Are you bracing for another round of FedEx and UPS rate hikes in 2025? You’re not alone. The average increase for FedEx and UPS ground shipments in 2025 is 5.9%, but the real impact on your business could be much higher. At LJM, we’ve been helping businesses optimize their shipping contracts and reduce costs for over 25 years. We understand the intricacies of carrier pricing and can help you mitigate the impact of these rate changes.
This year’s announcement revealed an average 5.9% rate increase for both Carriers domestic and international services, alongside a variety of other accessorial charge hikes that will push a shipper’s total increase even higher. For many shippers, surcharges account for more than 30% of their overall shipping spend. The “5.9%” increase is NOT applied across the board and the impact of these increases on a shipper’s cost will vary from shipper to shipper based on specific shipping characteristics.
In 2024, both carriers have actively increased surcharges, fuel costs, moved the goal post on surcharge criteria’s as well as introduced new surcharges all together. As costs continue to escalate, shippers need to assess the implications of these changes on their finances and explore strategies to mitigate the ongoing rise in shipping costs.
Highlights include:
After a challenging year, UPS is under pressure from rising labor costs and soft market conditions. UPS matched FedEx’s 5.9% GRI, a move likely influenced by the risk of losing more customers, particularly small-to-medium-sized businesses. This increase marks the second consecutive year UPS has set its GRI at 5.9%, suggesting that the days of smaller rate hikes may be behind us.
UPS has updated its list of ZIP codes subject to Area Surcharges and realigned some ZIP codes to higher-cost zones. These changes may go unnoticed by many shippers, potentially leading to unexpected rate increases.
Rate increases will apply across all weight breaks, with 2nd Day Air and Ground Residential shipments seeing the highest increases. UPS appears to be maintaining lower increases for shorter zones (2-4) due to competition from regional carriers. However, rates for 2nd Day Air Zones 5-8 will see increases exceeding 7%, possibly as a response to competition from FedEx’s One Rate service.
Shippers benefiting from discounted rates will see a rise in the minimum charge, or floor price, closely aligned with the GRI’s 5.9% increase. Additionally, the ground minimum for both carriers will experience a 5.8% hike from 2024 to 2025.
Most surcharges, especially those for large oversized packages, are increasing significantly more than 5.9%, with some rising over 28.2%. UPS has also introduced a new calculation method for determining Large Package and Additional Handling surcharges based on volume, length, or weight. Additionally, packages meeting specific additional handling dimensional criteria will now have a minimum billable weight of 40 lbs.
Starting October 26, 2024, UPS will apply a 2% surcharge on invoices paid by credit card. This fee will effectively offset any savings negotiated by shippers who choose this payment method.
To manage these increases effectively:
As we prepare for the 2025 General Rate Increase from UPS and FedEx, it is essential for shippers to stay informed and proactive. Understanding the implications of these changes and strategic planning can help businesses navigate the complexities of the logistics landscape while maintaining cost-effectiveness. Regularly reviewing shipping agreements and exploring potential alternatives will be key to adapting to the evolving market conditions. By taking these steps, shippers can position themselves for success in the face of rising shipping costs.
Contact LJM today to schedule a free consultation and discover how we can help you achieve significant savings on your 2025 shipping costs.
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