Parcel logistics

UPS is seeking to improve its bottom line through employee buyouts, but the move could introduce service risks and strife with the International Brotherhood of Teamsters union, industry observers say.

The delivery giant is in the midst of voluntary buyout programs for full-time drivers, who are represented by the Teamsters, and select operations managers in the U.S. as it chases $3.5 billion in expense reductions in 2025. 

Separations were slated to start Aug. 31 for drivers and Sept. 30 for managers. The company’s aim is to match network staffing levels with an arranged reduction in volume from Amazon, a major customer.

"It's a clear sign that they don't see this volume coming back," said Jeremy Tancredi, a partner in West Monroe’s operations excellence practice and a former UPS industrial engineer.

The buyout incentive for drivers amounts to $1,800 per year of service with a minimum payout of $10,000, a move experts say aims to sway higher-paid veteran UPS employees to accept the offer. The payout could be a good deal for drivers nearing retirement but less so for other employees, said Alan Amling, an assistant professor of practice at the University of Tennessee and former VP of corporate strategy for UPS.

It's not UPS' first attempt to trim employee ranks in recent years. The company rolled out targeted cuts within management roles and contracted positions in 2024 as it adjusted to softening demand.

The rightsizing has continued, even before the buyouts began. From Q1 to Q2 of 2025, the number of employees covered by UPS' national contract with the International Brotherhood of Teamsters dropped by 14,000 amid a wave of facility closures. The union's contract covers delivery drivers, package handlers and other employee groups powering the carrier's network.

Buyout risks

UPS executives said on a July 29 earnings call that buyout interest among drivers was in line with the company’s expectations, although they did not share additional details. Meanwhile, with the program presenting further pressures to the Teamsters' membership, the union is pushing back and urging members to reject the offer.

"You're selling your soul and selling your brothers and sisters out if you take this buyout," Teamsters General President Sean O’Brien said on his "Better Bad Ideas" podcast.

As the program advances, one risk for UPS is the potential strain to longstanding customer relationships, according to Tancredi. For example, a new driver may not know a business prefers deliveries to be made in the back of the building, rather than the front.

But operational cracks were showing even before UPS' driver buyouts commenced, O'Brien said. The Teamsters leader said the buyout program is difficult for UPS to justify given the "massive overtime problem throughout this whole country," with drivers encountering up to 12-hour workdays to deliver all packages. The issue is leading to longer customer wait times for deliveries, according to O'Brien.

Hiring more drivers would limit the excessive overtime and help the carrier fulfill its national contract obligations for more full-time job opportunities, he added. The requirement calls on UPS to offer part-time workers the opportunity to fill at least 22,500 full-time openings.

In an email to Supply Chain Dive, UPS did not address O’Brien’s overtime remarks but said it remains committed to providing high levels of service amid its network and staffing adjustments. UPS also said it is on pace to meet or exceed the staffing requirement in its national contract with the Teamsters.

For drivers still on board with the company, UPS may require more overtime to cover service gaps as the busy holiday season approaches, the University of Tennessee's Amling said. The company can hire seasonal support drivers during the peak season if its delivery needs aren't met by existing workers, per UPS’ contract with the Teamsters.

With UPS expecting its Amazon volume to decline over 50% by June 2026, the reported overtime reliance could dissipate. However, if UPS sees overall demand jump more than expected in future quarters, delays could become more likely as it works to expand capacity, experts said.

"While they are saving money, it's a lot easier to eliminate facilities and jobs in a downturn than it is to add facilities in an upturn and jobs," Amling said.

A partner in the overhaul

UPS could turn to the U.S. Postal Service, a longtime partner, to provide last-mile capacity while still reducing delivery costs, according to Mark Waverek, managing partner at PlaidMark Management and Consulting Services.

At the start of 2025, the two carriers ended their SurePost delivery arrangement, in which UPS handed off some packages using the economy service to the Postal Service. But the two sides began discussing a reunion for SurePost — now named Ground Saver — as UPS grapples with unexpected costs from delivering all of that volume in-house.

"The [Teamsters] union did a great job of negotiating for the worker, but unfortunately, the costs are too high to serve the residential market," Waverek said. "So UPS needs an outlet, and they need a partner. And I think the post office would be a great partner.”

