One of the most confusing and least understood aspects of parcel pricing is Dimensional Weight Pricing. This pricing component and its applicable surcharges can have a significant impact on your costs if you do not understand it or how it affects your package. A clear understanding of this is even more important after UPS and FedEx changed their Ground Dimensional Weight pricing to match their Express Pricing in January of 2007.
In the simplest terms, Dimensional Weight Pricing reflects package density, which is the amount of space a package takes up in relation to its actual weight in order to cover carriers lost revenue due to a higher cube. There are three components of this pricing today: Dimensional Weight, Large Package Surcharges and Over Maximum Limits Charge/Unauthorized Oversize Surcharges.
To understand if Dimensional Weight charges and its applicable surcharges apply to you, the first step is to determine the method of shipment and carrier. DHL, UPS and FedEx all use the same dimensional rating logic for express shipments. UPS and FedEx use the same dimensional rating logic for Ground, but DHL remains on legacy oversize (OS) logic with a change in late 2007. Once this has been determined, you need to calculate the cubic size of the package. To calculate your cubic size for express shipments, measure length by width by height. To determine the dimensional weight, divide the cubic size by the DIM divisor (the standard for Domestic is 194). So, if your box is 19 x 10 x 10, your cubic size is 1900, and the dimensional weight is 9.8 lbs. If your box is 30 X 20 X 10, your cubic size is 6,000, and the dimensional weight is 30.9 lbs. Once this is done, the higher of the actual weight or Dim weight will apply.
For ground shipments with FedEx and UPS, there is a threshold added to the calculation. So, you still calculate your cubic size, and if it is larger than 5,184 (standard threshold) you
divide it by 194, which gives you the dimensional weight. If the cubic size is less than 5184, you use the actual weight.
Examples of this would be:
Box1 weighs 20 lbs. and has dimensions of 17 x 17 x 17. The cubic size (17 x 17 x 17) is 4,913. The dimensional weight (4,913 / 194) is 25.3 lbs. However, because the cubic size falls below the 5,184 threshold, dimensional weighting does not apply. Therefore, the package will be rated at the actual weight of 20 lbs.
- Box 2 weighs 25 lbs. and has dimensions of 24 x 16 x 16. The cubic size (24 x 16 x 16) is 6,144. The dimensional weight (6,144 / 194) is 31.7 lbs. As the cubic size exceeds the 5,184 threshold dimensional weighting will apply. Therefore, the package will be rated at the dimensional weight, adding seven pounds to the rated weight.
Large Package Surcharge applies when a packages length plus girth combined exceeds 130 but does not exceed the maximum size of 165. The package will be rated at a minimum of 90 lbs, and a $40 Large Package Surcharge will apply. An Over Maximum Limits Charge of $50 applies if a package exceeds 150 lbs or its length plus girth exceeds 165 combined. Note that these charges are not exclusive and both could apply to the same package(s).
Its also important to remember that Additional Handling Charges can apply to some of your packages based on size and packaging type. For instance, most carriers will charge extra for shipping containers made of metal or wood, cylindrical items such as barrels or tires and any packages with its longest side exceeding 60 and its second-longest side exceeding 30 and any packages not fully enclosed in corrugated cardboard. Can you mitigate Dim weight pricing and its applicable costs? Yes, in most cases. First you need to have a clear understanding of your package characteristics. If youre an auto body supplier who ships windshields, bumpers and car doors, you are probably going to have a Dim weight pricing issue. The key here is to make sure you do everything you can to lower these charges and then factor these extra charges in your shipping charges, or sales price, if you are not charging for shipping to properly reflect Dim weight pricing and all of its components.
We highly recommend that all of your clients who have dimensional issues employ some type of cube-a-scan, or similar technology, and imbed the actual box dimensions in a reference field. Or assign numbers to standard box sizes and imbed those in the reference field, so if carriers audit your box and apply Dim weight or other surcharges, you will be able to dispute the charges if needed.
Another step, as simple is it may seem, is to actually audit your box sizes from your box manufacturer on a regular basis. We had a client who kept getting charged with additional surcharges and even had the carriers team come in and help them review their packaging to alleviate this issue. Once the carriers recommendations were tabled and accepted and the new boxes were in place, the charges were still being incurred. After significant research, it turned out the manufacturer had made the box too big! It was actually one inch bigger than the dimensions stated and was outside the carriers limits and charged as such.
The last step in your Dim weight strategy should be to try and negotiate better Dim weight terms. It could be a higher DIM divisor (Dim Factor), discounts on the surcharges or higher thresholds on the surcharges themselves. As with any negotiation, many factors are involved in your ability to negotiate terms, and a few that could impact this are total spend, actual percentage of packages receiving dimensional weight charges and even competitive pressures in the marketplace. It is clear that Dimensional weight pricing can have a significant impact on your costs if not understood, managed and accounted for. In order to succeed in this highly competitive industry, it is crucial to get a clear understanding of Dim weight pricing and how it affects your packages.
Don La France is Director of Transportation Services at enVista, and Baris Tasdelen serves as the Transportation Analyst. For more information, please visit www.envistacorp.com.