This Week in Supply Chain - What's Really Moving the Market

Costs Are Climbing. Strategies Should Be Too.

The headlines this week tell a clear story: carriers are pivoting, costs are climbing, and trade tensions are back in full force.

Major Changes from UPS Mail Innovations

Starting May 11, UPS Mail Innovations is rolling out another round of surcharges and pricing shifts that could significantly impact shipping costs, especially for Parcel Select and Ground Advantage users.

These follow steep increases already implemented in January, making this the second major cost adjustment in just five months.

What’s changing:

• $1.75 Delivery Area Surcharge: Applies per package on extended ZIP codes. This hits all Parcel Select and Ground Advantage shipments.

• 1.5% Late Fee: A new penalty for late invoice payments. Even a short delay could now cost you more.

• Account-Specific Price Hikes: UPS will introduce custom rate changes by account. Details won’t be published, and you’ll need to go through your UPS rep to get specifics.

These adjustments are a direct response to USPS ending its discounted rates for consolidators like UPS, which handled high-volume last-mile delivery.With that safety net gone, costs are shifting downstream and many shippers could see up to a 40% increase in affected service areas.

The Takeaway: This isn’t just a price hike, it’s a strategic shift. If your business leans heavily on Mail Innovations, now is the time to:

• Re-evaluate how you're using USPS-injected services

• Audit ZIP codes most affected by the new surcharges

• Don’t just accept what your rep hands you. Work with a logistics consulting firm that knows how to navigate opaque pricing and fight for the rates you deserve.

When costs rise without warning, the only defense is clarity, control, and a strategy built around your real shipping profile - not assumptions.

Mid-Year UPS Rate Hikes Are Here And They’re Hitting Where It Hurts

UPS is rolling out another round of pricing changes effective June 2, 2025, and this time, it’s not just a routine adjustment - it’s a structural shift in how fees are calculated, assessed, and passed on to shippers.

These updates follow a familiar pattern: align more closely with FedEx, increase complexity, and quietly push costs higher under the radar of traditional rate charts. If you're shipping large, heavy, or out-of-zone parcels, you're in the crosshairs.

What’s changing:

• Additional Handling (Zone 7+):

  • Weight-based: $55.00 (+4.26%)

  • Dimension-based: $38.00 (+5.56%)

  • Packaging: $31.50 (+1.61%)

    These surcharges are now directly comparable to FedEx’s highest zone thresholds.

• Large Package Surcharge Changes:

  • UPS is shifting from “length + girth” to cubic volume, a fundamental change that could drastically impact how dimensional weight is calculated.

  • Zone 7+ rates are rising:

    • Commercial: $260.00 (+4.00%)

    • Residential: $305.00 (+2.52%)

    • Over Max Limits: $1,775.00 (+33.96%)

• ZIP Code & Zone Shifts:

  • Remote Area Surcharges now extend to Ground Saver (previously only SurePost)

  • Expect updated Delivery Area Surcharges across several ZIP pairs, often without much warning or explanation

• Fuel Surcharges:

  • A 50 basis point increase was also applied to Domestic Ground, SurePost, and Air services back on March 10, 2025. This is another example of ongoing, layered cost pressure.

• Audit Fees Just Got More Expensive:

  • Shipping Charge Correction Audit Fee now applies the greater of $1.65 per package or 12% of the correction total (up from 8%)

  • That’s a 50% jump in the correction penalty and another incentive to get it right the first time

This isn’t just about new numbers, it’s about new risk exposure.
When fee structures shift from static formulas to fluid, account-level variables, transparency goes out the window and margin erosion becomes harder to detect.

If your shipping profile includes, large packages, high-zone or long-distance shipments, residential delivery - then this mid-year adjustment could significantly eat into your bottom line.

