Size matters! Here comes dimensional weights

by | Nov 19, 2014 | 3PLs, Omnichannel

By Tod Yazdi, TAGG Logistics

Dimensional Weight Pricing on EVERY Shipment Represents a Fundamental Change in the Way Internet Retailers Ship

Have you ever received a large box from Amazon with only a few items in it? You probably didn’t think much of it. It is easy to understand why the box size did not match what you purchased. You can order almost anything on Amazon, from toilet paper to watches. Trying to find a box that fits exactly right with infinite order variations would be time consuming and expensive. So the packer, or computer system, evaluates the order and picks the best box, erring on the side of picking too big a box because you would hate to pack everything out and not be able to fit that last item. Then the packer simply fills the extra space with dunnage. After all, it doesn’t really matter how big the box is, it matters more how much it weighs. It’s the weight that determines shipping price, and air pillows, bubble wrap and peanuts weigh next to nothing.

This line of thinking is what has guided the e-commerce fulfillment industry when it comes to packaging. Weight drives shipping price, and packaging needs to protect product but equally as important, be fast and efficient. The result, pick a box that is larger than necessary, void fill the extra space and get it out the door. Starting January 2015, this fundamental process of e-commerce fulfillment is going to have to change. FedEx and UPS are moving to dimensional pricing for every ground package. No longer is weight the singular factor when determining shipping price, box dimension becomes equally as important. This new pricing is expected to impact nearly over 30% of all ground shipments and will be major driver of change for the industry.

Background of Dimensional Weight

Dimensional weight was put in place to ensure that carrier is getting paid appropriately for the space the packages take up on its planes or trucks. While FedEx and UPS are introducingDimensional Weight example a new pricing structure in 2015, the concept of dimensional weight has been around for a while. Since 2007, both have used the tool of volumetric division, where a parcel’s cube is divided by a preset divisor, to price packages based not on their weight, but how much space or ‘cube’ they occupy on a delivery truck. This pricing, based on volume, was used for larger packages only, packages over 3 cubic feet. In 2011, both shrunk that divisor to make it even costlier to ship lightweight, bulky packages. The reasoning is simple, lets say you go to your favorite table tennis website and order 3 cases of Ping-Pong balls. The internet retailer puts the 3 cases in a large shipping box, puts some air pillow void fill in the box to make them fit snug, and sends them on their way. The box size might be 12 inches x 12 inches x 12 inches, but only weight 1 pound. Ping-Pong balls are light. So the carrier gets a large box that weighs next to nothing. If the price of that shipment was based solely on weight, it would be very cheap, but it would still take up significant room on the delivery truck. Therefore, the carriers figured out they need to charge for the dimension, or volume, which the large, lightweight package occupies.

With e-commerce continuing its rapid growth, the Internet has become a sales channel for items previously reserved for purchase at brick-and-mortar stores. The original dimensional pricing set forth in 2007 was meant to address on-line companies shipping large items like furniture. Today, e-commerce retailers are shipping everything. Amazon and other sites are even pushing the most fundamental of household items through this channel – towels, diapers even toilet paper. This growth has continued to put pressure on FedEx and UPS to make such shipments profitable, resulting in the new pricing structure.

How it Works

The existing dimensional weight pricing only applies to shipments where the box size exceeds 3 cubic feet. Beginning in 2015, EVERY ground package will be charged based on billable weight, which will be the greater of actual weight or dimensional weight.

Actual Weight is the scaled weight of the package in pounds rounded up to the nearest pound. Let’s take a theoretical e-commerce shipment of vitamins and supplements. The package weighs 5.3 lbs. on the scale, and the shipment will be billed based on an actual weight of 6 lbs.

Dimensional weights are determined by using length x width x height of the box divided by the applicable dimensional factor. Unless a shipper’s agreement calls for a modified dimensional factor, then UPS and FedEx both use 166 for all domestic shipments. Our e-commerce order of vitamins and supplements is packed in a box measuring 12 inches x 10 inches x 10 inches or 1,200 cubic inches. With the old pricing model, anything fewer than 3 cubic feet, or 5,184 cubic inches would not be subject to dimensional weight. So our box, at 1,200 cubic inches would not be affected. Under the new pricing model going into effect, this shipment is subject to dimensional weight.

Back to our box of vitamins and supplements, the cube is then divided by the dimensional factor to get dimensional weight. 1,200 cubic inches divided by 166 equals 7.2. Therefore the dimensional weight would equal 8 lbs.

Billable Weight is the greater of actual weight and dimensional weights. Our order which currently would get billed as a 6 lbs. shipment, because of the size of the box, would get billed as 8 lbs. under the new rule, a 25% increase in billable weight, resulting in a corresponding increase in shipping cost.

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SPS Commerce Blog Team

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