Impact of UPS and FedEx Dimensional Pricing Changes
In my observation, the vast majority of volume parcel shippers have tried to mitigate the impact of the 2015 dimensional pricing changes through a number of strategies. They include the following:
- carrier contract negotiations;
- diverting freight to regional carriers and the U.S. Postal Service that might offer higher DIM divisors and thresholds than the national private carriers;
- changing transportation mode to DIM-friendly services (e.g., FedEx Home Delivery to FedEx SmartPost);
- reducing box sizes and minimizing empty fill to decrease dimensional shipping costs;
- moving to polybags for lighter, smaller packages; and
- offering online shoppers free shipping only to retail stores — rather than to the customer’s residence — to consolidate multiple orders to a single commercial shipment.
It’s also my understanding that with very few exceptions, shippers have been unsuccessful negotiating with FedEx and UPS to grandfather the 5184 cubic inch exception (three cubic feet). Rather, nearly all shippers lost the exception, although many were able to improve their DIM factor, thereby mitigating – but not entirely offsetting – the 2015 DIM changes.
I’ve also heard some shippers were able to negotiate a break point whereby packages under three cubic feet receive a larger DIM divisor than packages exceeding the three cubic foot threshold, which were already subject to the DIM prior to 2015.
As a national freight audit company, Shipware queried its shipping database to identify any changes in billed weight — which is where most DIM increases would show up in a carrier invoice — over actual or entered weight between 2014 and 2015 when the new dimensional pricing took place.
The survey yielded extremely interesting results. It appears that FedEx may be enjoying greater dimensional pricing yields than UPS. In 2014, FedEx Ground billed weight was 9.6 percent higher than actual weight. However, in the billed weight for this year, FedEx Ground increased 28.9 percent over actual weight.
FedEx Home Delivery illustrates an even greater increase as billed weight was 11.6 percent higher than actual weight in 2014, and 45.1 percent higher in 2015.
UPS also showed increases, although significantly less dramatic. In 2014, billed weight for UPS Ground (all services) was 12.8 percent higher than actual weight, and 16.4 percent higher in 2015.
Why the discrepancies between UPS and FedEx? Based on the data, it’s apparent that residential packages are more frequently impacted by 2015 dimensional pricing than commercial shipments. As a percentage of overall ground deliveries, UPS still handles significantly more commercial packages than residential. Furthermore, it could be that shippers have had an easier time negotiating DIM concessions with UPS than FedEx.
Finally, Shipware points out that results are based on its unique customer blend, and may not be reflective of actual global results for the parcel shipping giants.
As always, shippers that need help measuring dimensional cost increases, negotiating best-in-class parcel carrier contracts, or other strategies to reduce shipping costs are invited to contact me at firstname.lastname@example.org. Good luck!
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies. Rob has helped some of the world’s most recognizable brands reduce parcel shipping costs an average of 25 percent through contract negotiations, rate benchmarking, modal optimization, invoice audit and other savings vehicles. A cum laude graduate of UCLA, Rob has 20 years of transportation industry experience, including executive positions at DHL and Stamps.com, in addition to his work as an outside consultant since 2001.