How FedEx, UPS shippers can limit fuel surcharge pressures
Summary
Shippers using FedEx and UPS are facing mounting pressure from fuel surcharges, which can add significant cost to outbound freight budgets. Experts recommend a combination of negotiating volume discounts, reducing dimensional weight penalties, and diversifying carrier relationships to include regional and alternative carriers. The goal is to create structural cost relief rather than absorbing surcharges as a fixed line item.
Why It Matters
For manufacturers, outbound freight costs are not a peripheral concern — they directly affect landed cost calculations, customer pricing models, and margin on finished goods shipments. Fuel surcharges from the two dominant parcel carriers can run 20-30% or more on top of base rates, compressing margins on lower-value SKUs in particular. Operations and supply chain teams should treat carrier contract renegotiation as a recurring discipline, not a one-time event, and should audit shipment data for dimensional weight inefficiencies that inflate charges without moving additional product. Diversifying into regional carriers or USPS for certain weight breaks can also reduce dependency on duopoly pricing power, giving procurement teams more leverage at the negotiating table.