Small Parcel Shipping Costs to Increase Despite Softening Freight Market

FedEx and UPS Show Near Double-Digit Small Parcel Increase for 2024

Both UPS and FedEx are expecting a decline in shipment volumes this year. UPS and FedEx are increasing prices to compensate for declining volume and higher costs. To prevent a strike, in July of 2023 UPS signed a new labor contract with the Teamsters that will increase labor costs by about 9% year-over-year. Consequently, both UPS and FedEx implemented a general transportation rate increase of 5.9% for 2024. These increases are higher than the 3.9%-4.9% increases we observed pre-pandemic.

Express services (overnight, 2-day, and 3-day) and longer distances/ zones are seeing even higher increases than 5.9%. Additionally, minimum charges for overnight shipments will increase between 7.5% - 8%. These minimum charge increases will impact the smaller weight and closer zone shipments.

On top of that, the carriers are raising numerous fees that are significantly higher than 5.9%:

• Additional handling charges: 18% - 21%

• Weekly pickup rates: 10%

• Residential/DAS: 7 - 10%

 • Address Corrections: 8%

US Postal Service (USPS) is a Competitive Small Parcel Option

As consumer and media mail volume continues to decline, USPS is focusing more on commercial deliveries. With their existing last-mile infrastructure, USPS offers competitive rates for smaller consumer shipments.

USPS is also increasing its rates for 2024. USPS Ground Advantage will increase by 5.4%, Priority Mail will see a 5.7% increase, and Priority Mail Express will see a 5.9% increase.

Considering other fees charged by FedEx and UPS, the USPS increases are smaller and will remain competitive in 2024, especially for direct-to-consumer shipments of small packages.

ERA Helps Decrease Small-Package Spending, Despite Rising Costs

Even in this rising-price environment, there are still ways to reduce costs. While most companies focus solely on negotiating better discounts, ERA has found that adding operational enhancement to negotiations yields even more significant savings.

Our approach to assessing clients’ operational needs and analyzing pricing options that meet those specific needs has generated substantial savings. Additionally, making informed operational adjustments further reduces accessorial and transportation charges.

By combining these changes with expert rate renegotiations, ERA has helped clients achieve more than an 18% reduction in express and parcel shipping costs.

About ERA

Expense Reduction Analysts (ERA) is a global cost optimization and supplier management firm. For over 30 years, we have helped thousands of clients find extra cash flow and improve operational efficiency in more than 40 expense categories. We provide specialized expertise, real-time industry benchmark data, and practical insider knowledge for dozens of supplier industries. Our risk-free model means the cost of doing business with us comes from a portion of the savings we find. If we do not find savings, there is no fee for our services.

About the Author

Mike Plesha is a senior-level executive with extensive experience in global manufacturing, distribution, transportation, and logistics. As a Consulting Partner with ERA, Mike combines his strong relationship-building, consulting, and leadership skills, with his experience across various business disciplines to partner with corporate leaders and business owners to identify opportunities for reduced costs and improved processes and financial outcomes.