes, and leveraging technology, analytics, and common sense to adjust forecasts to keep up with the ever-changing world of parcel.

Mingshu Bates is Chief Analytics Officer and President of Parcel Services, AFS Logistics.

This article originally appeared in the November/December, 2024 issue of PARCEL.