newsworthy
FedEx Corp. appears to be generating a handsome revenue
stream from its decision last September to change the way
it calculates shipping charges for low-density packages.
Last fall, FedEx and rival UPS Inc. announced a change in
their dimensional weight (dim weight) pricing formula that
reduced the “volumetric divisor” mechanism used to calculate the amount of space allocated to shipments hauled by
each carrier. The result was that shippers would be permit-ted less cubic capacity for the same shipment weight at current prices. Shippers whose packages didn’t meet the new
standards would face near 20-percent rate hikes on domestic and international services unless they found ways to
shrink their shipments’ cubic dimensions or increase their
density.
At a company conference last year, T. Michael Glenn,
executive vice president, market development and corporate communications and the company’s number-two executive behind Chairman, President, and CEO Frederick W.
Smith, forecast that in its 2011 fiscal year, which ended May
31, the company would generate $100 million in additional
domestic revenue from what amounted to a 17-percent rate
increase on U.S. traffic. This follows a similar revenue boost
to its international export business in fiscal year 2010 from
a 19-percent increase based on the same formula, according
to a slide obtained by DC VELOCITY from Glenn’s presentation. The slide did not show the impact of the pricing
Changes in “dim weight” formula proving
a windfall for parcel carriers
changes on 2010 domestic revenue.
The slide highlighting the changes in dimensional weight
pricing and their impact on the company’s top line was
titled, not surprisingly, “Brightening Our DIM View.”
Susan L. Rosenberg, a UPS spokeswoman, declined com-
ment on the impact of the pricing changes on the carrier’s
revenue stream. Jerry Hempstead, president of Orlando,
Fla.-based Hempstead Consulting, said it’s likely UPS gen-
erated even more revenue than FedEx because it handles
larger package volumes than its rival.
When the changes were announced last full, some analysts said it would ultimately benefit shippers by motivating
them to reduce or eliminate wasteful packaging. However,
Hempstead said there was virtually no way that affected
shippers could significantly revamp their packaging in time
to offset the pricing adjustments. The carriers also knew
that by changing the formula on current customers, they
could make the changes stick unless shippers complained
loudly enough to make the carriers consider backing off,
Hempstead said.
“The change of the ‘dim’ rule was pure yield management” on the carriers’ part, according to Hempstead. “It was
something they could do to people [who] had existing contracts to get substantial additional revenue, and it’s working
better than FedEx or UPS had hoped,” he added.
—M.S.
Rite-Hite, a maker of loading dock equipment, industrial
doors, safety barriers, and fans, has launched an all-new
mobile website. The site, http://m.ritehite.com/, is designed
to provide mobile customers with quick access to product
information. … NFI has acquired The Gilbert Co.’s West
Coast warehouse assets and related contracts. The acquisition includes six facilities in California’s Inland Empire. …
Pitt Ohio has upgraded its mobile iPhone application to
version 3.0 to give its customers quick access to information
on their shipments. … TMC, a division of C.H. Robinson
Worldwide Inc., has opened a global control tower center
in Shanghai, China. Together with the company’s control
tower in Mumbai, India, the Shanghai tower will provide
TMC’s clients with Managed TMS and control tower services in Asia. … Asset-based logistics company RWI
Transportation has become a corporate member of the
non-profit organization Women in Trucking Inc. …
Descartes Systems Group, a developer of logistics technol-
short takes
ogy, has acquired privately held software specialist Telargo
Inc. … Supply chain software specialist LLamasoft Inc. is
opening a new office in Shanghai, China. … Geodis Wilson,
a freight management company, recently acquired the
domestic transportation specialist One Source Logistics to
support its five-year U.S. expansion plans. … Logistics service provider Swan & Hercules Global Logistics has acquired
GP Logistics Inc., an ocean and air service provider serving
the Australia-New Zealand market. … Crown Equipment
Corp. has developed a list of key ways managers can utilize
lift-truck fleet and operator information to reduce costs
and improve operations. The full list can be found on the
company’s website, http://news.crown.com/?p=1104. …
Third-party logistics service provider Nexus has launched a
new website at www.nexusdistribution.com. In conjunction
with the site launch, Nexus also updated its logo. … 3PD, a
last-mile logistics service provider, has celebrated its 10th
anniversary.