FedEx is easing its pursuit of general e-commerce volume, focusing its commercial strategy instead on "specialized" segments in the business-to-consumer space along with premium business-to-business shipping, the carrier announced at its 2026 Investor Day.

As a result, FedEx expects to see "low single-digit growth" in B2C volume through 2029 as it pursues more sustainable and profitable business, EVP and Chief Customer Officer Brie Carere said during the investor event. The company’s pace in e-commerce is intentionally slower than the overall market, as FedEx isn't prioritizing volume gains in the fast-growing sub-pound package space, according to Carere.

Deliveries destined for home addresses have been a key growth driver in the delivery industry over the past several years, especially since the COVID-19 pandemic accelerated online shopping trends. But FedEx executives expressed confidence that the company doesn't need to lean on B2C shipping to fill its delivery vehicles and achieve its financial goals, for two key reasons.

One reason is that FedEx's U.S. network is already at high volume levels relative to overall capacity, with further improvements en route due to the carrier's Network 2.0 consolidation efforts, according to Carere.

"Our network utilization is at a very, very good place," Carere said. "We have not seen this utilization since the pandemic."

The carrier expects U.S. capacity to tighten even further. However, Carere added that FedEx can flex its network capacity to make room for B2B volume, such as bumping e-commerce shipments down to later sortation shifts.

The second reason is FedEx sees an opening to grab share in verticals such as healthcare, automotive, aerospace and data centers, which are generally more profitable than deliveries to consumers. Carere said priority verticals for the company represent a combined $130 billion market opportunity.

"We will concentrate our commercial energy where customers value speed, precision, visibility and reliability over the lowest price," President and CEO Raj Subramaniam said during the presentation.

Rival UPS is also chasing growth in high-value segments like healthcare as it cuts back on the amount of volume delivered for e-commerce giant Amazon.

FedEx isn’t distancing itself from the consumer delivery space entirely, however. The company recently announced it was aiming to acquire a 37% stake in Poland's InPost and tap into the operator's parcel locker network in Europe, which will provide "an innovative platform for profitable B2C growth," per Subramaniam.

Additionally, FedEx is still targeting specialized B2C volume, such as longer-distance shipments needed by smaller businesses lacking a robust fulfillment center footprint, according to Carere. Specialized shipments can also include heavier goods and higher-value products.

"If you're shipping T-shirts, FedEx might not be for you, but if you were shipping Oura Rings, FedEx is for you," Carere said, referring to the smart ring product that tracks personal health metrics.

A good portion of FedEx's B2C volume already fits within its priority areas. Carere said 70% of FedEx's ground shipping service revenue comes from shipments traveling more than 300 miles.

Shorter-distance e-commerce shipping is a competitive market with many parcel carriers outside of FedEx and UPS looking to gain a stronger foothold in the space. Experts have noted in the past that this trend has led to the major delivery providers being more cautious on price increases for those types of shipments, compared to longer-distance deliveries.

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By DHL eCommerce

For years, parcel delivery strategy has revolved around one central promise: faster delivery. Two-day, next-day, even same-day shipping became table stakes in e-commerce, shaping network design decisions across organizations of all sizes.

But that singular focus is beginning to shift.

Today, logistics leaders are questioning whether faster delivery actually delivers better outcomes – for customers or for the business. In its place, a new priority is emerging: certainty.

Customer expectations are maturing

While speed still matters, it is no longer the sole (or even primary) driver of customer satisfaction. Research consistently shows that missed delivery promises, inconsistent service, and poor communication have a greater negative impact on loyalty than an extra day in transit.

On-time delivery ranks highest in consumer preference, scoring 1.9 – nearly double the importance of same-day or next-day delivery (scores 1.1 and 1.0).

Source: McKinsey & Company

As e-commerce volumes grow and stabilize, shippers are seeing this play out in real terms. Highly accelerated delivery promises can introduce complexity and fragility into parcel networks – particularly as volumes increase or disruptions occur.

In contrast, delivery experiences that are predictable and well-communicated tend to build trust, even when transit times are slightly longer.