The Takeaway:

• Re-model your dimensional pricing risk under the new cubic volume rules

• Benchmark your surcharges against industry norms

• Tighten audit accuracy and recovery on the front end

• Work with a logistics consultant (like ICC) who can pressure-test these changes and negotiate with visibility

UPS Eyes a Return to LTL

After selling off its LTL business in 2021, UPS is signaling a return to the space. Why are they doing this? Because LTL costs are surging, up more than 12% year-over-year, and shippers need alternatives.

This isn’t just about chasing margin, it’s about trying to stay relevant in a shifting freight environment. With FedEx scaling back its own LTL footprint and Yellow now out of the picture, UPS has a clear opening and it's moving to fill the gap.

For shippers, this is less about a new carrier option and more about reading the signals:

• Diversification is no longer optional: if you haven’t revisited your LTL mix in the past 12 months, you’re already behind.

• Pricing volatility isn’t slowing down: mid-year rate creep is real, and mode-shifting will be key to protecting margins.

• Carrier leverage is shifting: and so should your negotiation strategy.

This move by UPS is a reminder: LTL isn’t on autopilot anymore. It’s a battleground, and the smartest shippers are treating it that way.

OnTrac Launches Tariff Relief Discounts

Regional carrier OnTrac is stepping in with targeted discounts for shippers hit hardest by new tariff costs and those using UPS Ground Saver.

Their new “Reciprocal Discount” program offers targeted savings to businesses impacted by the latest trade penalties, particularly those relying on UPS Ground Saver.

What makes this notable:

• OnTrac’s discounts are specifically designed to capitalize on UPS vulnerabilities

• They're courting shippers looking to diversify away from Ground Saver services, which are now subject to new surcharges

• It’s a clear signal that regional carriers are ready to compete on value, not just coverage

The takeaway: Carriers are fighting for market share and that opens the door for shippers to negotiate smarter.

This is the time to:

• Leverage regional competition to renegotiate national rates

• Use programs like OnTrac’s to test flexibility and service levels

• Pressure-test your parcel strategy against rising surcharges and fuel fees

Tariff Chaos: A 2020 Throwback, But Worse

The latest round of tariffs from the Trump administration is shaking up global trade, and this time it’s not a pandemic driving the disruption - it’s policy.

A 145% duty on Chinese goods and threats of 100% tariffs on select imports have pushed the trade deficit to a record high.

• The U.S. trade deficit has surged to a new record

• Export orders are slipping fast

• Domestic manufacturing output is cooling off

It’s a pattern supply chain leaders know all too well, but now with fewer safety nets and higher stakes.

The Takeaway:

For shippers, this isn’t a theoretical risk, it’s a bottom-line event. Tariff-driven cost spikes ripple through origin-destination networks fast, especially for companies sourcing from Asia or relying on single-region fulfillment.

Now’s the time to:

• Re-evaluate sourcing strategies and landed cost models

• Explore duty mitigation tools or country-of-origin shifts

• Consider multi-region distribution and nearshoring where possible

Reactive supply chains will feel the impact. Resilient ones will adapt.

Here’s What We’re Watching at ICC:

• LTL Market Realignment: UPS’s reentry and FedEx’s pullback are reshaping capacity and pricing power. We’re helping clients re-benchmark contracts and evaluate mode mix.

• Parcel Surcharge Creep: Mid-year fee changes, dimensional pricing shifts, and new audit penalties are quietly driving up costs. Visibility here is key to staying profitable.

• Tariff Fallout: New duties are disrupting sourcing strategies. We’re modeling total landed cost changes and identifying opportunities for nearshoring or diversification.

• Carrier Competition: Programs like OnTrac’s discount push signal a fight for parcel volume. Smart shippers are using this moment to negotiate - not settle.

• Final-Mile Risk: As USPS consolidator discounts evaporate, expect more pass-through charges and zone volatility. We’re tracking ZIP shifts and assessing alternatives.

Reactive decisions cost real money. Stay alert, stay flexible and don’t assume your current contract terms will protect you from what’s coming next.

If you’re re-thinking your logistics strategy, we’re here to help.

The savings are out there, you just need to know where to look.