June 18, 2014
Dimensional weight – the method that accounts for package volume rather than weight alone – may soon become the new normal.
That’s because in May, FedEx announced dim weight rules would apply to all shipments beginning in 2015, and yesterday, UPS followed suit with a similar announcement. The company said the change would align ground shipping standards with the approach used for air. Of course, it doesn’t hurt that the move will also boost its bottom line. Some estimates say the change could bring the company an additional $350 million in annual sales, pulled straight from the pockets of merchants and individuals.
Currently, dimensional weight comes into effect in ground shipping only for packages greater than 3 cubic feet, so that carriers don’t lose money on lightweight but bulky packages. That threshold is useful for consumers, insulating them from bearing extra cost, as when packaging has a lot of void space. More details can be found here, but in general, dim weight is calculated by multiplying a package’s length by width by height, and then dividing by a standard dimensional factor. Carriers then bill by whatever is greater between dim and actual weight.
FedEx’s – and now UPS’ – proposal could turn into a game of chicken between the major private carriers. If UPS had not follow suit with a similar policy revision (for now, mum’s the word), FedEx might have decided to balk on the proposed change to remain competitive. But as many have suspected, UPS likely found the promise of additional revenues too tempting, as the two companies have tended to move in tandem with announcements that shake up the industry. With this development, the United States Postal Service, which doesn’t charge dimensional weights in the same way, could emerge as the big winner.
Even so, merchants should brace themselves for the changes the New Year will bring, which is likely to include both increased costs and greater complexity.
To combat the cost, consider seeking out a dimensional weight waiver and working to negotiate better terms. That’s not always an option if you’re a smaller e-commerce retailer. When you lack the wherewithal to persuade carriers to grandfather in old pricing rules or big breaks, the dim weight approach will have significant ramifications.
That’s where a third-party logistics provider will prove useful: Companies like Shipwire can procure such waivers and pass savings on to their customers. Moreover, because they’re working with all the major carriers, they have clear insight into the best deals at every moment.
Shipwire also provides other advantages to simplify the process more broadly. Third-party logistics providers can lend the expertise and quality control methods to eliminate the need for costly corrections. Shipwire can also ensure you’re using the right packaging mix, so that mistakes like using too-large boxes don’t end up costing a boatload in this new pricing regime.
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