Jerry Hempstead--Friday night, after the markets closed and when most were on their way home for the weekend, FedEx announced a rule change for packages moving by its ground service. I have been predicting this change ever since UPS replaced it's "oversize rule" with a dimensional rule on January 1 of 2007.
Since that time ground packages that were three cubic feet or less (5184 cubic inches) were exempt from the application of the dimensional rule.
At the time, this was most likely the largest one time rate increase announcement on record.
That "by" or "gimme" of 5184 was strictly at the pleasure and generosity of the carriers and I have been on record advising shippers that when negotiating contracts to protect what they had because nothing prevented the carriers from lowering that gimme to two cubic feet, or one cubic foot, or eliminating the exemption entirely.
The announcement last night is just that. Effective January 1 2015 FedEx will be applying the dimensional rule on all packages.
The last change that was made in this regard was January 19 2009 when the the integrators modified the divisor to calculate the dimensional weight from 194 to 166.
So what does this change mean on a package? The extreme example is that three cubic foot (5184 cubic inch) package into which a shipper has placed a 5 pound item. Today that package is charged for 5 pounds and with this change that package should be charged for 32 pounds.
One cubic foot ( 12 x 12 x 12 or 1728 cubic inches) will be charges for 11 pounds ( or the actual, whichever is greater).
A shipper today normally has no dimensional data on packages that did not dim, so calculating what this might mean on your particular book of business and applying ones particular discount and minimum charge will be difficult. My guess is your Fedex rep can tell you exactly how much this is going to cost you based on your history, if they are pressed to get that answer.
This may take its place in parcel history as the largest price increase ( other than what fuel surcharges have brought in over time).
That leaves the last shoe to drop at some time in the future when the announcement is made that the divisor used will be adjusted from 166 to 139 to align with the international rule.
Shippers have seven months to navigate through this with their rep. I have no doubt that at some point in the future UPS will match this rule change because so much revenue is on the table. If they don't match now FedEx risks a mass exodus of shippers over to Big Brown, but UPS may play coy on this and wait until late November when they normally announce 2015 rate and rule changes to telegraph what they plan to do.
If the reader has significant ground business and you don't have a relationship with your UPS rep, now is the time to develop one.
You may be able to mitigate or postpone the application of this increase to your firm.
Since that time ground packages that were three cubic feet or less (5184 cubic inches) were exempt from the application of the dimensional rule.
At the time, this was most likely the largest one time rate increase announcement on record.
That "by" or "gimme" of 5184 was strictly at the pleasure and generosity of the carriers and I have been on record advising shippers that when negotiating contracts to protect what they had because nothing prevented the carriers from lowering that gimme to two cubic feet, or one cubic foot, or eliminating the exemption entirely.
The announcement last night is just that. Effective January 1 2015 FedEx will be applying the dimensional rule on all packages.
The last change that was made in this regard was January 19 2009 when the the integrators modified the divisor to calculate the dimensional weight from 194 to 166.
So what does this change mean on a package? The extreme example is that three cubic foot (5184 cubic inch) package into which a shipper has placed a 5 pound item. Today that package is charged for 5 pounds and with this change that package should be charged for 32 pounds.
One cubic foot ( 12 x 12 x 12 or 1728 cubic inches) will be charges for 11 pounds ( or the actual, whichever is greater).
A shipper today normally has no dimensional data on packages that did not dim, so calculating what this might mean on your particular book of business and applying ones particular discount and minimum charge will be difficult. My guess is your Fedex rep can tell you exactly how much this is going to cost you based on your history, if they are pressed to get that answer.
This may take its place in parcel history as the largest price increase ( other than what fuel surcharges have brought in over time).
That leaves the last shoe to drop at some time in the future when the announcement is made that the divisor used will be adjusted from 166 to 139 to align with the international rule.
Shippers have seven months to navigate through this with their rep. I have no doubt that at some point in the future UPS will match this rule change because so much revenue is on the table. If they don't match now FedEx risks a mass exodus of shippers over to Big Brown, but UPS may play coy on this and wait until late November when they normally announce 2015 rate and rule changes to telegraph what they plan to do.
If the reader has significant ground business and you don't have a relationship with your UPS rep, now is the time to develop one.
You may be able to mitigate or postpone the application of this increase to your firm.
