UPS Reenters LTL Space: Opportunities and Strategies for U.S. Shippers in a Rising Cost Environment

At Gain Consulting, we empower U.S. shippers with data-driven strategies to navigate the evolving logistics landscape. The recent reintroduction of UPS Ground with Freight Pricing, a service targeting shipments over 150 pounds, marks UPS’s strategic return to the less-than-truckload (LTL) space after selling UPS Freight to TFI International in 2021. With LTL costs climbing—driven by a 5.5% year-over-year increase in the U.S. long-distance LTL producer price index (PPI) in March 2025 and a 12.1% rise since Yellow’s collapse in July 2023—this move offers shippers new options amid a challenging market. This blog post analyzes UPS’s LTL reentry, its implications for U.S. shippers, and actionable strategies to optimize freight operations in 2025.

UPS’s LTL Reentry: A Strategic Shift

UPS, the largest U.S. package carrier, no longer owns an LTL subsidiary but is leveraging its parcel network to compete in the LTL market through UPS Ground with Freight Pricing. This service targets shipments over 150 pounds—typically palletized LTL freight—offering parcel-like pricing that differentiates UPS from traditional LTL carriers. “This positions us to be the only small package carrier that offers parcel-like pricing for less-than-truckload shipments, which is a true differentiator,” said UPS CEO Carol Tomé during the company’s Q1 2025 earnings call on April 29, 2025. Unlike FedEx, which plans to spin off its LTL carrier, FedEx Freight, in 2026, UPS aims to capture LTL volume without owning dedicated LTL infrastructure.

The service revives a concept similar to UPS’s pre-2021 “less-than-pallet load” (LPL) offering, targeting high-revenue-per-parcel shipments. Satish Jindel, president of SJ Consulting Group, notes that shipments under 250 pounds account for 25% of LTL volumes, and those under 500 pounds represent 45%. These “nice brown boxes” shrink-wrapped on pallets are prime targets for UPS, which avoids handling full pallets to maintain operational efficiency. By moving these shipments through its parcel network, UPS believes it can offer better rates than traditional LTL carriers while maintaining profitability.

This move coincides with UPS’s broader strategy to bolster domestic package volume, which declined 3.5% year-over-year in Q1 2025, with ground package volume down 2.5% and deferred service volume dropping 17.3%. A 7.1% increase in international package volume partially offset these losses, but total volume fell 1.9%. UPS is also reducing reliance on Amazon, its largest but less profitable customer, planning to cut Amazon volume by 50% by 2026, focusing on profitable shipments. To support this shift, UPS announced the closure of 73 facilities and the elimination of 20,000 jobs, alongside the launch of UPS Ground Saver, a slower, economy ground service for less urgent packages.

Key Takeaway: UPS’s reentry into LTL via Ground with Freight Pricing leverages its parcel network to capture high-value, lightweight LTL shipments, offering shippers a cost-competitive alternative as traditional LTL prices rise.

Rising LTL Costs: Market Dynamics and Challenges

The LTL market is under significant cost pressure, with the U.S. long-distance LTL PPI up 6% on average in Q1 2025 and 12.1% since Yellow’s collapse in July 2023, which removed a major player and tightened capacity. Yellow’s exit dispersed its business across carriers like XPO, Old Dominion Freight Line, and Saia, enabling them to maintain pricing discipline. “We see customers choosing other options in certain instances when we’re taking rate increases,” said Saia CFO Matthew J. Batteh during an April 2025 earnings call, highlighting shippers’ resistance to rising costs.

Shippers are exploring alternatives to mitigate LTL cost increases:

• Consolidating LTL into Truckload: With excess truckload capacity and rates still recovering from a 2023 low, some shippers are consolidating LTL shipments into full truckloads to reduce costs. However, truckload rates are beginning to climb, limiting this strategy’s long-term viability.

• Parcel and Hundredweight Programs: Parcel carriers like UPS have long competed for LTL freight through hundredweight programs, which UPS’s Ground with Freight Pricing enhances by targeting shipments over 150 pounds with simplified pricing.

• Mode Shifting: Rising LTL costs are pushing shippers toward parcel services or intermodal options for cost savings, especially for non-urgent shipments.

The timing of UPS’s LTL reentry aligns with these dynamics, as shippers seek cost-effective alternatives. However, competition is intensifying. Amazon launched its own LTL service in April 2025, coinciding with UPS’s Ground with Freight Pricing announcement, signaling a battle for lightweight LTL volumes. Meanwhile, traditional LTL carriers like Saia, which reported a 4% revenue increase in Q1 2025 despite market headwinds, are holding firm on pricing to maintain margins.

Key Takeaway: Rising LTL costs, exacerbated by Yellow’s collapse, are driving shippers to explore alternatives like UPS’s Ground with Freight Pricing, but competition from Amazon and traditional carriers complicates the landscape.

