Tractor Supply splits parcel volume as surcharges climb, panel says

Median last-mile costs rose 12% in 2025 for a second consecutive year, and 45.8% of U.S. delivery operators said delivery costs are rising faster than revenue, according to FarEye's Eye on the Last Mile America 2026 report. Panelists at FarEye's Last Mile Leaders America 2026 conference in Chicago in August said those numbers explain why shippers are abandoning single-carrier parcel agreements and spreading volume across multiple networks.

Including operators whose costs are merely keeping pace, 88% of respondents said delivery costs are growing as fast as revenue or faster. Carrier pricing now shifts through surcharges as much as through the annual general rate increase.

"Over the last couple of years, what we've seen coming out of small package is these variable charges that get applied in surcharges—not just surcharges, but how they define certain package types, big and bulky, and additional handling," said Kyle Langley, Vice President of Final Mile at Tractor Supply Co. "All those are somewhat unpredictable. GRI is not the only thing we have to worry about every year now."

Tractor Supply, a rural lifestyle retailer with nearly 2,500 stores in 49 states, now ships through parcel carriers, gig delivery networks and its own private fleet. Langley, who has spent about 15 years at the company, said many of its delivery customers live on 5- to 15-acre properties.

Why single-carrier leverage proved illusory

The retailer moved to multiple parcel carriers about seven or eight years ago. The conventional wisdom held that concentrating all volume with one carrier maximized negotiating leverage.

"We had a belief that if we give all of our volume to a single carrier, naturally that's going to allow us more leverage to negotiate, and that's not necessarily the case," Langley said. A single carrier blends the whole package mix into one cost, leaving the biggest and smallest packages at unfavorable rates. Splitting volume lets Tractor Supply assign package types and regions to specific carriers.

When one carrier applies surcharges to push bigger packages out of its network, the retailer can redirect those packages elsewhere and cap the cost increase early in the year.

"Gone are the days when, as a retailer, we can kind of change our shipping and handling rates as changes come upstream from carriers," Langley said. "Customers want and expect reliable, standard shipping, and in a lot of cases, free."

How carriers once locked shippers in

Nick Costides, founder of C-Level Advisory and retired global president of information technology at UPS, traced the shift to the 1990s, when the first multi-carrier shipping software let shipping desks compare rates and transit times. Carriers responded by embedding their own systems deeply into customers' operations.

"We tried to get our technology as far into companies' supply chains as possible. That's what happened," Costides said. "You couldn't switch because we were in too deep, and it was too expensive to leave."

Two demand shocks broke that grip: the 2013 e-commerce surge that outran carrier forecasts before Christmas, and the COVID-19 supply chain crisis. "So technology was the great equalizer, and it took an e-commerce hockey stick and a geopolitical crisis to actually accelerate this move and take the power out of carriers' hands," he said.

Carriers cannot counter with neutral tools of their own, Costides argued: "We couldn't bring a product to market like FarEye and say, look, it's better when it's UPS, but we're also enabling other carriers. Nobody was going to give us competitor data."

He noted the Teamsters have already begun campaigning for the 2028 UPS contract, and that UPS is pivoting toward higher-margin healthcare business. "I got a screw the other day. It was 99 cents," Costides said. "There's no way with a unionized workforce I could deliver a 99-cent screw in one day."

What happens when shippers rate-shop?

Multi-carrier agreements carry their own costs. Discounts often tie to volume thresholds, so someone must monitor each carrier's volume to keep the account inside its tier. Tractor Supply tried real-time rate shopping at order entry, pitting agreements against each other for the lowest cost per package.

That created a volume-balancing problem. "Because if all of a sudden too much volume shifts into one, well then you're going down a discount tier with another carrier, and then it's a self-fulfilling prophecy," Langley said. "Then all the volume before you know it is just going to get eaten by that carrier that won originally."

Brock Johns, Director Analyst at Gartner, said single-carrier strategies still suit some companies because they keep pickups and procurement simple, and spreading volume trades overall leverage for leverage in specific areas plus flexibility. The management burden is the overlooked cost.

"It's a big step from just managing that one carrier to five, six, maybe ten, depending on where your strategy takes you," Johns said. "We know it's going to happen, but the amount of work and the time that goes into that is a different thing."

A private fleet built for horse feed

Tractor Supply launched its private fleet about two years ago, after adding gig networks for same-day and next-day service outside its parcel agreements. The fleet targets a big-and-bulky service its customers lacked, with savings to follow.

"Our fleet is built to be able to take three or four pallets of horse feed to a 10-acre property and go into the stall, and our drivers know to go place it where the customer needs and what stall they need," Langley said. The retailer now handles deliveries from small packages to 10,000-pound loads, with third-party carriers taking the smallest packages and overflow, and more carriers being added for complex white-globe deliveries.

Langley said starting with service rather than cost is the one decision he would repeat: "Start with service, and then have a three-year roadmap of how we're going to claw back all that cost while not sacrificing your customer experience." With surcharges proliferating and labor negotiations looming at UPS, the multi-carrier playbook appears set to spread further.