From transit time to network reliability

This shift in customer expectations is forcing a reassessment of how parcel networks are built.

Rather than optimizing solely for transit speed, many shippers are prioritizing reliability, broad coverage, and consistent execution across their delivery footprint. That means designing networks that perform not just under ideal conditions, but under pressure.

“As parcel networks grow more complex, true reliability depends less on pure speed and more on network design and consistent execution. A resilient system isn’t defined by how fast it runs on a perfect day, but by how predictably it performs when volumes surge or disruptions hit. Certainty comes from repeatable processes and a network built to stay steady under pressure.”

Scott Ashbaugh, CEO, DHL eCommerce Americas

The ability to deliver consistently – across regions, order volumes, and seasonal demand – has become a baseline expectation. So has maintaining service standards without introducing unnecessary operational complexity.

For growing and established shippers alike, reliability is no longer a single metric. It is the outcome of how well each part of the network works together, from induction through delivery.

What’s next for parcel logistics

Looking ahead, parcel logistics is entering a more pragmatic phase. The next era will be defined less by headline-making delivery speeds and more by resilience, longevity, and execution.

Logistics and operations leaders are increasingly focused on questions such as:

• Can our parcel network adapt as volumes and customer expectations change?
• Are we over-optimized for speed at the expense of reliability?
• Do our partners scale with us or introduce new risks as we grow?

These considerations are elevating the importance of partners with proven operational foundations, broad reach, and experience managing complexity over time.

From vendors to true partners

As parcel strategies evolve, so do expectations of parcel providers. Transactional relationships are giving way to partnerships built on accessibility, accountability, and shared outcomes.

Shippers increasingly value providers that act as extensions of their teams – offering direct access to people, not just portals, and working collaboratively to solve problems as they arise.

“Our customers consistently tell us they value being able to talk to a real person – especially when something unexpected happens or when they’re thinking ahead about what’s next. That accessibility is a core part of how we support their growth and day-to-day operations.”

Dmitry Antonov, Chief Commercial Officer, DHL eCommerce Americas

This approach reflects a broader understanding that parcel delivery is no longer a discrete function. It is a critical component of the end-to-end customer experience.

A more sustainable definition of performance

The future of parcel delivery isn’t about being the fastest at any cost. It’s about being consistently reliable, broadly scalable, and operationally sound – day after day, as businesses grow.

For shippers navigating what’s next, success will hinge on aligning delivery promises with customer expectations and building networks designed for the long run.

The end of the de minimis exemption could pose challenges for e-commerce supply chains' peak season plans.

The exemption, which allows sub-$800 imports to enter the U.S. duty and tax free, will be eliminated on Aug. 29, 2025 to crack down on drug trafficking and importers avoiding tariffs, per a White House fact sheet. De minimis was previously set to end on July 1, 2027 as part of a tax bill signed by President Donald Trump.

The exemption has been barred for China-origin imports since May 2025, but many importers planned to keep using the trade tool from other countries for the next few years, LVK Logistics CEO Maggie Barnett said. While de minimis is associated with major direct-to-consumer marketplaces like Shein and Temu, an array of other businesses also utilize the tool for cost-effective parcel shipping across borders.

"They're scrambling right now because they just thought [the elimination] wouldn't happen so fast," Barnett said.

The shortened timeline for the trade tool's elimination will make it difficult for direct-to-consumer importers to fully adjust their operations ahead of the Q4 holiday shopping rush. However, there are ways for de minimis-reliant shippers to mitigate impacts tied to the exemption's end in both the short and long term, according to experts.

Pricing and shipping hurdles ahead

Without de minimis, low-cost imports will be subject to all applicable duties — including tariffs installed by President Donald Trump's administration — presenting added costs they could previously avoid.

Trump's executive order eliminating the trade tool provides an exception to this change for one cost-effective import method: the international postal network. Postal packages won't get off scot-free, however. They will be assessed either a duty equal to International Emergency Economic Powers Act tariffs or an $80-to-$200 fee based on the IEEPA rate.

The latter approach will be available for only six months, and the fee is a tough pill for importers to swallow, according to experts. The average value of a de minimis shipment was about $54 in U.S. Customs and Border Protection's 2023 fiscal year.

