It’s All in the Packaging.

Both FedEx and UPS have recently announced that they will use dimensional pricing to calculate shipping charges. Is your firm aware of the impact to your business? Depending on the type of product that your firm ships your business could be greatly impacted by the dimensional weight change.  Now is the time to develop a comprehensive shipping strategy for your business.  First and foremost, companies need to understand what products they ship and what types of boxes they utilize to ship product.  No more – one size box for all goods. Everyone has ordered products and received boxes full of air for a small product that comes in a big box.

 

The reason UPS and FedEx are implementing dimensional pricing is because they are cubing out rather than weighing out. The shipment mix has changed with the advent of online shipping to smaller light weight parcels.  However, these light weight parcels take up the same amount of cubic space in a trailer as a heavier parcel shipment.  Rating structures in the parcel industry were historically based upon weight.  Dimensional pricing takes into consideration the length, width and height of the box divided by a factor to calculate a weight. If the package actual weight is less than the calculated weight, the calculated weight is utilized for billing. If the actual weight is more than the calculated weight, the actual weight is utilized.

 

The time is now for firms to review their packaging of products and to develop a comprehensive plan to minimize the impact of the dimensional pricing change.  Small to medium size shippers are going to be the most impacted since they do not have the volume or the leverage to negotiate with UPS and FedEx.  They also may not have the resources to review their shipping processes and make the necessary adjusts to reduce shipping costs.  Depending on the type of product shipped many firms may have up to a third of parcels impacted.

 

Here are a few steps to take now to prepare for the dimensional pricing changes.  One, ensure that all products have dimensions listed in the fulfillment system.  Most firms use seven or eight different types of boxes. Consider adjusting the types of boxes that are utilized to ship products. Flat goods maybe better served shipped in flat boxes or envelopes.

 

Now is the time to evaluate your packaging materials. Certain goods that are susceptible to breakage may still need to be packaged with airbags and may require over packing.  Items that are non-breakable may not require any additional packing materials and can be shipped in smaller boxes avoiding higher shipment charges.

 

Standard Operating Procedures (SOP’s) and Work Instructions WI’s) may need to be altered and updated to reflect the changes in packaging. In addition, warehouse workers may need additional training in the revised SOP’s and WI’s. Item masters may need to be upgraded with correct dimensions for products.

 

Now, is the time to start the assessment and develop a comprehensive plan prior to the peak shipping season. Your firm needs to be ready when the dimensional pricing changes take effect.

 

Logistics Trends Inc. can help your firm with the dimensional pricing changes. We can be reached at jbisaha@logisticstrends.com.