Combat DIM Weight Shipping Costs With Efficient Packaging

UPS and FedEx announced earlier this year that they would be transitioning to the much-maligned — and typically misunderstood — “DIM weight” package rating schedule, starting in January 2015. Dimensional weight is a billing technique which takes into account the length, width and height of a package. Under this new costing method, commonly referred to as “Dimming,” the cost of shipping a package will be based on the item’s volume — the amount of space it takes up on a truck — and not just its physical weight.
 
According to industry experts BirdDog Solutions and F. Curtis Barry & Company, all shippers will be impacted by this costing change, but the resulting price increase will most affect companies shipping lightweight residential and commercial packages. Early estimates are that 65 to 75 percent of all packages shipped via the two largest parcel carriers — UPS and FedEx — will be negatively impacted by the broader application of DIM weight costing.   
 
From the carriers’ perspective, this new costing method makes sense. Larger, lighter packages take up space and trucks tend to be “cubed” out long before they reach their maximum weight capacity. Charging for packaging volume instead of weight is intended to reflect this higher cost of “cube” vs. weight.
           

With the DIM weight deadline fast approaching, many companies are understandably confused.

Confused not only about the application of the new costing method, but also about what they can do to mitigate the impact of DIM weight costing on their shipping costs. The expanded DIM weight process requires more complex calculations and effort to determine package shipping costs. No longer can we simply put the package on a scale and enter the physical weight in our shipping software, then send it out for delivery.  Shipping an item under DIM weight costing rules requires several additional calculations— first determining the cubic footprint of the package, and then applying the “DIM weight factor” to the resulting cubic foot value, finally reaching the “DIM weight” of the package. 

 
Packaging has always played a vital role in protecting items in shipment. Today, it may be more important than ever to clearly identify the impact of various packaging components — carton, void fill, and cushioning material — on the actual shipping cost of a package. Through the years, many companies transitioned to a more streamlined assortment of cartons, believing it was more cost-effective to purchase fewer cartons in larger volumes, adding void fill to stabilize and protect those items which didn’t quite fit a carton. In the world of weight-based costing, the underlying strategy was fundamentally sound; however, the rules have changed. The transition to costing based on package size/volume has turned a once sound strategy into one fraught with potential negative impact – and created a new opportunity to analyze both packaging methods and materials.
 
Faced with the prospect of significantly higher shipping costs under this new methodology, companies must completely rethink their approach to how they package items for shipment, focusing on more “efficient” packaging while maintaining proper protection for the product being shipped. Using a “one size fits all” approach to product packaging may have been a good idea in the past, but it is a guarantee of higher than necessary shipping costs in the future.  For many organizations, the task may be daunting; however, their efforts will likely pay off in substantially reduced shipping costs, offsetting the possibility of slightly higher costs of packaging materials and resulting in increased profitability.
 
In the end, we really don’t have a choice. January 2015 is not far off and DIM weight charges will fast become the largest component of small package shipping costs. The bad news is that this change is inevitable, and shipping costs will increase. The good news is that we can do something now to minimize the impact that “Dimming” will have on our bottom line.

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