Managing your business’s parcel shipping spend is a logistics-wide effort that analyzes everything from carrier contracts to parcel invoices. And with shipping costs on the rise, every dollar counts.
Carriers implement regular rate increases and surcharges every year, but shipping costs have risen significantly. Parcel shipping for FedEx and UPS has increased by 30% cumulatively over the past few years. These expenses directly impact your bottom line, but still, many businesses continue to operate with inefficient shipping practices.
The good news? There are actionable strategies that can deliver measurable savings without sacrificing speed, reliability, or operational efficiency. Let’s dive in!
The Current Parcel Shipping Landscape
Before diving into specific strategies, it’s essential to understand the current state of parcel shipping. Businesses are facing many challenges, such as:
- Rising surcharges and base rates
- Volatile demand during peak periods
- Capacity constraints and service disruptions
- Lack of transparency in shipping contracts
Carrier rates continue to climb annually, with GRI (general rate increases) averaging 4.9-6.9% in recent years. Beyond these base transportation rate hikes, carriers have introduced and expanded numerous surcharges for fuel, extended delivery areas, additional handling, and peak season volumes. Reveel’s 2025 GRI Guide identifies surcharge increases to be as high as 29% for some shippers. Increases as high as that can impact any shipping budget, whether you’re a small business or a nationwide chain.
With parcel shipping becoming more expensive and complex, it’s more important than ever to optimize your parcel shipping spend. Passive acceptance of shipping costs is no longer viable. Businesses that take a proactive approach to parcel shipping spend management gain a significant competitive advantage in terms of both profitability and customer satisfaction.
6 Strategies to Improve Your Parcel Shipping Spend
1. Perform a Comprehensive Shipping Analysis
First things first, you need a baseline of your current shipping operations. A full audit of your shipping data can uncover hidden costs and inefficiencies. Start by analyzing:
- Shipping volume by zone and service level
- Average package weight and dimensions
- Carrier performance metrics (on-time delivery, damage rate)
- Accessorial and surcharge fees
- Average cost per package and cost per pound
Regular parcel billing audits ensure that you only pay what you owe. Billing errors, incorrect shipping rates, hidden fees and surcharges, and duplicate carrier invoices are among the most common errors that can be overlooked.
Parcel auditing tools like Reveel can optimize your parcel shipping spend by:
- Identifying overpayments and uncovering credits you’re owed
- Improving financial forecasting so you can rely on your shipping budget
- Automating invoice processing to mitigate human error
- Providing complete visibility into your shipping costs with our suite of fully customizable reports and data visualizations
2. Negotiate Better Carrier Contracts
Carrier contracts aren’t one-size-fits-all, and if you’re not negotiating with a full understanding of your shipping profile, you’re likely overpaying. Understanding your shipping profile, informed by data from the shipping analysis, gives you leverage in these conversations.
Here are some key contract terms worth negotiating:
- Discounts on base and surcharge
- Minimum charges and thresholds
- Dimensional divisor (DIM factor)
- Accessorial charges like residential fees or fuel surcharges
- Performance guarantees
Pro tip: Adopting a multi-carrier strategy yields the best results, as it prevents overdependence on a single provider and creates competitive pressure during negotiations.
3. Optimize Packaging Dimensions
With dimensional weight pricing now standard across major carriers, package size directly impacts shipping costs, often more than actual weight. For example, reducing box size by just 2 inches can significantly reduce DIM charges and filler material costs.
To optimize packaging dimensions:
- Audit your current packaging inventory and match package sizes to product dimensions
- Eliminate unnecessary void fill by using right-sized boxes or poly mailers
- Test alternative materials that provide adequate protection with less weight
- Consider custom packaging for frequently shipped items
4. Strengthen Carrier Partner Relationships
Many businesses treat carrier management as merely contracts, but it should be focused on building long-term partnerships. By treating carriers as partners, you position your business for preferential treatment during capacity restrictions and/or negotiations.
Strategic carrier management is crucial to:
- Build long-term relationships with multiple carriers
- Negotiate better rates through volume and loyalty
- Diversify carrier options to reduce dependency risks
How can you build better relationships with your carriers? Here are a few ideas:
- Maintain consistent shipping volumes
- Communicate openly and proactively to resolve issues
- Provide feedback on service issues (before they become chronic problems)
5. Leverage Advanced Shipping Technology
Outdated software like Excel or general-purpose business intelligence tools holds you back. Modern shipping technology can help you reduce shipping costs, improve accuracy, and gain real-time insights.
Some key features to look out for include:
- Parcel shipping analytics tools equipped with AI and machine learning algorithms to comb through massive amounts of data in seconds
- Automated auditing tools that identify invoice errors, discrepancies, and overpayments
- Carrier agreement monitoring to ensure you never miss out on a discount or drop out of a revenue tier
Bonus tip: Calculate ROI to validate your tech investments—many platforms quickly pay for themselves through recovered savings and time saved.
6. Monitor Shipping Performance
You can’t improve what you don’t measure! Establish a set of key performance indicators (KPIs) to track your shipping performance. KPIs should center around the eight key performance areas:
- Service spend
- Surcharge spend
- Average cost per shipment
- Minimum charges
- Shipping weight (including average weight and % hitting DIM weight)
- Average zone
- Delivery performance (on-time vs late)
- Time in transit
Bonus Tip: Plan Ahead For Peak Season Challenges
The most wonderful time of the year is also the most expensive. The holidays result in additional surcharges, capacity constraints, and delivery challenges that require advance planning. For example, volume-based surcharges for UPS have increased by 11% year-over-year. FedEx’s volume-based surcharges increased upwards of 12% year-over-year, depending on the service area and week.
To optimize your parcel shipping spend, shippers need to:
- Lock in additional carrier capacity
- Review and adjust packaging to minimize peak surcharges
- Communicate expected delays clearly to customers
- Build out contingency plans for carrier disruptions
Reveel: Your Path to Parcel Shipping Optimization
Shipping costs may be rising, but that doesn’t mean they’re out of your control. By auditing your current shipping practices, optimizing your packaging and technology, and negotiating smarter with carriers, you can unlock real, lasting savings.
Remember that parcel shipping optimization is an ongoing process rather than a one-time project—market conditions, carrier offerings, and your business needs will continue to evolve. That’s where Reveel’s technology comes in. Reveel’s PSM 2.0 software is equipped with machine learning and AI, best-in-class visualization, and automated parcel invoice analysis to transform shipping from an expense to a strategic advantage.
