Three Ways to Plan for Increased Shipping Costs

In 2017, both FedEx and UPS will be implementing a major change in the dimensional weight calculation that could increase shipping costs for companies that use their services. FedEx and UPS will change their dimensional weight divisor on January 2 and January 8, respectively.  Additionally, both companies will start assessing fuel surcharges on a weekly basis on February 6.

Both companies will begin calculating dimensional weight using a divisor of 139 instead of 166, which will increase the box’s dimensional weight and overall pricing accordingly. The latest adjustment is a continuation of a 5-year trend in which the dimensional divisor has dropped from 194 to 166 to 139. Additionally, the latest rules apply to smaller boxes, which were previously exempt. Companies that ship products that are light-weight but large-sized will be charged for the product’s box size, not the product’s actual weight.

While the dimensional weight change will result in increased shipping costs for most companies and the UPS fuel surcharge change may impact how you collect shipping cost from your customers, there are a couple of ways to mitigate the impact to your company:

Readjust your box sizes

If your company ships products that are multiple sizes and you previously purchased two box sizes to ship your products, it may make sense, at least from a shipping cost perspective, to consider different box sizes, depending on the scale of what products you ship.  For example, if you normally use 10,000 boxes per month and they are divided between 5,000 large boxes and 5,000 medium boxes, but enough of your products could fit into a smaller-dimensioned box, you might find cost savings by switching to 5,000 large boxes, 2,500 medium boxes and 2,500 small boxes. However, if only 100 of the 10,000 products that you ship would fit into a smaller box, there wouldn’t be enough scale to financially justify using a smaller box.  Of course, adding a new carton size may impact the price of the other sizes as the volume is spread out over more boxes. So, it is important to consider the costs of packaging material and shipping when evaluating this option.

Revisit your customers’ shipping and handling fees

If you normally include UPS monthly fuel surcharge in your customers’ shipping and handling fees, you should restructure how you calculate or capture the fuel surcharge to reflect weekly fluctuations and include this in shipping and handling fees going forward.

Renegotiate your shipping contract

This may also be an opportune time to review your current contract with UPS or FedEx. You may be able to renegotiate more favorable dimensional weight divisors or you may be able to find areas where you can adjust other service discounts to mitigate any pending cost increases. It could also be wise to consult a third party to review your current contract and make cost saving suggestions. 

  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client
  • client