what is dimensional pricing? will it mean the end of your business?
TRANSCRIPT
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)
www.redstagfulfillment.com