Passing the cost burden of tariffs onto consumers has been a tactic mulled by many retailers. However, online shoppers accustomed to low prices could consider other options like brick-and-mortar stores if they're faced with added fees, said Nick Baker, co-lead of Kroll's trade and customs practice.

"When customers start seeing a tariff cost or a tariff charge in their cart, that's a lot of times going to kill that deal," Baker said.

Beyond pricing pressures, shipping delays could emerge as Customs and Border Protection processes a wave of formerly de minimis shipments through more stringent entry procedures, said Anthony Pizza, VP of marketing at freight forwarder Accelerated Global Solutions. Smaller shippers in particular may have trouble complying with formal entries, which call for detailed commercial invoices, a customs bond and more.

“The major retailers and all of our clients will be ready for peak,” Pizza said, but he added that “headaches and hiccups” will emerge for unprepared businesses.

Bulk shipping means bigger inventory bets

To understand the impact tariffs will bring on de minimis shipments, shippers should identify which of their SKUs leverage the de minimis exemption and run cost simulations that include applicable tariffs and fees, according to Stord. The fulfillment provider said businesses should also simulate the cost of importing a large number of units at once — as opposed to individual shipments direct to consumers — to determine the most cost-effective fulfillment strategy to employ.

Bulk imports to domestic warehouses will likely be more efficient than individual shipments for many e-commerce brands, according to experts. Such a shift could boost containerized imports while stymieing air cargo activity.

"Now you need a wholesale strategy where you're bringing in these goods and holding it in [the] U.S.," said Rathna Sharad, CEO and founder of FlavorCloud, a cross-border shipping platform.

But bulk importing will present new inventory planning considerations for formerly de minimis-centric brands, as they will have to ensure the goods they're bringing in larger quantities have enough appeal to sell quickly and not clog up warehouses. Companies may incentivize consumers to buy goods already stocked in the U.S. through sales promotions, Baker noted.

Some importers with inventory tied up in cross-border warehouses in Canada and Mexico are limiting the frequency of their U.S.-bound shipments, Barnett of LVK Logistics said. This allows them to consolidate a larger number of orders into a single customs crossing, limiting costs associated with customs clearance. The tradeoff is that it potentially introduces slower fulfillment speeds to consumers, so many shippers are considering U.S.-based fulfillment options once the peak season rush clears up, she said.

"Everyone is just doing this to get through peak season, get through the end of the year while they start to figure out their new business model," Barnett said. "And that usually will entail a U.S. 3PL because again, they're going to have to pay the tariffs at some point."

Some U.S.-bound packages are being held by Customs and Border Protection for prolonged periods — and, on occasion, disposed of — as shippers struggle to adjust to the end of the de minimis exemption, according to parcel carriers.

On Aug. 29, the Trump administration eliminated de minimis, a trade tool allowing sub-$800 imports to enter the U.S. duty and tax-free. Without the exemption, low-cost packages are now subject to tariffs and more stringent entry requirements before entering a carrier's domestic delivery network.

The shift in U.S. import regulations has led to instances of packages being unable to clear customs due to missing or incomplete information, UPS said in an emailed statement to Supply Chain Dive. The carrier didn't specify how many packages are experiencing customs holdups but said its brokerage team is clearing more than 90% of packages on the first day of entry. FedEx and DHL Express also cited changes in trade rules as an obstacle for some cross-border shippers.

"All of this is an implication of the abrupt changes to de minimis," said Rathna Sharad, CEO and founder of FlavorCloud, a cross-border shipping platform.

The post-de minimis customs snafus have led to surprise fees and unexpected cases of package disposals for a wave of consumers, according to recent reports. The complications could challenge importers' efforts to keep customers happy as the peak holiday shipping season draws near.

Here's what direct-to-consumer shippers need to know about potential customs holdups, from carrier policies on handling rejected shipments to expert tips on mitigating disposal risks.

How top carriers handle customs clearance issues

While policies vary by company, UPS, FedEx and DHL Express all said their practices aim to ensure a smooth and compliant customs clearance process. Standard freight shipments typically have 15 days to clear customs, after which disposal is one option to maintain compliance with CBP, said Thomas Taggart, VP of global trade at Passport, an international shipping and compliance provider.

