It was recently reported at FedEx’s Q3 earnings call that beginning June 1, FedEx will be reducing its additional handling package length threshold from 60 inches down to 48 inches on all ground shipments. According to FedEx’s Mike Glenn, this change was made primarily as a way to leverage the costs and labor associated with the growing e-commerce volume.
The additional handling surcharge is assigned to a ground shipment based on a set of eight constraints. The first three are concerned specifically with the dimensions and weight of a package while the remaining five assess the methods of packaging. By analyzing past shipment data, one can quickly analyze how this change in thresholds might affect their specific package profile. This gives shippers a solid basis for decision making when it comes to reducing the cost impact of this change. In order to avoid any mid-year shocks, it’s important for shippers to analyze how this change in the additional handling threshold will impact their shipping costs.
Shippers of primarily small items such as apparel or pharmaceuticals will see little to no cost impact. However, shippers that offer a breadth of larger items such as furniture and various large hard goods have reason for concern. Assessing the cost impact, many of these shippers can expect a substantial cost increase that requires addressing. These shippers need to understand their options for mitigation and even assess the profitability of these SKUs if nothing can be done to eliminate the charge. Many larger SKUs are fulfilled by a vast network of dropship vendors for many retailers, which will make efforts to mitigate through packaging changes more time consuming and challenging.
As FedEx pointed out, this change has a direct correlation with the rise of e-commerce and the difficulties that come with it. Specifically, carriers want to counter the costs of shipping oddly-shaped or cumbersome packages, which, until recent years, would have been confined to brick and mortar stores. We’ve already seen changes in pricing and charges similar to these with the extinction of the DIM threshold in early 2015, and as we have seen many times before, any change made by one carrier will surely be emulated by the others. This means that shippers who are already heavily embedded in e-commerce or those who are seeking to make this transition will accomplish much by taking advantage of this early notice.
William Cordell is a Strategic Solutions Analyst at Green Mountain Technology. Green Mountain Technology provides a comprehensive solution that helps the largest parcel shippers optimize and manage their network. Learn more about Green Mountain Technology’s Parcel Spend Management solution at GreenMountainTechnology.com.