The Growing Unpredictability of Parcel Costs: What’s Driving Volatility and How to Regain Control

What’s driving the problem isn’t just rising costs—it’s volatility. Every new variable increases the gap between what shippers think they’ll pay and what actually shows up on the invoice. And the wider that gap gets, the harder it becomes to protect margin.

This blog looks at the major forces driving parcel market volatility and how they’re impacting retailers and 3PLs. More importantly, it looks at what businesses need to stay competitive: a way to quickly interpret change, respond with agility, and make smarter shipping decisions at every stage.

What’s Fueling Parcel Market Volatility

Higher shipping costs are a problem, but if that were the extent of it, shippers could easily account for it and adjust pricing accordingly. Unfortunately, they’re also having to adjust to constant change—carrier pricing structures and service expectations are shifting faster than most legacy shipping systems can adapt. Volatility has become the norm, and the cost of not keeping up is margin erosion.

Below are four key factors driving unpredictability in the parcel market today.

1. Expanding Omni-Channel Fulfillment Models

As eCommerce continues to grow—projected to reach 24% of global retail by 2028, up from just 9% in 2014—retailers, driven by Amazon’s example, are expanding fulfillment networks to meet rising demand for fast, low-cost delivery. That often means distributing inventory across more regional DCs and drop-ship partners.

While the goal is speed and efficiency, the result is added complexity. Shipping costs now depend on a growing number of variables: origin point, carrier contract terms, carton dimensions, accessorial fees, and zone-specific surcharges. And when fulfillment needs change based on inventory availability or customer preferences, legacy systems aren’t equipped to compare real-time shipping costs across all carriers and service levels.

That makes it harder to identify the most cost-effective option for each order—especially when those decisions need to happen instantaneously at the shopping cart level. Without visibility into the true cost-to-ship across locations, retailers risk overspending or routing orders in ways that quietly erode margin.

2. Carrier Diversification

For years, most shippers defaulted to a single-carrier strategy. It was so simple—sign a contract with a parcel carrier like UPS or FedEx, tender all shipments there, and take advantage of guaranteed discounts. Planning? That amounted to this: “I plan to ship all my parcels with carrier X.” But that model no longer holds up in today’s environment.

To keep up with rising costs and shifting service expectations, retailers are now expanding their carrier mix. Regional and last-mile carriers offer greater flexibility and broader reach—but they also introduce more variables to manage. Each carrier has its own rate structures, service commitments, and surcharge policies.

And splitting volume across providers creates a new risk: losing access to tiered discounts tied to spend thresholds or service allocations. What was meant to reduce cost can just as easily increase it—unless shippers have a way to manage contracts, monitor incentives tiers, and performance in one place.

3. Constantly Changing Carrier Pricing Structures

Everyone expects the annual GRI—but that’s just the baseline. Beyond these base rate hikes, which have been increasing at twice the rate of inflation for years, carriers continue to introduce mid-year pricing adjustments, demand surcharges, and zone reclassifications that impact total shipping costs in unpredictable ways. Fuel surcharges, delivery area fees, and dimensional weight pricing fluctuate frequently. And UPS recently added invoice fees.

Meanwhile, carrier tiered discount programs are increasingly tied to volume commitments and service-level agreements, requiring businesses to continuously adjust shipping strategies to maintain competitive cost advantages. Legacy systems weren’t built to account for this kind of variability, let alone adjust for it in real time. And that’s how shippers bleed margin—not in big, obvious ways, but in small, constant losses that add up fast.

4. Disruptions in USPS Workshare Partnerships

For years, FedEx and UPS relied on USPS for final-mile delivery through SmartPost and SurePost, offering retailers a cost-effective way to reach residential customers and PO Boxes. But recent changes at USPS have made that strategy harder to sustain.

Under Postmaster General Louis DeJoy, USPS has eliminated key discounts and restricted access to its network—driving up costs for carriers using hybrid models and forcing FedEx and UPS to reevaluate their approach. FedEx shut SmartPost down entirely. UPS restructured SurePost to bring more deliveries in-house, adding potential delays and increased cost.

Businesses that once depended on these services now face higher expenses and fewer final-mile options, forcing them to reassess their carrier mix and explore alternative shipping strategies to maintain profitability. 

What This Means for Shippers

In simpler, pre-eCommerce days, accurately determining shipping costs wasn’t that complicated. Choose a carrier, weigh the box, check the zone chart, print the label—done. But that model doesn’t hold up anymore.

Today, final mile costs are a wide array of variables—origin point, fuel, packaging, carrier contracts, performance history, accessorials—and they change constantly. Yet most legacy enterprise systems (eCom, OMS, and WMS) still rely on static rules, average rates, or outdated assumptions to make final mile shipping decisions, which results in massive margin exposure across the board.

At the same time, consumers expect fast, low-cost delivery—if not free. But “free” shipping isn’t free for retailers. It’s a cost they have to absorb, offset, avoid, or pass through without alienating customers. Without visibility into true costs at the time of purchase, most end up guessing—and either overcharging and losing the sale, or undercharging and eating the loss.

For 3PLs, the problem is compounded because they sell transportation services. They need to meet diverse client expectations while controlling margin on every transaction. But when final-mile costs can’t be accurately determined until the carrier invoice arrives, billing becomes a significant problem.

To maintain profitability in this environment, businesses need more than static pricing models and reactive fixes. Controlling parcel costs requires real-time visibility and automated decision intelligence applied throughout the order-to-invoice process.

Solving for Complexity With Intelligent Parcel TMS

Shippers don’t need more dashboards or after-the-fact analysis—they need agile systems that adapt to changing environments and make better decisions in real time. That’s what a modern parcel TMS, like Sendflex, is built to do.

Unlike legacy systems, the Sendflex platform is designed to process a multitude of shipping variables—carrier rates, surcharges, cartonization, incentive tiers, and performance data—and change as they change, not after. That means every routing, packing, and pricing decision reflects actual conditions, not best guesses.
Sendflex’s next-gen parcel TMS gives shippers the ability to:

• Configure business rules without code – Logistics managers can build, test, and apply optimization instructions in minutes—no IT resources or outside development needed.
• Optimize at enterprise speed – The in-platform engine processes thousands of rates, transit times, and business rules per second—without relying on slow, unreliable carrier APIs.
• Plan smarter with simulation modeling – Run “what-if” scenarios using historical data to compare strategies, test changes, and fine-tune decision logic for future shipments.
• Protect margin with accurate cost modeling – Control landed shipping costs by factoring in surcharges, dimensional weight, and SKU-level cartonization during pre-purchase and fulfillment.
• Adapt to customer preferences on the fly – Offer personalized delivery options based on buyer behavior or client requirements—without sacrificing profitability.

Sendflex gives shippers the tools to keep pace with constant change—and make smarter, faster decisions when it counts. From planning through execution, the platform delivers the speed, control, and flexibility needed to protect margins in today’s volatile parcel market.

Ready to take control of parcel costs? Schedule a consultation and see how Sendflex can help.

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