The new FedEx and UPS dimensional (DIM) rates that just went into effect probably add up to the single biggest rate increase ever for many shippers—on the order of 25%. Both these carriers now impose dimensional weight pricing on all Ground packages, not just those measuring three cubic feet or greater.
The driver for this change has been the exponential growth in Business To Consumer ( B2C )shipments, which is impacting carriers’ pickup and delivery networks. Both FedEx and UPS have been capturing the dimensions of shipments in transit, and they’ve found that many are packed in relatively large, lightweight boxes. Thus their trucks, planes, delivery vans, etc. are filling up while still well below their weight limits.
Rolling more trucks and planes means higher fleet and labor costs. So rather than buy thousands of larger vehicles, UPS and FedEx are applying economic pressure to force shippers to stop “shipping air” and start using smaller boxes whenever possible. Other carriers are likely to follow suit soon. Unless your company has negotiated a dimensional divisor greater than the current 166 and an exception around cubic volume thresholds, these new DIM rates will certainly impact your bottom line.
What can you do to minimize this significant cost increase? Here are six opportunities to take a little of it back. The right solution for your business will depend on the level of automation you have in your fulfillment process—one size does not fit all (pun intended).
Either manually or using inline cubing equipment or “cartonization logic” software, record both actual weights (to fractions of pounds) and external package dimensions (in 1/8” increments). To get pounds per cubic foot, multiply length times width times height and dived by weight. If that number (pounds per cubic foot, abbreviated PCF) is below 10.4, you’ll be paying more to ship that package using today’s DIM rates.
2. Use smaller boxes
Start with the low-hanging fruit; packages with the lowest PCF. Adding to your choice of stock box sizes could help here. In some cases you might be able to switch to mailing envelopes, which are not subject to DIM rates.
3. Use different packing materials
If you use less or less bulky dunnage, smaller boxes might work more often. Amazon and other high-volume shippers are increasingly using air pillows because they weigh “nothing” and provide great cushioning. Consider calling in professionals to help redesign your packaging.
4. Change carriers
For the moment, USPS and probably many regional carriers have lower-cost DIM rules than UPS and FedEx. Given this potential leverage you might be able to diversify your shipping options, and/or negotiate a more favorable rate with UPS or FedEx. Multi-carrier shipping systems like AccellosOne Ship can save significant costs by automatically rate-shopping carriers on a per-package basis. Parcel/postal hybrid solutions could also be an option.
5. Reconsider “free” shipping
If you’re currently offering free shipping for some products or customers, it might be time to rethink that, because it’s now costing you more. Analyzing your current packages will help you determine what orders and customers are costing the most. Increasing shipping costs or accepting lower margins are, of course, also options.
6. Consider new technology investments
Higher shipping costs mean faster payback time on new investments. Increasing automation—and thus speed—will not just cut costs but also help keep you competitive. Warehouse Management Systems (WMS) can enable you to implement custom cartonization, automatically weigh, measure and label every package, or even automate the entire packaging process once the order’s contents are in the container. On-demand boxing systems can save on wasted boxes and dunnage as well as “air space” in shipments. A high-volume automated shipping solution could radically streamline your entire warehouse operation.
Whatever you do, don’t “do nothing.” Changes can take time. The sooner you start planning on how to cut your rising shipping costs, the better.
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