For eCommerce sellers, one of the biggest expenses that can cut into their margins is shipping fees. In 2007, shipping carriers threw another wrench in retailer’s freight calculations: dimensional weight pricing. While some brands remained unaffected, this change negatively affected the shipping rates for lightweight products.
What Is Dimensional Weight?
Dimensional Weight, also known as DIM weight or volumetric weight, is a pricing tactic used by shipping carriers and freight companies to ensure they don’t lose money on oversized lightweight parcels. With limited space on shipping trucks, DIM weight takes the density of the package into account when determining pricing fees.
Shipping carriers like UPS, FedEx, and USPS will charge freight fees based on whichever is greater: the physical weight of the package or the dimension weight.
How Is Dimensional Weight Calculated?
Carriers follow the same rules when calculating DIM weight: find the package dimensions and divide by the DIM Factor.
(Package Height x Package Width x Package Length)/DIM Factor = Dimensional Weight
Note: Dimensional weight is rounded up to the nearest whole number.
Note: Dimensional weight uses the longest point on each side
The DIM Factor, also known as a DIM divisor, is a number set by carriers that represents cubic inches per pound. UPS uses a DIM factor of 166 for retail customers. FedEx uses a DIM divisor of 139.
Let’s say a company is shipping a package via FedEx with the following dimensions:
- Length – 12 inches
- Width – 15 inches
- Height – 7 inches
The first step is to multiply the length, width, and height together to get the cubic size of the package. In the above example, the package would be 1,260 cubic inches (12 inches x 15 inches x 7 inches). The next step is to divide the cubic size by the DIM factor of 139, giving the package a dimension weight of 9 lbs. If the package actually weighs 5 lbs, the carrier would use the DIM weight (9 lbs) to determine pricing. If the package actually weighs 15 lbs, the carrier would use the actual weight to determine pricing.
How Dimensional Weight Negatively Affects Freight Rates
If a company is shipping a small but heavy product–think a bowling ball–the actual weight is likely to exceed the dimensional weight, so a carrier will base pricing on the actual weight of the product. However, if a brand is shipping a large lightweight product–think a 5-gallon cowboy hat–the dimensional weight is likely to exceed the actual weight, so a carrier will base pricing on the dimensional weight. These larger, lighter packages are negatively affected by dimensional pricing.
How a Third-Party Logistics Company Can Help
Even if a retailer’s product is large and requires extra packaging, the shipping costs don’t have to ruin margins. Many 3PLs, Third-Party Logistics Company, ship a large quantity of packages with carriers, giving them leverage to negotiate shipping rates. These rates are passed on to their customers and can allow them to significantly lower their freight expense.
Dimensional pricing takes into account the mass of a package rather than just the weight. When factoring in shipping costs into a product’s margins, be sure to account for any DIM pricing increases as this pricing tactic can have a negative impact on lightweight parcels. Here are some tips on minimizing the impact of DIM to your bottom line. The effects can, however, be canceled out by leveraging the freight rates & DIM factors of a high volume 3PL. Do the due diligence and see what shipping method makes the most sense for your products!
LEARN MORE: Shipping a large lightweight product? A 3PL may be the solution you need. Jay Group has simple, straightforward pricing and best-in-class negotiated freight rates to help our customers save money. Request a free consultation today.