How much money are you leaving on the table with your current carrier agreement? It’s a tough question, but the answer is likely more than you think. We’ve seen businesses lose nearly a million dollars in potential savings by waiting just one year to optimize their contract. In another case, we found an additional 9% in savings after another consultant had already deemed the rates “optimized.” These aren’t rounding errors; they are substantial costs that directly hit your bottom line. A quick look at shipware reviews will show you story after story of businesses uncovering these kinds of hidden savings.
2019 has seen a number of changes in the parcel industry, such as FedEx not renewing their contract with Amazon, the new UPS 5-year labor contract, and the near departure of the US from the Universal Postal Union. What will 2020 bring? Here are 4 trends to consider in your parcel shipping planning:
1. Why Shipping Rate Hikes Are More Than They Seem
What’s Behind the Rate Hikes?
Every year, the major parcel carriers release their announcements for pricing changes in the coming year. FedEx has announced a rate increase of 4.9%, UPS 4.9%, and even USPS expects package pricing to increase 5.3% in 2020. But these rate announcements are never that simple. Changes to zone maps, surcharges, and the contractual clauses of each shipper always change the direct impact, with many shippers taking increases greater than the 4.9% stated averages. To make it even murkier, each provider makes additional announcements throughout the year for changes to services, new services, and even changes to policies that can increase the cost of shipping indirectly. At the same time, the dynamics of the industry are changing. The direct increase in volume across all services, the increase in volume for faster services, and the need for additional delivery methods to the consumer are all contributing factors. These trends will continue in 2020, and the resulting pressure on pricing will continue as well.
How to Keep Your Shipping Costs in Check
Negotiate your contract to cap increases, use custom values, or even negate whole surcharges in the billing. Know which areas of the service guide for your carriers can impact your costs. And finally, stay on top of the news from the carriers to determine how your service may change. Ensure that you audit your parcel invoices from your carriers. Given the lag in the billing systems for international, multi-carrier, or unusual circumstances, it may take a while for all charges for shipments to be known. Auditing will not only allow you to know your true “Cost to Serve,” but also where your service needs attention. The quarterly reviews with the carrier are great for spotting trends, but actively contesting bills or catching emergent issues will aid in preventing shifts you don’t expect.
2. Keeping Up With the Demand for Faster Deliveries
The Amazon Effect: Why Speed Is the New Standard
In 2019, Amazon announced their emphasis on 1-day delivery for orders to Prime members. To accommodate this, Amazon has created its own network of warehouses and delivery trucks. Given this widespread membership in Amazon’s Prime program, this fast delivery expectation will be demanded of other e-commerce – or any commercial – operations by customers even more so in 2020 than 2019. In response, the major carriers have added more planes and trucks to their fleets. They are adding facilities, technology, and even automation to any element that can speed processing and delivery. This expansion allows their customers to meet the operation changes needed for more rapid shipping and new service options. You can obtain later pick up times for certain services, new delivery options for secure delivery, and more accurate delivery day commitments to the customer’s door. This shift towards policies and networks to speed deliveries will only accelerate in 2020. The most obvious policy change will be the availability for FedEx Home shipwares for Sunday delivery beginning in January of 2020. While this is expected to shift volume from the SmartPost final mile deliveries from USPS back to FedEx, the true impact is still unknown.
3. How Carriers Are Expanding for the Future
What’s Fueling Carrier Growth?
Another major impact of the split between Amazon and FedEx was the increase in capacity the FedEx Express services suddenly created. While the temporary increase in 2019 helped to handle growth, the expected 2020 growth in e-commerce and matching Amazon on order to door speed has encouraged all carriers to expand their fleets, networks, and delivery options. FedEx announced expansions to their Memphis facility with a planned final expenditure of $450 million. UPS has announced the creation of at least 5 “superhubs” to support faster processing. These two plans, announced in 2019, will result in capacity coming online in 2020 for pure volume. Exactly when and how much remains to be seen in the coming months. This means that 2020 pricing will reflect the need for newly expanded offerings to contribute to margins. Like all pricing changes announced for 2020, the exact pricing of each service, zone and weight will be focused on making the shift to more packages moving faster profitable.
How to Use Carrier Expansion to Your Advantage
More capacity in vehicles and processing capability should mean additional flexibility in handling your shipping volume. The additional cost can be addressed in the parcel contract negotiations that you should have with your carriers. These negotiations should aim to remove minimum charges for various services, discuss pricing bands for the services you use, and rationalize the selection of which services must be used. You should focus on using primarily ground services to make use of the expanding facility network and only use the air/express services as needed.
