As of January 1st, 2015 both Fedex and UPS have started pricing shipments based on ‘Dimensional Weight’ not just the actual weight of the package. The dimensional weight is the package density which takes into account its height, length and width in addition to its actual weight. Whichever is greater is going to be the package billable weight!
If you are shipping products with a lot of packaging around the items, in a larger box than is really necessary, you’ll be charged more for your shipments this year.
This change makes a big impact for online retailers selling and shipping direct to customers, but it’s also worth verifying that the items you distribute are packaged in the most efficient manner possible to keep shipping costs low.
The new policy is now in effect for all ground shipments. Check the specific terms for your company in your carrier contract. Large, but light weight products will experience the major impact of the price increase. The infographic on the right gives some good price comparisons on common items.
If you ship case quantities already packaged efficiently by the manufacturer, then you can probably ignore the change. But, if you repackage, ship combined kits or ship small quantities take a quick look at the size of your shipping boxes in comparison to the products.
Do you need to change the shipping boxes sizes you keep in stock? Consider if a box inventory change will cost you more and offset any shipping cost savings?
Will your automated warehouse systems be able to handle these new box sizes? Think about your picking lines and package sealers.
The background reason Fedex and UPS are changing their price policy is because their delivery trucks are filling up (cubing out) with fewer packages per trip (because of the use of large dimension boxes) before they reach their maximum load weight. They want to incentivize the shipping community to use the smallest size possible box for the items. And, of course, increase their profits per delivery route.
Large boxes and excess packaging may also be effecting your warehouse storage costs!
Your warehouse costs the business a certain amount per square foot. Are the products you stock taking up more space than they should because of their packaging? Can you use your floor and shelf space more economically and carry a wider range of items (one of the primary ways to combat disintermediation)?
Perform some rapid analysis by:
- Starting with the items in the largest boxes in the highest number of your pallet locations – do they have excess packaging?
If so, unpack and stack to reduce the storage foot print.
- Are your pallets stacked effectively and consolidated where possible?
- Are highest volume items packed efficiently?
- Next, which of your product shipments are sent out in the largest boxes?
- Can the packaging or total size be decreased?
Review the data in your Enterprise Resource Planning system for inventory items which may be costing you more this year in shipping or warehousing costs. Does your inventory system include the item dimensions? If not, a project to add this detail to your data will create the ability to perform more rapid analysis to reduce future shipping and warehousing costs.
Contact the Distribution 20/20 team at Socius for help with improving your ERP Inventory data and analytics. They can help your distribution business reduce inventory management costs!