Dimensional weight (also referred to as DIM weight, volumetric weight, or cubed weight) is the relationship of shipping box size to actual weight of the unit. Shipment pricing based on dimensional weight has been applied in air freight for many years because the amount of space utilized by a shipment was a bigger cost factor to airlines than the actual weight of the shipment. Think about something like ping pong balls, which weigh virtually nothing no matter how many are shipped.
Essentially, dimensional weight establishes a density factor that defines the ratio of shipping box size to its minimum weight.
For example, parcel carrier giants UPS and FedEx use a density factor of 12 pounds per cubic foot. This, in turn, means that a box measuring one foot on all three dimensions must weigh a minimum of 12 pounds [1 x 1 x 1 = 1 x 12] while a box measuring two feet on all three dimensions will have a minimum weight of 96 pounds [2 x 2 x 2 = 8 x 12] and so forth. If the actual box weight is under the established threshold, the box will be billed at the minimum; if actual weight exceeds the minimum, actual weight will drive the freight cost. In all instances, the parcel carrier will apply the higher cost.
History of DIM Weight
The application of dimensional weight migrated to ground parcel in 2013, at which time major parcel carriers set the target density at nine pounds per cubic foot. In 2015, target density was increased to 10 pounds per cubic foot, and in 2016, it was raised again to 12, where it sits right now. Every time the density factor was increased, light-density shipments endured a price hike.
Many parcel shippers have complained that the application of dimensional weight is just a money grab by the parcel carriers. On the other hand, carriers say they are merely attempting to apply true cost to their operations so more efficient shippers will pay less. It doesn’t take much math to compute the fact that DIM weight impact has increased by 33% in the past six years. With this kind of aggressive cost increase, it is no wonder that some perceive the pricing change as unfair.
There is no doubt that the explosion of e-commerce sales changed the cost factors for carriers handling ground parcel shipments. Because dimensional weight was already being applied to air shipments, carriers were protected from those inefficient shipments. On ground parcel operations, major carriers had always used weight as a cost base. When e-commerce brought in more and more light-density packages (many going to residential destinations), using weight as a cost base no longer made sense, hence the introduction of dimensional weight into the ground parcel segment.
Up until now, shippers have had some relief on DIM weight pricing, as USPS had not implemented this pricing. However, late last year, the Postal Service announced that they were following other national parcel carriers and would begin charging for DIM weight on June 23 (at least this advanced notion gave shippers a chance to prepare for the change). Concurrently, USPS has also announced that their DIM weight factor will be 166, equivalent to 10 pounds per cubic foot, which is where the big parcel carriers were in 2015. So, while there will be cost pain for shippers of light-density boxes, it will not be as bad as UPS and FedEx, which currently use a DIM factor of 139, equal to 12 pounds per cubic foot.
The Importance of Efficiency
While inefficient shippers are not fans of dimensional weight pricing, companies that are able to achieve density factors above the established threshold have not been impacted by DIM weight pricing. There are two factors which drive dimensional weight pricing:
• The basic nature of the products being shipped: items composed of dense material such as glass, metal, stone, or rubber should easily exceed the density threshold.
• The efficiency of packaging (how much filler and air is contained in the shipping case).
While an item such as a hardcover book is inherently dense and should not be impacted by dimensional weight pricing, if it is shipped in a box triple the size of the book, the density factor may be so low that dimensional weight pricing will apply. Thus, the basic message being sent by parcel carriers to their shippers is that packaging efficiency has direct correlation to transportation cost.
Feedback from small-package carriers and industry analysts indicates that many shippers have done little to change their shipping practices. Rather, they have elected to just absorb the higher freight cost associated with DIM weight pricing and to pass the cost on to their customers whenever they can. It is very likely that this lack of progress is due to shippers not knowing what specific steps to take to reduce the impact of DIM weight pricing.