UPS said in instances of customs holdups, it makes multiple attempts to contact shippers to obtain the necessary information. If UPS is unable to get that information to clear the package, the carrier said two options are available.

"First, the package can be returned to the original shipper at their expense," UPS said. "Second, if the customer does not respond and the package cannot be cleared for delivery, it is considered abandoned, and we dispose of it in compliance with U.S. customs regulations."

FedEx said it works with shippers to update customs paperwork in instances of incomplete or rejected information by CBP officials. In cases where clearance remains an issue, shippers can opt to either return the package to the sender or request that the shipment be disposed of.

"In those rare cases, recipients are notified at the direction of the shipper," FedEx said. "This is not a common practice."

DHL Express said in an email that it doesn't dispose of packages that aren't cleared by customs. Instead, it pushes to gather any missing information within 10 days. If unsuccessful, DHL Express returns the shipment to its origin.

"This timeframe allows DHL Express to process the shipment for export prior to day 15 to ensure Customs regulations compliance," the company said.

Tips to avoid customs hangups

Shippers should work closely with their broker and carrier to ensure their import paperwork is completed correctly to limit customs issues, something many formerly de minimis-reliant importers have struggled with, experts said. Key information needed by CBP includes a 10-digit Harmonized System commodity code and the product's country of origin, according to Sharad of FlavorCloud.

Another common issue stemming from de minimis' end is that U.S. buyers are now designated as the importer of record for many cross-border shipments, per experts. This puts much of the burden on end customers to release the goods from customs and pay for incurred fees, which can spur some to abandon their purchase and try to collect a refund instead.

"The shippers would likely only be involved on the front end to make sure the carrier has contact info for the buyer, or the buyer may contact the shipper to ask why their package is delayed," said Nick Baker, co-lead of Kroll’s trade and customs practice, in an email. "But once the package is in the US and pending customs clearance, it’s really the buyer’s responsibility to work with the carrier to clear the goods and tender any duties owed."

To avoid these scenarios, foreign merchants should work with a third-party customs broker to manage clearance on behalf of customers, especially when using express carriers to move the goods, Baker said. Non-U.S. shippers also have the option to establish themselves as a foreign importer of record to prevent the end customer from being designated as the importer.

"If you are a legitimate shipper and you want to streamline the process, you should get set up as a non-resident importer and get established, and that way you can streamline the process," said Passport's Taggart.

FedEx and UPS surcharge changes could increase expenses for shippers with larger packages, parcel pricing experts say.

On Jan. 12, FedEx expanded its assessment for determining which shipments will incur a dimensional additional handling surcharge or an oversize charge.

The carrier has added a cubic volume criterion to the dimensional fee, stacking on top of its existing assessments. Any package exceeding 10,368 cubic inches — determined by multiplying the length, width and height in inches — will be assessed the surcharge.

As for the oversize fee, FedEx has added both a cubic volume and a weight criterion on top of existing length and girth assessments. The oversize charge will apply to any package over 17,280 cubic inches or exceeding 110 pounds.

UPS revealed similar changes take effect in January, per its website. Domestic packages with a cubic size over 10,368 cubic inches will face a handling charge from UPS. Packages with a cubic size greater than 17,280 cubic inches or in excess of 110 pounds will be subject to the carrier's domestic large package surcharge.

The changes mean some packages that would have been able to dodge the fee previously could incur additional charges, Paul Yaussy, head of parcel contract intelligence at Loop, said in an interview with Supply Chain Dive. For example, a shipment measuring 46 by 24 by 16 inches previously would have avoided the oversize or large package charge, but under the new rules, the fee would apply, he added.

"I think there's going to be a ton of shippers that get really caught off guard with this one," Yaussy said.

Businesses shipping lightweight packages that take up significant space will be most affected by the change, according to an analysis by logistics intelligence company Sifted. It could also particularly hurt the bottom line of customers whose packages are at risk of shifting from an additional handling charge to the significantly pricier oversize fee, Mingshu Bates, AFS Logistics' chief analytics officer and president of parcel, said in an interview. For one client, "their total cost tripled from this one change," she added.

