what is dimensional pricing? will it mean the end of your business?

Will It Be The End of Your Business?

WHAT IS DIMENSIONAL

PRICING?

How does pricing work now?

The historical way for calculating costs to

send a package was based on a very

simple method;

Carriers use a table that assigns a “base

rate” for every combination of weight (1-150

lbs.) and distance (Zones). The heavier the

package and/or the farther you ship, the

more it costs.

Other surcharges and fees are then added

to the base rate as they are applicable (E.g.

fuel surcharge).

Does it work?

Historically, this pricing

structure was ideal because

transport trucks could use

these same variables in

their formulas to calculate

transportation costs, and

therefore determine the

profit margin for each truck

transporting goods.

What is dimensional pricing?

In other words, many of the lightweight packages you

ship today could see A BIG INCREASE IN COST!!!

Every package you ship will now have two weights – actual

weight and dimensional weight. The larger of these two

will be used to calculate the cost of your shipment

(Height x Width x Length)

Dimensional Factor*= Dimensional Weight

* The standard Dimensional Factor that UPS and FedEx will use is 166

Why the change?

The convenience of online shopping

with in-home delivery, has resulted

in an increase in the number of

lighter weight packages in bulkier

boxes being shipped to homes

across the world.

Consumers now purchase bath robes and teddy bears online!

Bigger boxes take up more room

in a truck; so less space and less

weight = less revenue per truck

for the carriers.

How will this affect my

shipping cost?

3 lbs. x Zone 8

$9.84

Base (Daily Pickup) Rate

3 lbs. package shipped in a 12” H x 12” W x 18” L box

From: Knoxville, TN (ZIP 37923)

To: Reno, NV (ZIP 89501)

TRADITIONAL

(12 x 12 x 18) / 166 = 15.6 lbs.

16 lbs. x Zone 8

$18.86

Base (Daily Pickup) Rate

DIMENSIONAL

3 Questions to Consider

What will my margins be if I eat the cost?

If I pass this cost on to my customer – how

many will I lose?

Will I still be in business 1 year from now?

Solutions

Take the Air Out

Negotiate your dimensional factor

Find a partner with negotiating power (E.g.

a 3PL)

Take the Air Out

Deliberately engineer packaging to remove as much “air” as possible.

If additional packaging is added when preparing to ship, educate your packing team on the effects of their decisions.

This should be the first step for any company looking to avoid large dimensional weights

You might be surprised how much opportunity there is

Negotiate Dimensional Factor

Larger Dimensional Factor

= Smaller Dimensional Weight

= Less Effect on Your Business

Must negotiate with each carrier you use

(i.e. FedEx and UPS)

There are no guaranteed

outcomes

Shipping Revenue = Power

Find a strategic partner

Quality 3PL fulfillment operations minimize

effect to their clients

Strategic Partners help with these various

strategiesExamples:

Negotiating power with Carriers

Package consolidation

Packaging engineering

FOR HELP REDUCING COST

OF DIMENSIONAL PRICING

800.815.STAG (7824)

info@redstagfulfillment.com

www.redstagfulfillment.com