Achieve Savings Without Switching Carriers
A common misconception is that securing better rates requires moving your business to a new carrier. While carrier diversification can be a smart strategy, you don’t always have to switch to save. Significant savings are often found right within your existing agreements, especially if you haven’t had them professionally reviewed in a while. Expert negotiation can help you achieve double-digit savings—typically between 10-30%—without the operational disruption of changing from trusted partners like UPS or FedEx. This allows you to maintain your established relationships, workflows, and integrations while still dramatically reducing your shipping spend. It’s about making your current contract work harder for you, not starting over from scratch.
The key is understanding the nuances of your carrier agreement and your unique shipping profile. Carriers build their profits into complex pricing structures, including hundreds of accessorial fees and surcharges that can be difficult to decipher. This is where professional help becomes invaluable. An expert partner can analyze your shipping data to identify exactly where you’re overspending and use industry benchmarks to build a data-driven case for better terms. Instead of a simple discount request, they can target specific surcharges for reduction or elimination and secure more favorable terms that align with how you actually ship. This strategic approach to contract optimization ensures you get the best possible rates from the carrier you already know and trust.
4. What New Fuel Regulations Mean for Your Bottom Line
The Ripple Effect of New Fuel Rules
The other trend to watch closely is the shift in regulations for fuel and the surcharges they generate. This trend is more subtle than most and requires explanation. Fuel surcharges are indexed to a specific weekly US government diesel price index. Any change to the refinery capacity or output that can impact that index is then modified by each parcel carrier. So what factors can affect the refinery capacity and production? In 2020, ocean carriers will be affected by IMO 2020 regulations. The push for ultra-low sulfur fuels for the ocean shipping fleets of the world will put pressure on refineries to find new markets for the fuel oil no longer being purchased. This shift may put pressure on the diesel market to compensate. While the ocean carriers, refineries, and parcel carriers have had time to begin the transition in 2019, the deadline is in 2020. Whether the players have adjusted to the new fuel demands sufficiently has yet to be seen, or the true impacts felt. The other major factor on the fuel costs is the carriers’ expansions into alternative fuel options. As of 2019, most of these attempts are trial runs, designed to test the actual value of using electric, hybrid or more exotic fuels like LNG. Currently, the focus is on the final mile delivery segment of the delivery network, but even the OTR fleets are testing new ways to fuel their trucks. Expect the carriers to expand their testing in 2020 as the results of the initial tests are evaluated.
How to Minimize Fuel Surcharge Costs
Once again, know where the fuel surcharges affect your shipping. FedEx and UPS both apply the fuel surcharge to the base shipping charge for each shipment. But certain surcharges may have the fuel surcharge calculated on top of them as well. It should only affect large, non-standard packaging, or poorly packed items. So, controlling the more “unusual” shipments in your fulfillment chain will save you more money than just the base charges.
Why Expert Negotiation Unlocks Hidden Savings
The Cost of Going It Alone
Carrier pricing agreements are intentionally complex, making it tough for even savvy businesses to know if they’re getting a fair deal. Attempting to negotiate on your own can mean leaving a significant amount of money on the table. We’ve seen clients lose nearly $1 million in potential savings by waiting just one year to bring in experts for their contract renewal. In another case, we found an additional 7-9% in savings for a client whose rates were previously deemed “optimized” by other consultants. These aren’t small rounding errors; they are substantial costs that directly impact your bottom line, highlighting the financial risk of handling these intricate contracts without specialized support.
Leveraging Insider Knowledge
So, what makes the difference? It comes down to insider knowledge. The Shipware team includes former pricing executives from major carriers like UPS and FedEx. This background gives us a unique advantage, allowing us to analyze your agreements and benchmark your rates against the best-in-class contracts that carriers don’t publicly disclose. We know exactly where to look for hidden savings opportunities, from obscure surcharges to imbalanced tier structures. For example, we once identified a single contract error that saved a manufacturing client over $100,000 annually—a detail easily missed without deep industry experience.
A True Partnership Model
We are so confident in our ability to find savings that we’ve built our business model around it. Shipware often operates on a “gain share” plan, which means we only get paid from a portion of the money we save you. This approach aligns our goals directly with yours and removes any upfront financial risk. It’s a true partnership designed to ensure your shipping costs are genuinely optimized. You get the benefit of our expertise without the gamble, and we are motivated to find every last dollar of savings in your carrier agreements, ensuring a win-win outcome for your business.