Unfortunately, many managers originally thought they could just negotiate their way out of this pricing. Others tried simplistic but ineffective changes, such as adding one or two additional outbound box sizes, asking box suppliers for advice [note: DIM weight is a freight cost issue, not a box construction problem], or using internal staff to run some kind of mathematical analysis. One entry-level packaging engineer who called me explained that she was comparing the internal dimensions of a box against the calculated cube of the product in each order. While the latter approach is on the right path, the optimal process entails millions of calculations that require a computer program to make any headway.
DIM Weight in LTL
Very recently, application of dimensional weight pricing has also leaked into the less-than-truckload sector. The freight classes defined by national motor freight classification hearken back to the 1930s, when Franklin D. Roosevelt was President. The factors considered in assigning a National Motor Freight Classification (NMFC) freight class to a specific product are:
• Product density
• Product value and susceptibility to damage
• Product handling characteristics; hard-to-handle items such as a mattress will get a higher rate
• Product stowability characteristics (how easily the item can be loaded into a truck and how well it fits with other products; for example, a stepladder, being lengthy with open gaps, will get a higher rate)
The logic gap that always existed in the NMFC freight classification system is that it is based on the product itself rather than how the product is packaged, so when a high-density product, such as a hardcover book, was shipped in an excessively large box, the shipper still got benefit of the lower freight class while the carrier endured the brunt of inefficient packaging. When viewed in this light, one has to conclude that this is inherently unfair: the shipper who caused the problem suffers no adverse consequence, while the carrier who has no control over the packaging bears the negative impact. While the NMFC had a stated density for each freight class, it was impractical for carriers to measure it, and confronting customers about the issue was bad for business, so everyone just ignored the problem.
Back to Basics
E-commerce has caused a radical change, leading all parcel and LTL carriers to recognize the impact of density on shipping efficiency. What many have not realized is that the application of dimensional weight has served to shift responsibility and the cost of inefficient packaging from the carrier to the shipper because transportation cost is now based and invoiced on the freight class of the entire box and not just the product itself. While no announcement was made about this change in responsibility, this is one of the biggest changes that has ever impacted NMFC freight classes.
How many shippers do you suppose added to their internal staff packaging engineers to simultaneously weigh and measure an entire pallet load of freight to deal with this added responsibility? I visit a lot of companies in my travels and have yet to encounter any business that has beefed up its internal packaging capability in response to this responsibility shift. On the contrary, many large corporations had, at one time, significant staffing to work on packaging, but in recent years, most of them have cut back on packaging engineers in cost reduction efforts.
One of the major drivers of DIM weight pricing was the development of dimensioners — measuring equipment that can simultaneously weigh, measure size, and calculate density of a shipping case or even an entire pallet of freight. Dimensioners gave carriers an easy-to-use tool to measure density. Like parcel carriers, LTL truckers are quickly moving to DIM weight application. One 3PL told us that all of their LTL shipments are now getting DIM weight pricing. Most LTL carriers have invested in pallet dimensioners, so even if the carrier is not yet applying DIM weight pricing, the equipment is being used to evaluate pricing accuracy and identify inefficient shippers. Either path will result in higher rates for companies shipping excess void.
LTL shippers actually get a double hit on DIM weight because pricing is based on both their ability to get good cube utilization on individual shipping cases and also on their ability to stack those boxes efficiently on a pallet. Loading voids, pallet overhang, or underhang all now work to the carrier’s advantage in pricing.
So we are back to logistics basics: while the ability to increase the density of a specific product is limited, if not impossible, efficient packaging and pallet stacking should be in the scope of every shipper. Those companies that can package products and stack pallets better will see their efforts rewarded through lower freight costs. Laggards will continue to see their competitive positions fading due to inefficiency and higher costs.
Jack Ampuja is President, E-commerce Optimizers and Executive in Residence, Niagara University. Visit www.e-commerceoptimizers.com for more information.
This article originally appeared in the March/April, 2019 issue of PARCEL.