on Jun 9th, 2014 in Ideas Worth Exploring | 4 comments
 

Dim weight. Sounds like something you might call your not-so-smart cousin. It’s actually a way to price parcels based primarily on how much space they take up during transport and delivery.

FedEx is the first major carrier to announce plans to charge prices based on the dimensional weight of all its ground shipments. Retailers and other shippers are bracing for a nasty hike in shipping costs come January 2015, when the FedEx changes take effect.

Shipping costs are heavily influenced by how much cubic volume a parcel takes up in the back of a truck or plane. If parcels are roughly uniform in density (weight in relation to size), then charging by weight makes sense. But if parcels are light yet bulky, such as shoes, diapers, and many other goods ordered online, then weight-based pricing doesn’t reflect costs. Dim weight pricing will let FedEx charge more for these light yet bulky packages – for example up to 30 percent higher on a 32-pack of toilet paper – that take up more space in the truck.

Analysts say FedEx’s change will result in the most dramatic rate spike the parcel shipping industry has seen in decades. And these increases will affect either online shoppers or retailers, or both. As the Wall Street Journal recently noted: “Someone will have to swallow the estimated hundreds of millions of dollars in extra shipping costs.” Could free shipping for consumers become a casualty of this pricing change?

Analysts expect UPS to follow suit with a similar pricing strategy. If so, the Postal Service and small regional carriers could see an uptick in volume – albeit higher-cost and lower-yield volume – as shippers look for ways to reduce the expected sticker shock from dim weight pricing. The move also could accelerate Amazon’s reported plan to launch its own fleet of trucks and drivers for local deliveries.

Do you think FedEx’s change in its pricing structure will benefit the Postal Service? Or is it likely to primarily shift less-profitable packages to the Postal Service? Should the Postal Service consider a move to dim weight pricing for its ground services as well? Or would it hurt the Postal Service’s standing as the lowest-priced competitor?

 

4 Comments


I have thirty years in the Postal Service as a carrier, and this is a great idea, although right now it is FedEx starting it.
Small parcels can often be placed in the mail satchel in the case of a walking route like mine, and then placed in the mail box at the same time as the other mail.

In the case of a curbside route, smaller parcels can be placed in the box at the same time, also.

Larger parcels require me to drive to the individual address, get down, walk the second time to the house or business and knock or find a secure location for the parcel. Curbside carriers also have to dismount and take the parcel to the door.

It is not only a space issue, but a time issue.

Perhaps a bulk mailer and the delivery company (FedEx, USPS, etc) can work out contract agreements that would compromise and make both sides happier...some combination or choice between weight and size rates.

I think this move to dimensional weight pricing is the beginning of the end for free delivery of online purchases. UPS will follow suit and the Postal Service will also eventually move to a dim weight pricing scheme of some kind. It may not happen for a few years, but I expect it will happen. Ultimately, online retailers will pass the cost on to consumers, either in the form of higher shipping and handling fees or baked into the price of their goods sold online, or both. I suspect both.

As the majority of USPS priority flys on fedex aircraft I don't believe you have a choice or is usps proposing to "eat" the possible addition costs and not pass on to customers. The technology exists to automate the process of dim weighting. USPS tested this several years ago but failed to follow through. As they failed did with rigid trays, robotics (next generation), automating platform operations, etc. Etc. USPS continues to validate that they cannot compete with private industry in terms of implementing new technology.

Isn't the Postal Service is ALREADY charging DIM weight. Isn't that the purpose of the window personnel measuring parcels and inputting the dimensions into the terminals at time of acceptance? Even items mailed at usps.com ask for the dimensions and have the higher rate for larger, lighter weight items. Who are you trying to fool?

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