Remember the good old days when parcel carriers would increase rates and surcharges once per year? I certainly do. Annual General Rate Increases (GRIs) rarely touched underlying logic. They were typically just adjustments to list rates and surcharge amounts. Oh sure, every year would come with a changing surcharge definition, or an adjustment to the DIM factor, or something else fundamental to the pricing logic. But, generally speaking, pricing changed once per year, with maybe an additional change in the fuel matrices thrown in mid-year sometime. The annual GRI was, if not predictable, at least reliable in the sense that impacts could be analyzed and costs could be budgeted with accuracy at least as good as internal projections. But I am sad to say those days seem to be gone; probably for good. We live in a different market at this point, and pricing incrementalism looks like the new norm, and that’s not good news for shippers.

Incrementalism is a decision-making approach that involves making small, gradual changes rather than large, disruptive shifts. This strategy is used across various fields, including economics, politics, and business, to reduce risks and allow for continuous learning. And it appears parcel carriers, particularly the national carriers, have learned the lesson. In transportation pricing, incrementalism allows companies to adjust rates and charges gradually in response to changing conditions like fuel costs, labor expenses, or demand fluctuations, all of which are certainly present in today’s market. Instead of imposing large price hikes, transportation providers may implement small, incremental increases over time. Moreover, the focus is not, or is not exclusively, on transportation charges.

Many recent changes by the national carriers have been on surcharges, fuel, and rating logic — areas that are less visible than changes to list transportation rates.

This approach helps carriers manage revenue while maintaining customer relationships, as sudden and dramatic price changes are likely to shock the market. Incremental pricing also provides flexibility, allowing companies to monitor customer reactions and adjust strategies accordingly, ensuring competitiveness without sacrificing customer retention.

If it sounds like I am exaggerating, I am not. See the bottom of this piece for a partial list of the extra-GRI changes FedEx and UPS have made in the last 12 months or will be making through May 2-25 (as of the date of this writing), and excluding peak / demand charges:

So, why have the national carriers adopted this approach? The use of surcharges for revenue enhancement purposes has been going on for a couple of decades now. As noted, the current market involves increased labor costs (for UPS in particular), decreased market-wide volumes, service downgrades by many shippers, a highly competitive marketplace, and a general yield per package decline.

Carriers are currently navigating a challenging landscape, balancing the need to remain competitive in the short term with the uncertainty of waiting for volumes to recover. In this environment, they are tasked with finding innovative solutions to make lower service levels financially viable while also working to boost revenues. Not an enviable position. But an incrementalist approach at least makes the resulting increases less visible than a simple transportation charge increase. Moreover, changes like fuel surcharge increases (some in the face of declining fuel prices) apply across service levels and are applied to many surcharges, providing a multiplier effect. While GRIs will continue to have a substantial impact, it is likely that incremental, mid-year changes to logic and surcharges will also contribute to cost increases, in often unexpected ways.

Large shippers often possess the leverage to counteract these effective price increases, either through direct negotiations or by having provisions in their agreements that mitigate the impact. In contrast, smaller shippers lack this advantage. As always, it is the smaller and less informed shippers who bear much of the cost of carrier incrementalism. Staying informed through carrier announcements and industry news is essential for shippers to anticipate upcoming changes. At this stage, proactive negotiations remain the most effective strategy to protect, or at least partially safeguard, shippers' profit and loss statements.

Joe Wilkinson is VP, Professional Services (Transportation Consulting) at Intelligent Audit. He can be reached at joey.wilkinson@intelligentaudit.com

This article originally appeared in the May/June, 2025 issue of PARCEL.