What’s New with Dimensional Weight?

by Rich Lindgren, CPP
Chainalytics

We are about half way into 2015 and the new Dimensional Weight pricing model issued by UPS and FedEx earlier this year. Fortunately, many shippers and 3PLs have been able to avoid the price increases taking immediate effect thanks to negotiation or multi-year contracts that haven't yet expired.  

(If dimension weight charge is news to you, check back on this previous blog entry.)

Rumblings and rumors from the packaging and supply chain industries suggest that the carriers are forming contractual partnerships with companies like Pack Size not only to secure business for each other, but ultimately appear to relieve the sting felt by shippers with the price increase. Naturally, the details of these dealings have been kept hush-hush. 

There would have to be a pretty compelling financial savings for a company to lock into long term exclusivity for both packaging and single parcel carrier arrangements. In my opinion,  if you already have a relationship with one or the other, why would you want to bring another company into the mix? Sounds messy. 

How much air are you shipping from you distribution centers?

If your company was not so fortunate at the negotiation table, and your plan A was to wait and see if the changes affected your ground pricing, now would be a good time to start reviewing your FedEx and UPS invoices against past quarters to see what the ultimate cost impact has been to your business and profit margins. Chances are after seeing the delta you will have to go to Plan B, and try and salvage some money to not blow this year's budget.  

Admittedly, sometimes Plan B's can be better than Plan A's in the long run. An exceptional Plan B in my opinion is to redesign the packaging for your high volume products, or implement a simple box sizing optimization exercise for your distribution centers.

Shipping air is almost like using dollar bills as void fill!

Either way, with dim weights in the mix, there is a lot of jockeying for market share by both carriers or packaging suppliers in the parcel game as "grace periods" expire for companies currently phasing in the dim weight pricing changes immediately. And frankly, there's a lot of money to be made (or lost) depending on the packing strategy you take. It's important to be aware of this the next time your contracts are up. Go line by line and review them carefully.