Implications for U.S. Shippers

UPS’s reentry into LTL and the broader market trends present several implications for U.S. shippers:

1. Cost Management Opportunities: UPS Ground with Freight Pricing offers potential savings for shipments between 150 and 500 pounds, particularly for non-palletized or lightly palletized freight. Shippers can leverage this service to reduce costs compared to traditional LTL carriers, whose prices have risen 12.1% since mid-2023.

2. Capacity Constraints: While truckload capacity remains loose, LTL capacity is tighter due to Yellow’s exit and pricing discipline among remaining carriers. UPS’s parcel network provides an alternative for lightweight LTL shipments, easing pressure on LTL capacity.

3. Service Differentiation: UPS’s focus on parcel-like pricing simplifies rate structures for shippers, contrasting with the complex tariffs of traditional LTL carriers. However, shippers must ensure UPS’s network can handle their volume and delivery requirements.

4. Amazon’s LTL Entry: Amazon’s LTL service, launched in April 2025, targets similar lightweight freight, creating a three-way competition with UPS and traditional carriers. Shippers may benefit from increased options but must navigate varying service levels and pricing models.

5. UPS Network Adjustments: UPS’s closure of 73 facilities and reduction of 20,000 jobs to cut unprofitable Amazon volume may impact service reliability in some regions. Shippers should monitor UPS’s network performance as it adapts to these changes.

Key Takeaway: Shippers can capitalize on UPS’s cost-competitive LTL offering but must weigh it against Amazon’s new service and traditional carriers’ reliability while monitoring UPS’s network adjustments.

Strategic Recommendations for U.S. Shippers

To navigate rising LTL costs and leverage UPS’s reentry, Gain Consulting recommends the following strategies:

1. Evaluate UPS Ground with Freight Pricing: Assess shipments between 150 and 500 pounds to determine if UPS’s service offers cost savings over traditional LTL carriers. Focus on non-palletized or lightly palletized freight to align with UPS’s target profile. Request quotes and compare transit times to ensure service meets delivery needs.

2. Diversify Carrier Mix: Incorporate UPS, Amazon’s LTL service, and traditional carriers like Saia or XPO into your carrier portfolio to mitigate cost increases and capacity constraints. Use Freightos or SONAR to track LTL and parcel rates in real time for informed negotiations.

3. Optimize Shipment Consolidation: Where possible, consolidate LTL shipments into truckloads to leverage lower truckload rates, but monitor rising truckload costs. For smaller shipments, test UPS Ground Saver for non-urgent packages to reduce ground package expenses.

4. Monitor Amazon’s LTL Performance: Evaluate Amazon’s LTL service for lightweight freight, particularly if you already use Amazon’s fulfillment network. Compare pricing and reliability against UPS and traditional carriers to identify the best fit.

5. Strengthen Last-Mile Partnerships: With UPS reducing Amazon volume and closing facilities, secure backup carriers like FedEx Ground or USPS for last-mile delivery to ensure capacity. Leverage cross-border hubs like Laredo, TX ($23.4 billion in freight) for efficient North American shipments, as per BTS Transborder Freight Data.

6. Invest in Technology: Use transportation management systems (TMS) to optimize mode selection between LTL, parcel, and truckload. Implement AI-driven tools to forecast demand and identify cost-saving opportunities, especially for lightweight LTL shipments.

7. Negotiate Strategically: Push back on LTL rate increases, as Saia’s CFO noted shippers are challenging pricing. Highlight your volume commitments and explore UPS’s simplified pricing to secure favorable terms.

Key Takeaway: Shippers should test UPS’s Ground with Freight Pricing, diversify carriers, and invest in technology to manage costs and capacity in a competitive LTL market.

How Gain Consulting Can Help

Gain Consulting offers tailored solutions to help U.S. shippers thrive in 2025’s complex logistics environment:

• Freight Cost Analysis: Compare UPS Ground with Freight Pricing, Amazon’s LTL service, and traditional carriers to identify cost-saving opportunities.

• Carrier Diversification: Build a resilient carrier portfolio to ensure capacity and mitigate rate increases.

• Technology Integration: Implement TMS and AI tools to optimize mode selection and streamline operations.

• Negotiation Support: Leverage our expertise to secure competitive rates with UPS, Amazon, and LTL carriers.

• Market Intelligence: Provide real-time insights on LTL and parcel rates, capacity trends, and carrier performance.

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The reintroduction of UPS Ground with Freight Pricing offers U.S. shippers a compelling alternative as LTL costs rise and competition intensifies. Contact Gain Consulting today to optimize your freight strategy and stay ahead in 2025.

Sources: FreightWaves, April 29, 2025; Reuters, April 29, 2025; Logistics Management, April 2025; BTS Transborder Freight Data, April 23, 2025