FedEx to shippers: Trim your
packaging or pay more to ship
Companies that use FedEx Corp. to deliver packages in the
United States may need to improve their packaging or face
a potentially significant increase in their shipping costs.
Built into FedEx’s recent announcement of a 3.9-percent
net increase in air tariff rates effective Jan. 3 is a change in
the amount of space that will be allocated to shipments it
accepts for delivery. The result is that shippers will be
allowed less cubic space for the same shipment weight at
current prices. Unless shippers add more weight to their
shipments or shrink a shipment’s cubic dimensions
through more efficient packaging, they will pay more for
FedEx to ship their goods.
The change will also affect shipments moving on FedEx
Ground, the company’s ground parcel operation. Rate
changes for FedEx Ground will be announced later this year,
the company has said. It is expected that UPS Inc., FedEx’s
chief rival, will adopt similar cubing changes for 2011.
At the heart of FedEx’s move is one of shipping’s oldest
maxims: that freight cubes out on a conveyance before it
weighs out, and that a less-dense item generally occupies a
higher volume of space relative to its actual weight. As a result,
some carriers charge more for shipments with higher “
dimensional weight” ratings because of their relatively low density.
To calculate a package’s density and determine what basis
to use for calculating freight charges, carriers multiply a
package’s length, width, and height, and divide it by a certain threshold of cubic centimeters per kilogram, usually
5,000. The calculation determines if a shipment’s cost
should be based on its dimensional weight—how a shipment cubes out—or its actual weight. The higher of the two
weights is used to calculate the shipping costs.
What FedEx has done is reduce the so-called volumetric
go figure …
25.2%
The percentage of 4,000 trucking executives surveyed
who identified compliance with the federal government’s new truck safety program—CSA 2010—as the
industry’s biggest challenge. CSA compliance ranked
second only to the health of the U.S. economy on the
list of top industry concerns.
SOURCE: AMERICAN TRANSPORTATION RESEARCH INSTITUTE
divisor—the amount of space allocated to a shipment—
from 194 to 166. In a recent analyst conference call, the
company estimated that about 8 percent of its domestic
packages would be exposed to higher shipping costs under
the new FedEx formula—unless shippers find a way to
either add more weight to their packages or shrink their
cube through better packaging methods.
Satish Jindel, president of Pittsburgh-based consultancy
SJ Consulting, applauded the move, saying it will give
FedEx customers an incentive to adopt leaner packaging.
Jindel noted that millions of items ranging from iPods to
cereal boxes are shipped with either too much packaging or
with wasteful excess air space.
The FedEx move “should be used by shippers as a way to
get their packaging under control,” Jindel said. “We have
overcubed our packages in this country.”
Other parcel consultants, however, view the move as a
back-door rate increase in a climate where the standard rate
adjustments will meet with resistance from shippers. Jerry
Hempstead, a long-time parcel executive and head of a con-
sultancy that bears his name, estimates that the change will
result in a $100 million increase in shipping costs. ;
—M.S.
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