Weekly Update on Supply Chain and Logistics: August 4th - August 7th, 2025
In the face of rising costs, two major American companies, Albertsons and O'Reilly Automotive, are taking different approaches to maintain their competitive edge.
Albertsons, the supermarket giant, is aiming to absorb inflationary pressures wherever possible and pass costs onto consumers only when absolutely necessary. The company's CEO, Susan Morris, has outlined a strategy focused on dissecting vendor price increases and maintaining competitive pricing. If tariffs become excessive, Albertsons is willing to switch suppliers to keep costs under control.
Meanwhile, O'Reilly Automotive, the auto parts retailer, is embarking on an aggressive growth strategy. In the first half of 2025, the company opened 105 new stores and is finalizing the construction of two new distribution centers. One, a 560,000-square-foot facility in Haslet, Texas, marks O'Reilly's 33rd distribution center. The other, a 530,000-square-foot center in Stafford, Virginia, is aimed at unlocking store development opportunities in the Mid-Atlantic region. The Texas distribution center, expected to be operational by 2027, will support 350 stores and alleviate pressure on surrounding distribution hubs in the South Central U.S.
However, these expansions come at a time when the shipping industry is undergoing significant changes. The recent update by UPS to its dimensional weight (DIM) calculation now requires rounding up all fractional package dimensions, leading to increased shipping costs for many businesses. This change aligns UPS's method with FedEx's updated DIM calculation.
The impact of this change is substantial. High-volume shippers, such as merchants shipping thousands of packages monthly, are facing additional costs running into tens of thousands of dollars annually. This pressure on business margins is particularly challenging for sellers using platforms like Shopify, Amazon, or their own warehouses, especially during peak sales periods like holidays.
To adapt, businesses are encouraged to audit their packaging dimensions to minimize unnecessary DIM weight increases and diversify carrier usage to mitigate risk. The long-term implications could see a greater incentive for packaging optimization, increased shipping cost predictability challenges, accelerated adoption of multi-carrier shipping platforms, and industry-wide effects on pricing and supply chain.
Despite these challenges, both Albertsons and O'Reilly Automotive are demonstrating resilience and adaptability in their respective industries. Albertsons' proactive approach to addressing rising costs due to new tariffs, coupled with O'Reilly's strategic expansion, underscores the importance of flexibility and innovation in the face of economic changes.
[1] Shipping Costs Soar Due to UPS's Dimensional Weight Change [2] Albertsons' Proactive Approach to Tariff-Induced Cost Rises [3] O'Reilly Automotive's Aggressive Growth Strategy [4] Multi-Carrier Shipping Platforms on the Rise [5] UPS and FedEx Align on DIM Weight Calculation
- The news of UPS's dimensional weight (DIM) calculation change is causing concerns for businesses, leading to increased shipping costs and potential annual expenses in tens of thousands of dollars.
- Albertsons, recognizing the impact of new tariffs on their costs, has taken a proactive approach by dissecting vendor price increases and preparing to switch suppliers if tariffs become excessive.
- O'Reilly Automotive's strategic expansion, marked by the construction of two new distribution centers, indicates an aggressive growth strategy aimed at unlocking new opportunities in the Mid-Atlantic region and supporting their existing operations.
- As a result of these challenges, there may be a greater incentive for businesses to optimize their packaging, adopt multi-carrier shipping platforms, and enhance shipping cost predictability.
- UPS's new DIM calculation method now aligns with that of FedEx, placing additional pressure on high-volume shippers and potentially influencing industry-wide changes in pricing and supply chain management.
