Late last week, FedEx announced pricing changes for its FedEx Ground and Freight offerings.
For FedEx Ground, the company said that effective January 1, 2015, it will apply dimensional weight (aka: dim weight) pricing to all shipments moved via FedEx Ground, as opposed to its current method of applying dimensional weight pricing to oversized packages that measure three cubic feet or more. FedEx defines dimensional weight pricing as “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.” FedEx officials said that this change will align the FedEx Ground dimensional weight pricing with FedEx Express by applying it to all packages.
What is dimensional weight, you ask? Dimensional weight is the volume of your package = (L x W x D) / 166. If the dimensional weight is greater than the actual weight of the package, you get charged for the dimensional weight. This formula applies to both UPS & FedEx.
This is going to be a major change for many online retailers, omni-channel shippers and companies that utilize single parcel for moving goods intra-company or business to business. No need to worry if your company specializes in heavy good like replacement auto parts or gold bricks, but for many companies this could cause a substantial increase in logistics costs. Based on initial research by WSJ, many companies could see price increase between 6%-30%+ on the majority of their single parcel shipments.
If you think you are protected because UPS is your carrier of choice, most experts agree that UPS will follow suit within a similar timeline. There would be just too much money on the table for them to pass up. Not sure if your packages will be subjected to dimensional weight, use our free online dimensional weight calculator below or find additional examples on dim weight in this previous blog post.
Domestic Single Parcel Freight Dimensional Weight Calculator
No longer will companies be able to afford ground shipments that look like the picture below. Before, all this air space would often cost them a few extra dimes in extra corrugated box material and air pillows, but going forward they may be paying extra dollars for that extra air they are shipping in this under-utilized secondary package.
|Starting Jan 1, 2015 shipments like this will be costly for online retailers|
That being said, this doesn't have to be all doom and gloom, there is a way out or to at least minimize this cost increase. It all starts with right sizing and/or optimizing your packaging and over packaging strategies, and finding the balance between how many box sizes your fulfillment line should carry, what size they should be, and what's the balance between box size and dimensional weight impact. Not sure how to do that, feel free to reach out to our Packaging Experts at Chainalytics - Packaging@Chainalytics.com