One of the highest annual price increases implemented by the largest small parcel shipping companies occurred in 2015. This increase affects everyone shipping a package weighing over a pound. Both FedEx and UPS have followed suit, making small package dimensional fees the new norm in shipping packages.
Dimensional weight – the method that accounts for package volume rather than weight alone – is the new norm.
Both companies describe the change as one that aligns ground shipping standards with the approach they use for air shipments. Of course, this move will also boost the bottom line of these companies and be one of the largest annual General Rate Increases (GRI) of their history. We have seen estimates that it could bring just FedEx an additional $350 million in annual sales, straight from the pockets of merchants and individuals.
Before this change, dimensional weight came into effect in ground shipping only for packages greater than 3 cubic feet, so that carriers don’t lose revenue for lightweight but bulky packages. Even so, merchants / shippers should evaluate these changes by examining the size and weight of their packages which is likely to include both increased costs and greater complexity.
One of the things AMS Fulfillment has done to combat this cost is to seek out dimensional weight waivers and/or to negotiate better terms with these companies for the dimensional weight factor.
‘Dim factor’ is the denominator used in the formula to calculate dim weights. Most of the ground agreements will provide anywhere from a 139-166 Dim factor: for example, a package weight of 2lbs, having dimensions of 12Lx6Wx10H. This number is calculated by multiplying LXWXH / 166 Dim Factor = 4.3lbs. So 4.3lbs is the new charged weight for this particular package versus the 2lbs actual weight of the box. They may even round up to 5lbs depending how their internal scanners measure the dim.
Getting waivers or negotiating the dim factor is not always an option if you’re a smaller eCommerce retailer or shipper. You would need the ability to persuade carriers to grandfather in old pricing rules or provide breaks; otherwise dim weight changes may have significant ramifications to your business model.
That’s where a third-party logistics provider will prove useful. Companies like AMS can negotiate such discounts and pass savings on to their Clients. Additionally, because we have much more volume and ability to work with all the major carriers, we have clear insight into the best deals with every carrier.
AMS also provides many other advantages to streamline the process more broadly as a third party logistics provider. We can ensure that you’re using the right packaging mix, so to eliminate mistakes like using the Dim weight versus a lighter actual weight for your boxes. Don’t end up costing your campaign huge additional shipping costs in this new small package pricing model.
For more information please contact John Bevacqua by phone or email at the following: Office 661-775-0611 or [email protected].
About the Freight Freak:
John Bevacqua is the VP of Logistics at AMS Fulfillment. His area of excellence is in creating distribution and fulfillment operations that function as a capable interface between suppliers, retailers, and wholesale distributors. His experience includes developing and leading FedEx/ Kinko’s Distribution Services into the FedEx post acquisition, USA Wireless Technologies, and a top Logistics Management company. He has also worked with third party fulfillment companies, preparing him for his current position with AMS Fulfillment.