Now that FedEx’s dimensional weight factor is on the move again, it may take a combination of tactics to balance out the cost impact of packaged shipments.
Is this déjà vu? Did I just wake up from a long winter’s slumber way too early? I could swear I just read that FedEx is changing their dimensional weight pricing structure again.
But just as there is no such thing as a free lunch, there is no such thing as free shipping and FedEx is making the push to get the air out of its trailers: http://parcelindustry.com/article-4740-FedEx-Announces-2017-General-Rate-Increase-&-Other-Changes.html
Back in 2014, FedEx introduced a new mechanism that determined charges by the cube of the packaging, not just the weight: dimensional weight pricing.
At the time, most of our clients chose to take one of the following approaches:
1. Negotiate their dim weight factor;
2. Redesign their packaging to minimize dim weight charges;
3. Pass on the price increase to their customers; or
4. Accept the price increase and eat it, thus lowering profit margins.
Many of our clients were able to renegotiate, so there wasn’t as much of a need to redesign their packaging. But now that the dim weight factor is on the move again, it may take a combination of all four of the components above to help balance out the cost impact.
But first, let’s review the basics.
A refresher: What is dimensional weight pricing?
Usually applied to small packages that travel via FedEx Express or FedEx Ground, dimensional weight (“dim weight”) is the volume of your package (L x W x D) divided by a nominal value to get your dim weight value. As a shipper, you then pay the greater of the two (dim weight vs. actual weight).
In other words, if the dimensional weight is greater than the actual weight of your package, you get charged for the dimensional weight.
For example, a box size of 15in. x 12in. x 9in. would now have a dimensional weight of 11.7lb; (15 x 12 x 9in. = 1620; 1620 divided by 139 = 11.655 rounded = 11.7 lb).
Back in 2014, the nominal value used to calculate dim weight was 166; but the new dim weight factor will be moving to 139. This new 139 divisor results in a 12lb/cubic foot density, which essentially maxes out a 53ft trailer by both cube and maximum weight of 45,000 lbs.
The bottom line here is that FedEx will get paid for the maximum load the trailer can haul one way or the other.
That means that a 12 x 12 x 12in. package would be charged as a 13-lb package. Stop and think about that; that’s a pretty dense, heavy box.
As you can imagine, from a high-level perspective, this is bound to impact packaged product shipments, as most small parcel packages are just not that dense. Therefore, if your packaged product shipping densities are currently less than 12lb/cubic foot, you may be at risk for an increase in your small-parcel shipping costs.
How do morphing dim weight factors impact my shipping costs?
The change in dimensional weight factors is a 19.5% increase.
Please let me repeat that factoid, since it bears repeating: The change in dimensional weight factors is 19.5%! And we have not even begun to delve into the ramifications on supply-chain costs.
That percentage increase may vary on a case-by-case basis, depending on your current packaging configuration, and how much air you ship in your shipper boxes, and shipping distance (zone). The chart above shows a sampling of the top items purchased online, and how the new dim weight factor will increase their shipping costs.
As before and as it is in 2017, the game is still the same: Ship your products to your customers in the most cost-effective and efficient way possible, but know that the rules are changing, at least for FedEx. It’s up to you to choose your own adventure as we navigate through this amorphous new dim weight pricing structure. As an added bonus, FedEx will also be increasing its rates: 3.9% for FedEx Express and 4.9% for Ground deliveries.
Rob Kaszubowski is the Engineering Manager at Chainalytics, where he is focused on improving sustainability metrics and implementing packaging cost savings while leading a team of packaging consultants. Rob also contributes to the Packaging Matters blog.
Main image credit: Designed by Freepik
Chart image credits: Toaster: Home vector designed by Rosapuchalt - Freepik.com; Shoes: Camera vector designed by Smithytomy - Freepik.com; Diapers: Baby vector designed by Freepik.
Fine-tune and optimize your packaging with new ideas at WestPack, February 7-9, 2017, in Anaheim, CA