UPS recently announced that it was following FedEx in applying DIM (dimensional) weighing to all ground shipments, not just large packages. While the two giants both divulged these changes, they did so quietly, with the hope that this wouldn't bubble up as big news. However, industry analysts and consultants have been stirring the pot, and word on the street is that this has the potential to result in the shipping industry's most dramatic cost increase in the last 15 years.
What are most important to shippers in the DIM conversation are three issues: what exactly does this mean, how will this affect domestic shippers, and what can shippers do to protect themselves?
What It Means
Effective at the end of this year, UPS and FedEx will be charging for dimensional weight based on package size regardless of the weight of the parcel.
Here's what the DIM formula looks like:
• L x W x H = DIM Weight
• Divided by:
• DIM Divisor
While 166 is the DIM divisor for UPS and FedEx, this number may vary among carriers.
How It Affects Shippers
The changes are expected to affect about one-third of all parcels, and the cost hikes can be substantial. How substantial? It is estimated that the increases may translate into revenue spikes totaling hundreds of millions of dollars for FedEx and UPS.
Those shippers with the most at stake may be e-commerce retailers, but shippers in all sectors should consider the ramifications and the fact that consumers may be on the tab to pick up the differential.
What Shippers Can Do
Most important is the need is for shippers to become aware of what's involved with these changes and be proactive in mitigating the cost increases before they take effect.
Other tips for shippers include:
• Determine your DIM weight vs. actual weight. Note that shippers can generally calculate this manually rather than investing in automated dimensioning systems that can cost thousands of dollars.
• Secure packages of different sizes so employees can choose the proper box for the shipments.
• Educate employees to determine accurate DIM weight and ensure the appropriate and safe packing of boxes. Employees should round off numbers to the nearest significant digit.
• Strive for smaller and denser packages, as appropriate.
• Meet with carriers and determine projected cost increases upfront.
• Ask carriers for their DIM divisor and compare with other carriers.
• Expect carrier transparency, including a review of billing methods that reflect these and other charges (note that UPS is notorious for difficult-to-decipher billing).
• Negotiate!
• Look for carrier alternatives.
Consider the Regional Advantage
Overall, shippers should plan ahead to reduce the chance for surprises.
They should remember that, as always, regional carriers may be the best alternative because they are more flexible than the giants when it comes to customizing contracts and negotiating for the best terms.
So, our overall advice to shippers is that they should take this opportunity to get smart about DIM and think "outside the box."
Ted Kauffman is the Chairman of Eastern Connection. Founded in 1983, Eastern Connection, one of the largest regional small-package overnight carriers on the East Coast, covers over 6,800 zip codes in the Northeast. The company, which has 16 facilities, is open 7 days a week and 365 days a year. Services include Next-Day Ground, Priority Overnight, Same-Day, Logistics & Warehousing, Trucking, Medical Logistics, and Expedited Mail. For more information, visitwww.easternconnection.com.
What are most important to shippers in the DIM conversation are three issues: what exactly does this mean, how will this affect domestic shippers, and what can shippers do to protect themselves?
What It Means
Effective at the end of this year, UPS and FedEx will be charging for dimensional weight based on package size regardless of the weight of the parcel.
Here's what the DIM formula looks like:
• L x W x H = DIM Weight
• Divided by:
• DIM Divisor
While 166 is the DIM divisor for UPS and FedEx, this number may vary among carriers.
How It Affects Shippers
The changes are expected to affect about one-third of all parcels, and the cost hikes can be substantial. How substantial? It is estimated that the increases may translate into revenue spikes totaling hundreds of millions of dollars for FedEx and UPS.
Those shippers with the most at stake may be e-commerce retailers, but shippers in all sectors should consider the ramifications and the fact that consumers may be on the tab to pick up the differential.
What Shippers Can Do
Most important is the need is for shippers to become aware of what's involved with these changes and be proactive in mitigating the cost increases before they take effect.
Other tips for shippers include:
• Determine your DIM weight vs. actual weight. Note that shippers can generally calculate this manually rather than investing in automated dimensioning systems that can cost thousands of dollars.
• Secure packages of different sizes so employees can choose the proper box for the shipments.
• Educate employees to determine accurate DIM weight and ensure the appropriate and safe packing of boxes. Employees should round off numbers to the nearest significant digit.
• Strive for smaller and denser packages, as appropriate.
• Meet with carriers and determine projected cost increases upfront.
• Ask carriers for their DIM divisor and compare with other carriers.
• Expect carrier transparency, including a review of billing methods that reflect these and other charges (note that UPS is notorious for difficult-to-decipher billing).
• Negotiate!
• Look for carrier alternatives.
Consider the Regional Advantage
Overall, shippers should plan ahead to reduce the chance for surprises.
They should remember that, as always, regional carriers may be the best alternative because they are more flexible than the giants when it comes to customizing contracts and negotiating for the best terms.
So, our overall advice to shippers is that they should take this opportunity to get smart about DIM and think "outside the box."
Ted Kauffman is the Chairman of Eastern Connection. Founded in 1983, Eastern Connection, one of the largest regional small-package overnight carriers on the East Coast, covers over 6,800 zip codes in the Northeast. The company, which has 16 facilities, is open 7 days a week and 365 days a year. Services include Next-Day Ground, Priority Overnight, Same-Day, Logistics & Warehousing, Trucking, Medical Logistics, and Expedited Mail. For more information, visitwww.easternconnection.com.
