Because shipping and logistics are a core competency at Materialogic, we keep abreast of industry changes that might affect how and when people ship items, including how much they are likely to pay. One factor that is constantly changing is the way carriers such as FedEx and UPS calculate dimensional weight.
Dimensional weight determines the amount that businesses are charged for shipping and this can have a huge impact on the bottom line for businesses that ship often. The last major change to DIM weight, back in 2015, for example, meant that retailers paid on average 17% more in ground shipping costs.
At the end of last year, FedEx announced that effective January 2 of this year, it would shrink the “volumetric divisor” used to calculate dimensions of domestic parcels. This divisor has been 166 since 2011 but is now shrinking to just 139 for all parcels. This means a near-20% increase in the dimensional weight of most packages. UPS made a similar announcement earlier this year for shipments larger than one cubic foot.
Furthermore, this move is likely to hit small- and medium-sized businesses disproportionately. With past DIM weight increases, we have seen smaller players bear the brunt of higher shipping while larger companies and some 3PLs were able to leverage their volume to negotiate better deals with carriers (and knew how to do so). The current change, then, means that small- and medium-sized businesses have an incentive to look at 3PLs to take advantage of such discounts.
Lessening the Impact of DIM Weight Changes
Last year, we provided other tips for mitigating shipping costs in the face of a rate hike due to DIM weight changes. That advice stands today. But we feel it worth repeating—and adding a few new tips into the mix:
- Optimize the way items are packed for shipping. Getting more items in a box (on average) means lower DIM weight shipping costs. So does cutting down on the filler and using smaller boxes.
- Try new package designs. Items themselves often have their own packaging, and while some packages make for a great store display, they might not be the most efficient when it comes to volume and packing material. This is especially important for e-commerce, where shipping costs are more of a factor than how items look on a shelf.
- Consider your shipping options. Not all means of shipping will be equally affected by DIM weight changes. For example, some parcel consolidator services like Fedex Smartpost are not subject to DIM adjustments. Multi-carton shipments with a total weight over 200 pounds can often avoid DIM charges as long as the average carton weight is high enough.
- Make shipping a value add. Consumers will oftentimes foot the bill for shipping if it means they get value from it. For example, an article from eMarketer found that most consumers are willing to pay same-day or next day shipping for items that they truly need in a hurry. You can use a 3PL to stage and ship items quickly, allowing to offer premium shipping.
- Seek advice, give us a call. A phone call costs nothing but could make a huge difference to your bottom line. As an experienced 3PL provider, we can assess your shipping processes, review pricing strategies, suggest improvements, and pass along the savings we get from our volume contracts. This way, your business can receive many of the protections that larger players have when DIM weight changes go into effect.
When you are ready to have that conversation, you can reach out and contact me:
Bill Young, 314-692-7545, byoung@materialogic.com.
