Use your Order Management Software Data to Analyze your Shipping Costs

January 28, 2015 | By

Don’t Let DIM Weight Pricing Take a Bite out of your Profits

The New Year has brought the expansion of FedEx and UPS’s DIM Weight Pricing program.  Now, all domestic ground shipments will fall within the DIM weight category.  Previously only domestic ground boxes larger than 3 cubic feet were included in the DIM Weight Pricing program.

Box Information:  Fifteen of the top 25 most popular box sizes in the US are now part of the DIM weight category.  They previously were excluded because their dimensions were less than 3 cubic feet or 5,184 cubic inches.

Companies who generally ship heavier items may see little change in their costs.  But for firms that traditionally ship items in boxes which are large for the size and weight of the order, the new pricing could take a big bite out of your company profits or cost your customers more shipping dollars.

Why Are UPS and FedEx Making this Change?

UPS and FedEx’s vehicles are physically filling up with boxes well before reaching their weight capacity.  This leads to inefficiencies for the carriers and higher costs.  By introducing DIM Weight pricing, the carriers will be closer to weight capacity when they reach the physical package limit of their transportation vehicles, leading to a cost reduction for each package they transport.

DIM Weight Primer

  1. Measure the outside of your shipping boxes and multiply:  height x length x width.
  2. Divide this total by the DIM factor (currently 166 for UPS ground).
  3. Round to the closest whole number:  These are your boxes’ DIM Weights.
  4. Compare this to the actual weight of the package.  The higher number is the one used to determine your shipping charges.

Example:  On December 20, you mail a package from your company in a 10 x 10 x 10 package that weighs 3 pounds.  The package costs $6 to ship using FedEx or UPS domestic ground service.  In mid-January, the customer orders the same item again.  It’s mailed in a 10 x 10 x 10 package that weighs 3 pounds.  However, because of DIM Weight Pricing (10 x 10 x 10 /166 = 6.02 pounds or rounded to 6 pounds)  the package is charged under the 6 pound rate and costs $9 to ship using FedEx or UPS domestic ground.

How Much Does it Affect Your Costs?

That depends upon your present shipping processes and whether you are willing to pass on some of the increase to your customers.  If you want to get an idea of the impact, and you have kept records in your order management software that include package size, you can compare your shipping costs:  Pull a month’s worth of data from 2014 and sort it by DIM Weight.  Compare what you paid then with what you would pay now for the same packages.

If you see a difference that makes you cringe, then it is probably time to implement some new procedures.

Review Your Boxes and the Packing Materials

  • Find the proper size box for each item or group of items you send out.
  • Use strong corrugated boxes to prevent their bulging during transit.
  • Choose the most effective packaging materials so you can reduce your box size.  Many large shippers are using Air pillows which cushion well for their size and weight.

Consider other Carriers or Renegotiate

  • USPS Priority Mail has fast transit times and offers a great cost savings for small parcel shippers.
  • USPS regular shipping services have a higher DIM factor and only apply it when shipping to Zones 5 or higher.
  • Regional carriers may have more flexibility to negotiate rates.
  • If your volume is high enough, you may be able to negotiate with FedEx or UPS for lower rates.

For a more in-depth look at how you can reduce the DIM Weight Shipping impact, read the follow-up article next month, Reducing the DIM Weight Shipping Impact Utilizing Your Order Management Software.

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Tony is working on new client relationships and the expansion of present accounts.

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