When the news that both carriers were going to start basing rates on the dimensional weights for shipments broke over the summer it grabbed the industry’s attention and was the subject of many emails, articles, and blog posts by the Catalog Fulfillment, 3PL, and Ecommerce Fulfillment Services media.
If you missed it, or as a refresher in case you are otherwise occupied by a little thing called Holiday Peak, let’s recap what’s changing and what you can do to avoid getting clobbered by the imminent changes.
To begin, let’s review what dimensional weight pricing actually is. DIM weight, is a method that considers not just the weight of a package, but also the volume of that package. On the UPS site, there’s a handy reference that shows how to calculate the DIM weight for both domestic and international packages.. Simply multiply the length, width, and height of your carton, divide by the shipping factor of 166 for domestic shipments or 139 for international shipments and round up to the nearest whole number.
Industry experts point to several reasons for the change, but the long pole in this tent is the ever increasing demands placed on the carriers by online shopping. Because most items bought online are small, and shipped with additional void filler in over-boxes to protect the contents during transit, these packages – even if they don’t weigh much – consume a lot of space on trucks and planes – but are priced at generally lower rates.
If you haven’t budgeted for those kinds of increases in your shipping budget for 2015, don’t panic. There are a few ways to mitigate this issue and here at The Jay Group we’ve been busy examining options and planning strategies to make sure our shipping costs stay competitive and we have an array of solutions to offer our clients. Here are areas we’ve explored.
- Optimize packaging. Since the new rates are based on volume and not weight alone, finding the best balance between package densities and ensuring the safe transit of your goods is an area for potential improvement. Because we have relationships with several packaging companies, we’re continuously evaluating our packaging options and right-sizing to meet our customers needs. UPS also offers a custom package sizing option through its partnership with Packsize, which gives shippers the option to generate exactly the right size packing, too.
- Negotiate. As with any business relationship, there’s always an opportunity to negotiate the best rates possible given your unique business needs. This is no exception. Bala Ganesh, director of marketing for UPS, reported to Multichannel Merchant earlier this year that there are “…ongoing conversations with shippers regarding how to best align their costs and our expenses…” One way rates are being negotiated, according to John Haber, founder and CEO of shipping optimization provider Spend Management Experts, is by working with the carriers to adjust the dimensional weight divisors in order to offset some of the additional costs. If you can find a way to reduce your divisor the resulting cost savings can be dramatic.
- Explore Optional Carriers. Some regional carriers or Postal Consolidators may be able to offer the same level of service, but at a reduced cost, or even offer more favorable terms and flexibility that align their capabilities to your business needs. Among other options – notably highlighted by Endicia – is to consider the USPS. In some cases services like their Priority mail option e offer an economical alternative that provides many of the benefits without much difference in service level – especially if you’re already using to a ‘last mile’ option like Surepost or Smartpost.
- Find Savings Elsewhere. Talk to your 3PL Partner about your overall strategic plan for your logistics program. There may be opportunities to apply a whole host of strategies like Just-In-Time or On-Demand inventory practices, economies of scale available by using their broader buying power or the opportunity to bundle services to that can all contribute to your overall profitability.
According to The Jay Group’s Director of Operations Brad Weise, “In a 3PL environment, conquering the cost impact of DIM weight shipping requires a multifaceted approach.”
The Jay Group’s technology and processes are very much aligned to support these changes. “By partnering with our clients on education of dimensional based shipping, recommending alternative packaging solutions, leveraging strategic relationships, and tailoring a transportation solution to meet each client’s needs we’re prepared to face the new changes and increased costs head on,” said Weise.
If you need any help evaluating the impact of this change on your shipping costs, contact us today and one of our Fulfillment Experts would be happy to provide a complimentary Operational Assessment to review your current program and discuss how we can help.