Whether you ship 2 or 2,000 packages a day, you are impacted by dimensional pricing on all ground shipments that went into effect in 2015 with UPS and FedEx.
FedEx® and UPS® are now enforcing dimensional pricing on all ground shipments, including those weighing less than 3 pounds. Packages that are 3 cubic feet or less are most affected by the change.
For example, the cost to ship a small box of cups weighing three pounds and measuring 17x17x17 inches could jump from the current $8 to more than $18 in January. A 2lb. package of light bulbs with dimensions of 10x10x10 inches could increase from $8 to $10 – a $25% increase (Parcel Industry, June 18, 2014).
What Is Dimensional Pricing?
Dimensional pricing is based on the volume (length, width and depth) of a package rather than the weight. UPS and FedEx instituted dimensional pricing in 2015 as a way to regain revenue that was lost because shippers were using large sized boxes (volume) containing small, lightweight contents. These boxes took more room on their trucks but the cost (based on weight only) did not compensate for the space they took. While this approach helps FedEx and UPS regain significant revenue, shippers are feeling the pinch.
How To Reduce Shipping Fees
In order to avoid experiencing significant cost increases, every shipper needs to take action. The following are 6 ways to lessen the impact of Dimensional pricing:
- Optimize Package Contents
- Evaluate Shipping Containers
- Indicate package dimensions on your shipments
- Spot-Check Shipping Rates
- Audit Shipping Invoices
- Negotiate rates
Whenever possible, ship as many items as possible in one box. It is no longer cost effective to pay for “air” when a small item is shipped in an oversized box. Multiple items in each box will increase cost efficiencies.
Many shippers stock a limited number of carton sizes, then fill any negative space with packing material. However, with the Dimensional Pricing rate structure, consideration should be given to incorporating a broader array of box sizes. Using smaller boxes that reduce or eliminate “air” will not only keep shipping costs lower but will also provide savings on packing material. If you ship a significant number of boxes per day, consider automated systems that fit the box to the contents. These systems virtually eliminate any unused space.
Another option is to use padded envelopes or Tyvek® bags if they can accommodate the contents of your shipment. These are lightweight, low-volume options that can reduce shipping costs.
Shippers used to have the option of including package dimensions in their shipping systems on cartons that are 3 cubic feet or less. However, package dimensions are now mandatory. Exclusion of the dimensional data could result in a 20% – 100% penalty, depending upon the actual dimensions of the package.
With rates being updated on a regular basis, it is important to make sure your rating software is accurate. It is virtually impossible to go back to a customer and try to recover incremental shipping charges, so avoid a potentially a significant hit to your bottom line by doing regular “spot checks” of rates. When you include dimensions in your shipping system, it should return accurate pricing right away. If not, or if it’s too time consuming, contact us at 303-761-0681 for assistance with navigating these changes.
An on-going review of your shipping expenses can help you identify and recover costs. On average, 3% of FedEx and UPS charges are eligible for a refund due to billing errors and late deliveries. Comparing billed vs. rated invoices helps you identify inaccurate rates as well as incorrect billing. Products such as Complete Parcel Audit provide valuable business intelligence to help identify, quantify and achieve all possible cost savings and helps you improve your profitability. Find out more about Complete Parcel Audit at: Parcel Audit
There is no better time to negotiate shipping rates with FedEx and UPS in order to better control and manage your shipping costs. Shippers can obtain discounts from 10% to 70% as a result of negotiating fees. Some of the factors that impact rate include:
- Shipping Volume –this is the sheer number of packages you ship. The higher the number the greater your ability to negotiate a discount.
- Urban vs. rural delivery points – generally, the more concentrated the delivery area, the more cost-efficient it is to deliver the packages. Some of these savings can be passed onto the shipper.
- Shipping from single vs. multiple locations – a limited number of shipping locations can be an advantage, especially if you are shipping a high volume of parcels.
- Delivering to few vs. many destinations – again, this helps focus shipper’s resources and can save you money.
- Package size variations – having fewer standard package sizes helps FedEx & UPS because they can maximize their loads.
- Negotiating skill – if you have a strong hand (based on the above), hang tough for higher discounts
- Keeping the competition in play – don’t keep your eggs in one basket. Shippers may be more motivated to work with you knowing the competition might replace them.
For more information on ways to manage your shipping costs, call us today at 303-761-0681.