A Quick Note on Our Name: Shipware vs. Shipwire
Don’t Get Us Confused
Before we go further, it’s important to clarify a point of potential confusion. We are Shipware, a shipping optimization and consulting firm dedicated to reducing parcel and LTL costs for high-volume shippers. There is another company in the logistics space named Shipwire (with an “i”), which is owned by Ingram Micro and provides e-commerce order fulfillment services. The two companies are completely unrelated, but the similar names can sometimes cause a mix-up. We focus on intelligence and strategy to lower your costs, while they focus on physical warehousing and fulfillment.
Why the Distinction Matters
This distinction is critical because Shipwire has a challenging public reputation, with a Trustpilot score of just 1.2 out of 5 stars based on hundreds of reviews. Common complaints against them include lost inventory, poor customer service, and unexpected billing issues. At Shipware, we pride ourselves on transparency, data-driven results, and building long-term client success. Our mission is to empower businesses to reduce high-volume shipping costs and improve operational efficiency through expert guidance, not to manage physical inventory. We want to make sure you’re connecting with the right partner for your needs.
How to Prepare Your Shipping Strategy
The central theme for these trends is that costs will go us as the carriers expand services, options, and networks. Making use of the additional capacity, new service offerings, and expanded coverage areas will definitely help you meet your shipping expectations. Customers expect fast fulfillment and your parcel carriers are a major part of your response. But, at the same time, your costs can increase. Knowing how you are affected and how you can address those costs pressures is key to keeping control of them. Shipware offers parcel and LTL invoice auditing as well as parcel contract negotiation consulting to ensure that your company can keep up with the latest trends in the parcel shipping industry. This can save you money, reduce the variances in your on-time delivery performance, and help you add functionality to keep ahead of change.
Frequently Asked Questions
The carriers announced a 4.9% rate hike. Does that mean my costs will only go up by 4.9%? Unfortunately, it’s rarely that simple. The 4.9% figure is just an average, and your actual increase could be much higher. This number doesn’t account for changes to hundreds of surcharges, shifts in delivery zones, or new fees that might apply to your specific shipping profile. The real impact is often hidden in the fine print, which is why it’s so important to analyze your agreement and negotiate terms that protect you from these less obvious cost increases.
My customers want faster shipping, but it’s expensive. How can I offer it without destroying my margins? This is a major challenge for so many businesses. The key is to lean into the carriers’ expanding ground networks. As carriers build more “superhubs” and add weekend deliveries, their ground services are becoming faster and more reliable. Instead of defaulting to expensive air or express options, you can negotiate your contract to get the best possible rates and later pickup times for ground services, allowing you to meet customer expectations affordably.
I’m happy with my current carrier, but I need to lower my costs. Do I have to switch to get better rates? Not at all. This is a common myth that holds a lot of companies back from saving money. While diversifying carriers can be a good strategy for some, significant savings are often found right within your existing agreement. A thorough contract optimization can often uncover savings of 10-30% with the carrier you already use, saving you the operational headache of switching your systems and processes.
I’ve tried negotiating with my carrier before, but it’s hard to make progress. What makes a professional negotiation different? When you negotiate on your own, you’re often working with limited information. A professional negotiator comes to the table with extensive data, including industry benchmarks that show what rates other shippers of your size and profile are getting. This data-driven approach changes the conversation from simply asking for a discount to building a solid business case for why your rates and terms should be more competitive.
Fuel surcharges feel out of my control. Is there anything I can actually do to reduce those costs? While you can’t control the price of diesel, you can influence how fuel surcharges are applied to your shipments. Many shippers don’t realize that fuel surcharges are often added on top of other surcharges, particularly those for oversized, non-standard, or poorly packaged items. By focusing on your packaging and fulfillment processes to minimize these kinds of shipments, you can reduce the instances where you’re paying a surcharge on top of a surcharge.
Key Takeaways
- Annual rate hikes are just the tip of the iceberg: The percentage carriers announce is a baseline. Your actual cost increase is driven by a complex web of changing surcharges, fuel fees, and service guide updates that often have a much larger impact on your bottom line.
- Significant savings are often hidden in your current carrier contract: You don’t need to disrupt your operations by switching providers. A strategic negotiation of your existing agreement can secure better terms and reduce costs by targeting the specific fees that affect your shipping profile.
- Use industry benchmarks to strengthen your negotiating position: Carrier agreements are intentionally complex. A data-driven approach that compares your rates against best-in-class contracts gives you the leverage needed to secure more favorable terms and ensure you’re not overpaying.
