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Dimensional Pricing – How the New Fed Ex and UPS Rules Affect Fulfillment

January 15, 2015

supply chain - John B - AMS FulfillmentIt’s not news when FedEx and UPS decide to change their pricing, but it is big and potentially budget-breaking news when dimensional weight must be applied to every single package being shipped. The former pricing of these carriers called for dimensional weight to be applied primarily to air shipping. Only when a ground package was larger, with a dimensional size over 3 cubic feet or 5,184 cubic inches or more, did such pricing apply.

One might ask exactly what is dimensional weight pricing, and why have carriers made this change? This type of pricing calculates the size or amount of space a package takes up, relative to its weight. By implementing this pricing, carriers are looking to gain back some of the costs associated with shipping large, lightweight packages.

When the announcement was made, that effective December 29, 2014, major shipping carriers will put in place dimensional weight pricing on all ground shipments, fulfillment companies, who are in the business of warehousing and shipping products, began planning ahead of the change, putting their best expertise and technology forward in order to manage this change in their warehouses, for their clients.

Fortunately, due to commitments to the environment and overall efficient packaging, there are fulfillment companies in an excellent position to begin handling dimensional weight pricing: primarily those with a long-time commitment to choosing the proper size shipping box, and choosing the proper amount of packaging to assure safety of the contents.

In the industry, carelessness with regard to sizing is called ‘shipping air’. Shipping an oversized box is wasting space in a truck or plane, which is, of course wasteful of energy and damaging to the environment. So ‘green’ fulfillment companies already have an advantage in managing the impact of dimensional weight pricing.

One such company is Los Angeles-based AMS Fulfillment. In a recent interview with Jay Catlin, President of AMS, he underlined the importance of the next stage of preparing for dimensional pricing: minimize the dimensions, capture the dimensions in the system, and feed your clients accurate shipping cost information.

“First and foremost, we must continue to promote proper sized packaging,” Catlin said. “With dimensional weight coming into play for UPS and FedEx, companies should establish processes to efficiently choose the best shipping cartons for an outgoing order in pick and pack operations, especially those with items that tend to be bulky, awkward-shaped and lighter in physical weight.”

He explained that fulfillment operations must be prepared to capture the dimension information in the system, especially for clients who re-bill exact freight costs to their customers. “You’re not going to take a tape measure out, and you don’t want to hand-key dimensions into the system. We are coming up with technological and process solutions to help ensure we can efficiently capture dimension information in the system, whether we’re shipping the clients’ master cartons or picking and packing into generic cartons.”

Catlin pointed out that in addition to choosing the smallest packaging possible, and capturing the dimensions up front, a third consideration is the denominator. The denominator or divisor is an important factor in determining dimensional weight and thus the cost of shipping.

Dimensional weight is calculated by multiplying the carton’s length/width/height and dividing that number by the ‘denominator’ or ‘divisor’. The standard or published divisor is 166, but AMS has negotiated a higher divisor, which serves to reduce the dimensional weight of the outgoing package. For clients who utilize AMS Fulfillment for small parcel shipments that are impacted by dimensional weight, the higher number divisor will be extremely helpful in controlling the anticipated spike in shipping cost.

Dimensional weight rate increases by UPS and FedEx can’t be avoided and will negatively impact many businesses, especially those with products that are light, awkwardly shaped, or bulky, but proactive steps can and should be taken by fulfillment companies to minimize the impact.

For more information on the steps AMS Fulfillment is taking to minimize the impact of this new pricing on its clients, you may contact John Bevacqua by phone or email at the following: Office 661-705-7591, Cell 805-377-3422, [email protected].

Author: Amsfulfillment
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