Attention FedEx and UPS Ground Shippers: New Carrier Policies Amount to Largest Rate Increase Ever!
The table below shows the new dimensional weight calculations applied to the 25 most common box sizes sold in the U.S. The first three box sizes result in a dimensional weight of 1 pound — the absolute minimum weight — and therefore aren't impacted by the change. However, the next 15 box sizes (highlighted in yellow) will be subject to the new dimensional policies in 2015. The remaining seven box sizes — those at or above 5,184 cubic inches — are already impacted by the current dimensional rate calculation, and as such aren't incrementally impacted by the announced change.
Some shippers are making the mistake of thinking they're not affected because they've negotiated nonstandard dimensional divisor greater than 166. While many volume shippers have contract dimensional divisors (greater than the standard 166), few have negotiated specific cubic thresholds written into their contracts. A shipper's carrier contract must specify a three cubic foot (or other such exception), and such exceptions are rare. Shipware estimates that fewer than 5 percent of parcel pricing agreements for volume shippers include specific cubic threshold exceptions.
Like FedEx, UPS made the announcement several months in advance of the actual increase knowing that its biggest customers will want to negotiate, and that obviously takes time. UPS's announcement is significantly more impactful than FedEx's, as it does three times the ground volume as FedEx. When fully deployed, Shipware estimates $380 million/year to the upside for UPS, and $180 million/year for FedEx.
Neither carrier will be able to implement the new policy with ALL customers right away. What we've been seeing is a multiyear approach to implementation. For example, no changes to the 5,184 cubic inch DIM exception in year one; year two = DIM exception decreases to 4,000; year three = 3000; year four = no DIM exception. For 2015, Shipware forecasts the carriers will get about half the potential revenue windfall.
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.