How Happy Are Fulfillment Providers with DIM?

As we reach the six-month mark under the new Dim Weight pricing models FedEx and UPS have both universally adopted, it’s clear freight costs are up industry wide – notably affecting B-2-C fulfillment customers.

Happy Stinkin’ Birthday.

In their April cover story “Diversifying Delivery” Internet Retailer reported, “How much shipping fees are up varies by product and a retailer’s volume. But some say prices are up as much as 30%. That includes an average 4.9% annual rate hike, various residential and fuel cost surcharges, and the move to charging by a package’s physical dimensions…”

In their June 2015 Executive Summary: Dim Weight Pricing, Multichannel Merchant puts the increase lower. They report, “Industry experts estimate that retail shippers are seeing an average increase of 17% in their 2015 ground shipping costs from the major carriers on parcels affected by DIM.”

Obviously your financial results are the ones that matter most though, and to help you try to mitigate the risk to your bottom line here are a few ideas for beating the higher costs resulting from dim weight pricing.

Before you ask – yes these are all real products, techniques, and tips I’ve found on the interwebs targeted to retailers who are grappling with increasing shipping costs. Caveat emptor.

Reduce Your Footprint

It’s easy to say use the right size box, but what if you don’t have it? The Bubblefast Box Sizer tool lets you modify boxes to reduce the overall cubic volume they consume and reduce the need for void filler. There is no disputing that the principles behind this tool are sound. The carriers adopted the new pricing model to combat the rising costs they were facing because their vehicles were full of half empty boxes stuffed with dunnage (and air). Your results and the practicality of this particular solution – as presented in the demo video on YouTube – cause me to question whether this tool would stand up to the rigors of a high production shipping line, or why you’d elect this one-trick pony over the less expensive and ubiquitous box cutter.

Use Data to Drive Logistics

Yes, there really are Bluetooth enabled tape measures. I don’t think they transfer the data from the portable hand-held device to your desktop PC with the snazzy light show the demo video suggests, but even without the Spielberg inspired special effects the core concept behind this technique is still valid. If you know how big your products are, you can systemically control downstream choices – like offering customers intelligent rates, optimizing carton selection for each shipment, or selecting which packages go by which carriers to ensure you’re getting the best deal. A slightly more sophisticated process employed by many fulfillment providers is to use industry-leading Cubiscan equipment from Quantronix to measure both individual and case pack dimensions for each SKU. When this data is fed to your Warehouse Management System you can use it to optimize not just outbound freight, but every aspect of your warehouse operations including:

Auditing outbound package weight to confirm you aren’t over or under shipping the order
Maximize storage efficiency in both your pick modules and overflow racking
Reduce errors introduced by manual measuring and weighing options

Customers have also reported to Internet Retailer that, with new dim weight pricing, vendor billing has become more complex and more challenging to understand. A WMS and solid data collection regimen makes it easier to validate and confirm your invoices accurately.

Think Outside of the Box

If you ship a relatively small number of SKUs you might be able to take advantage of the surging options available in the custom packaging market to buy shipping materials that are specially made to fit your needs. In the past, most companies would choose from a relatively small selection of “off-the-shelf” boxes and customized packaging was reserved for branding opportunities. Nowadays, operations professionals are just as influential as – and maybe more influential than – their creative and marketing colleagues when it comes to making packaging decisions. Shaving inches saves dollars.

From the June Multichannel Merchant article, Mike VanZetta, corporate director of corrugated for Shorr Packaging, suggests that for the ideal candidate – an ecommerce retailer with a large assortment of differently sized items, for instance – on-demand options may be a great solution. Packsize and Box On Demand both offer slick options that take raw materials on one side and shoot finished boxes out of the other.

If your products aren’t fragile and your customer experience goals allow it – you might also consider shipping in Poly Mailers. The supplies themselves cost less, and there are clear freight cost advantages. Just make sure:

your shipping option matches your customer’s expectations of your brand, and
you don’t become a reluctant YouTube star because something goes sideways

Choose the Right Tool

While UPS and FedEx continue to lead the pack, many shippers are exploring other options to reduce their costs. From regional carriers, to USPS, mail aggregators and third-party logistics providers the number of options and diversification of shipping programs continue to grow.

While some customers are using the various shipping options as a bargaining technique, others are simply diversifying because the widespread delays of the 2013 Holiday shopping season demonstrated the risk of becoming too reliant on too few vendors.

Making these decisions isn’t always easy, though. Electing a different shipping vendor may offer reduced costs, but it may also require your customers to be patient and wait a bit longer for their package to arrive. Choosing an ecommerce fulfillment service that can offer you the best balance of reach – so your customers don’t have to wait – and value – through competitive volume discounts – often makes the most sense for many.

Conclusion

If your shipping costs for the quarter came in over budget and your CFO is asking questions feel confident in your triage planning. While there is no debating that DIM Weight pricing is having a significant impact, there are ways to mitigate the risk to profitability and find strategic partners who can help you plug profit leaks in your fulfillment program. Contact Us to learn how Jay Group’s Fulfillment Services can help you save money on shipping.

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