A new factor in determining dimensional weight to calculate delivery charges on ground shipments will add significant costs for most parcel shippers.
Dimensional weight is calculated by multiplying the length by width by height of each package in inches and dividing the total by a specific factor. Effective Jan. 3, both FedEx and UPS will change the factor from 194 to 166 for Ground and Air packages that are 3 cubic feet (5,184 cubic inches) or larger for shipments within the U.S., and from 166 to 139 for International Ground shipments to Canada.
This is going to result in a major rate hike for shippers, says consultant Rob Martinez, president/CEO of Transult. When parcel carriers applied the 194 express dimensional divisor to ground shipments four years ago, he says, “we estimated it generated $195 million in additional revenue to the carriers. So taking both express and ground to 166 will have an enormous impact.”
How exactly will shipping rates will increase? Let’s say you’re shipping a lamp using FedEx’s two-day service, going to zone 6, Martinez says. The parcel’s actual weight is 6 lbs, and shipping list rate is $29.50.
At a factor of 194, the package “dimensionalizes” to 14 lbs. The cost is now $55.90—an 89.5% increase. At a factor of 166, it dimensionalizes to 16 lbs., and costs $65.40, for a net increase of 17%. Overall, from actual weight to dim weight at 166, the increase is 121.7%, he notes.
How can shippers address the dim-weight change? Many shippers are contacting their carrier reps to negotiate the new factor to something greater than 166, Martinez says.
Several will try to “grandfather” the current dim factor into the next term of the pricing agreement, he says. And some shippers will redesign their corrugated packaging and packing configurations to try to reduce dimensional weight.
Indeed, says Gerard Hempstead, president of Hempstead Consulting, the new dim-weight factor is “a pretty massive hit for shippers, and one that’s going to require some creativity in package design and or mixing commodities with better density to items that lack density, to avoid being hit with this new formula.”
Item density is hard to re-engineer, Hempstead says, but shippers can look at packaging and see if the package size can be reduced without compromising the safety and integrity of the item. Or they can try to divert packages to regional carriers who don’t ordinarily apply a dimensional rule, “or explore the many flat rate options now being offered by the USPS for smaller items,” he says.
But Martinez believes the majority of shippers will do nothing and accept the rate increase. Why is that?
Because they either don’t think it will impact them; they don’t know about it; they are unaware it is negotiable “and they don’t think they have any alternatives,” he says.