Dimensional Weight, Making a Dim Future Bright
On the Not So Bright Side of Things
Dimension Weight calculations will drastically change freight costs effective December 29, 2014 for UPS and January 5, 2015 for FedEx. These changes are being made due to less than optimal packing by shippers. Currently packages are loaded with about 40% air. Freight companies are losing money essentially because they are transporting air in boxes larger than necessary without additional weight.
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Charging more for larger box sizes, regardless of actual weight, will force shippers to consider how much air they are shipping. This in turn will reduce the amount of truckloads required by freight carriers, reduce fuel costs and cut down the excess amount of corrugated used in distribution and fulfillment facilities.
Let’s look at how we can brighten this “Dim” future.
What is Dimensional Weight?
Dimensional Weight, more commonly known as “Dim Weight”, is a common industry practice that sets the transportation price based on package volume – the amount of space a package occupies in relation to its actual weight. This is calculated by multiplying length times the width times the height of the package and dividing by 166 for domestic shipments and 139 for international shipments.
Dim Weight freight charge will apply if the Dim Weight exceeds the actual weight of the package. This change is expected to increase shipping costs by 20 to 30 percent.
Images from UPS
How will companies effectively charge customers the correct freight amount? One of the greatest challenges shippers will face is not knowing the exact shipping cost before a package leaves their facility. The actual amount will be determined when the package reaches the UPS and FedEx hub.
How will companies make the right box choices and will they be able to provide more box size option for packers? Another challenge is providing warehouse workers with appropriate box sizes and having them manually determine the correct box size to use. About 25% of fulfillment workers choose the wrong box size when packing an order. Studies have shown that when you look at the total available cube in a carton from a typical E-Commerce fulfillment center, only about 60% accounts for actual product. Even worse, some E-Commerce providers have elected to send multiple item orders out in several cartons rather than combine them into one consolidated carton. Both of these scenarios have significant cost and environmental considerations.
As companies look for lower cost options, will the new carrier’s network be able to handle the influx of packages? Will customers who attempt to move to another carrier, for example the USPS, encounter the type of network disruptions experienced during the 2013 holiday season when many holiday deliveries were missed due to network capacity issues at UPS and FedEx.
What Steps Can You Take?
There are different approaches that you and your company can take to get ready for the shift to Dimensional Weight pricing in order to minimize the impact this change will have on your company operationally and financially.
If you have not already made provisions for the change in shipping and you are a high volume shipper, consider calling your carrier to negotiate a time delay for Dim Weight implementation for your company.
If you have a manual packing operation, be sure your packers are properly trained in making the right box size choice to minimize charges for excess air in the boxes shipped.
It may be time to consider reducing corrugate by analyzing the box sizes currently being used. You may need to offer more box size options to properly fit the product you are shipping. Analyzing historical order data and dimensions of your SKUs will help you choose the “Right-Fit” box sizes.
Now is also good time to look into different technologies, such as cartonization software that can calculate what the most optimal box size for your product or technologies that will build a “Right-Fit” box for your shipment. Both of these options have a “green” benefit of using less packaging material through reducing the amount of “void” or air in a carton that needs to be filled with packing material such as air pillows or crinkled paper.
Questions Left Unanswered
How do we charge customers for shipping if we do not know the cost until the package has already left our facility? Where do shipping bags fall in the measure of Dimensional Weight? What it the best approach for my company when it comes to the increase in shipping costs? If I decrease package size, how do I prevent products from being damaged in transit?
The Bright Side Solution
The first step to address the Dim Weight changes is to focus on your products to determine how best to package them to save space, which will save you money in the New Year. The change in shipping costs presents the opportunity for you to reach out to an integrator and have your fulfillment operations analyzed. Potential enhancements to your operation to mitigate the impact of Dim Weight pricing can be justified by minimizing the increase of shipping costs which are inevitable. It has been found that using box optimization technology can improve box utilization, improve pick/pack labor efficiency and a reduce the amount of corrugate used.