Affected shippers have ways to ease the sting, according to Bates. They could push to negotiate lower surcharges from the carrier, or adjust their packaging size to avoid triggering the fee.

"If you're selling certain things, you have to pay attention to the box size," Bates said.

In a move that could expose some shippers to additional fees, the U.S. Postal Service is planning to expand its dimensional reporting requirements to include smaller packages in July 2026, according to a Federal Register notice.

Currently, a Postal Service manifest requires accurate parcel dimensions for certain shipping services only when a parcel's size exceeds 1 cubic foot or 22 inches in length. A $1.50 dimension noncompliance fee applies to shipments of that size that fail to include dimension information. The requirement applies to commercial Priority Mail, Priority Mail Express and USPS Ground Advantage and Parcel Select services.

The Postal Service is proposing to remove the size threshold starting July 12, meaning accurate length, width and height dimensions would always be required in the manifest for parcels of any size using those services, per the notice. An exception would apply for flat rate-priced pieces and USPS returns volume.

"Failure to comply with the expanded requirement, would continue to subject the parcel to the Dimension Noncompliance Fee," the notice said.

The proposal was open for public comment through Feb. 9.

The expected impact of the planned rule change is unclear, as many larger-scale USPS shippers are already collecting the full dimensional information of every parcel they handle, Carlos Barbosa, VP of e-commerce solutions at ePost Global, said in an interview with Supply Chain Dive. One potentially vulnerable group is businesses that generate USPS labels from shipping platforms and don't have the proper systems or partners to capture package dimensions.

"This is going to impact anybody that's printing a label and going straight themselves to USPS without [measuring dimensions]," Barbosa said.

Affected shippers may opt to move volume to carriers that don't have dimensional measurement requirements or partners that can handle the process for them, according to Barbosa. Others might simply adjust their operations to measure dimensions to avoid the fee.

Charges related to package dimensions can sting a shipper's bottom line if left unchecked. In 2025, UPS and FedEx rolled out tweaks to how they measure dimensions, rounding up all fractional measurements for length, width and height. Experts warned that the practice could cause shippers' delivery charges to climb further, even if they're shipping the same-sized packages as they have historically.

Dive Brief:

• Amazon is expected to ship more U.S. parcels than the U.S. Postal Service by 2028, according to Pitney Bowes' 2024 Parcel Shipping Index.
• The index projects Amazon's logistics arm will ship 8.4 billion parcels domestically in 2028, surpassing USPS' 8.3 billion. Amazon is currently second in terms of U.S. market share by volume after surpassing UPS and FedEx in recent years.
• "Since we began tracking shipments in 2015, the parcel market had been dominated by the Big 3: FedEx, UPS, and USPS," Pitney Bowes said. "However, Amazon Logistics — once a small competitor — is closing the gap rapidly."

Dive Insight:

Amazon is well-positioned to continue its blistering pace of volume growth, in part out of necessity. UPS plans to slash the amount of Amazon volume it delivers in half by 2026 as it prioritizes more profitable customer segments, pushing the e-commerce giant to lean on other delivery options.

For now, Amazon's delivery volume is largely contained to orders made on its online marketplace, but the company has been inching closer toward direct competition with FedEx and UPS via its Amazon Shipping service.

Amazon's ascent isn't the only concern for legacy parcel carriers. The market has remained highly competitive, leading to aggressive price discounts offered to shippers that have blunted the impact of increased surcharges. As a result, revenue per parcel dropped from $9.10 in 2023 to $9.09 in 2024, according to Pitney Bowes.

"This pricing pressure is largely driven by the rapid growth of alternative carriers, as well as USPS’ new low-cost shipping option, Ground Advantage," Pitney Bowes said.

Alternative delivery providers outside the big four are gaining volume as they expand coverage and strengthen their services. These carriers shipped 780 million U.S. parcels in 2024, up 22.6% year over year, Pitney Bowes said.

Meanwhile, the Postal Service is securing more direct customer contracts through Ground Advantage as part of its push to compete against FedEx and UPS. Pitney Bowes said USPS handled 6.9 billion parcels in 2024, the first time the agency has seen year-over-year volume growth since 2020.