Impact of 2015 UPS & FedEx Dimensional Pricing Changes

By March 19, 2018 News
pricingchanges

In our observations, the vast majority of volume parcel shippers have tried to mitigate the impact of the 2015 dimensional pricing changes through a number of strategies including:

  1. Carrier contract negotiations;
  2. Diverting freight to regionals and the US Postal Service that might offer higher DIM divisors and thresholds than the national private carriers;
  3. Changing transportation mode to DIM friendly services (example: FedEx Home Delivery to FedEx SmartPost);
  4. Reducing box sizes and minimizing empty fill to decrease dimensional shipping costs;
  5. Moving to polybags for lighter, smaller packages;
  6. Offering online shoppers free shipping only to retail stores – rather than to the consumer’s residence – to consolidate multiple orders to a single commercial shipment.

It’s also our understanding that with very few exceptions, shippers have been unsuccessful negotiating with FedEx and UPS to grandfather 5184 cubic inch exception. Rather, nearly all shippers lost the exception, although many were able to improve their DIM factor, thereby mitigating – but not entirely offsetting – the 2015 DIM changes.

We’ve also heard some shippers were able to negotiate a break point whereby packages under 5184 receive a larger DIM divisor than packages exceeding the three cubic foot threshold, which were already subject to the DIM prior to 2015.

As a national freight audit company, Shipware queried its shipping database to identify any changes in billed weight – which is where most DIM increases would show up in a carrier invoice – over actual, or entered weight between 2014 and 2015 when the new dimensional pricing took place.

Extremely interesting results: It appears that FedEx may be enjoying greater dimensional pricing yields than UPS. In 2014, FedEx Ground billed weight was 9.6% higher than actual weight. However in the 2015, billed weight for FedEx Ground increased 28.9% over actual weight.

FedEx Home Delivery illustrates an even greater increase as billed weight was 11.6% higher than actual weight in 2014, and 45.1% higher in 2015.

UPS also showed increases, although significantly less dramatic. In 2014, billed weight for UPS Ground (all services) was 12.8% higher than actual weight, and 16.4% higher in 2015.

Why the discrepancies between UPS and FedEx? Based on the data, it’s apparent that residential packages are more frequently impacted by 2015 dimensional pricing than commercial shipments.

As a percentage of overall Ground deliveries, UPS still handles significantly more commercial packages than residential. Plus, it could be that shippers have had an easier time negotiating DIM concessions with UPS than FedEx.

Finally, Shipware points out that results are based on its unique customer blend, and may not be reflective of actual global results for the parcel shipping giants.

As always, shippers that need help measuring dimensional cost increases, negotiating best-in- class parcel carrier contracts, or other strategies to reduce shipping costs are invited to contact me at rob@shipware.com. Good luck!

Shipware

Author Shipware Admin

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