transportationreport

Dim weight pricing— One year on

How have parcel and less-than-truckload shippers responded to the switch to “dim weight” pricing? According to a recent survey, the answer depends on how well they understand the new rating scheme.

PARCEL AND LTL SHIPPERS THAT UNDERstand the significance of moves by the nation’s two biggest carriers to apply “dimensional weight” pricing to all their U.S. ground shipments are the ones trying hardest to blunt its impact, a sign that the pricing change should be taken seriously by all shippers, according to a survey recently conducted by Niagara University, consultancy Supply Chain Optimizers, and DC VELOCITY.

The survey, taken of 146 parcel and less-than-truckload (LTL) shippers, found that about half had a good understanding of so-called “dim weight” pricing, under which delivery rates are based on a parcel’s dimensions rather than its actual weight. In mid-2014, Memphis, Tenn.-based FedEx Corp. and Atlanta-based UPS Inc. decided to abandon actual-weight pricing on domestic ground shipments measuring three cubic feet or less and adopt dimensional weight pricing on those packages, which make up a large portion of their ground traffic. (Dimensional weight pricing on ground shipments measuring more than three cubic feet has been in effect for several years.)

Aware of the impact of the new policies, about 46 percent of the better-informed shippers have already negotiated pricing adjustments with their carriers and have made changes in their packaging processes to shrink parcel cube and avoid a significant rate increase that would accompany the change in the carrier formula, according to the survey. An additional 30 percent said they had pursued packaging changes without negotiating rate adjustments, according to the findings. Seasoned shippers were also more likely to use computer systems to help select the optimum box size, as well as to install “cut to size” systems where boxes are custom-formed based on their contents, the survey found.

By contrast, more than half of the shippers who
said they lacked a strong understanding of the
pricing scheme had taken no action as of the time
of the study, and only 20 percent of those respon-
dents had made any adjustments to their pack-
aging, according to survey data. In all, about 27 P H O
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