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December 13, 2016

DIM and DIMMER

Back on January 1, 2015, the largest parcel shipping companies like FedEx and UPS implemented Dimensional Weight Pricing for ground parcels less than three cubic feet. The billable weight was whichever weight was greater between actual weight and dimensional weight.

Dimensional Weight Pricing calculates the minimum billable weight based on a package’s cubic volume. The formula multiplies length-in-inches by width by height, and then divides the product by a DIM factor, which FedEx and UPS set at 166 for domestic shipments.

The change was significant as it was estimated that up to 75% of the most widely used box sizes were less than three cubic feet. Industry experts predicted an average increase of around 30%.

At the time, most companies chose to either:
1. Negotiate their DIM weight factor;
2. Redesign their packaging to minimize DIM weight charges;
3. Pass on the price increase to their customers; or
4. Accept the price increase, thus lowering profit margins.

Many were able to renegotiate, so there wasn’t much of a need to redesign their packaging.

Fast forward to 2016 and the announcement that FedEx will modify its Dimensional Weight Pricing starting January 1, 2017.

FedEx will change the DIM factor from 166 to 139 resulting in a 12 lb. per cubic foot density, which maxes out a 53 ft. trailer by both cube and maximum weight of 45,000 lbs. FedEx will, essentially, get paid for the maximum load the trailer can haul.

This means that a 12x12x12 in. package will be charged as a 12 lb. package. If a company’s packaged product shipping densities are less than 12lb/cubic foot, it will likely see an increase in its small-parcel shipping costs.

The change in the factor results in around a 19.5% increase depending on packaging configuration, i.e. how much air is in the shipper boxes, shipping distance (zone), etc.

The chart below shows the top items purchased online, and how the new DIM weight factor will increase their shipping costs.

And, in case you’ll now be adjusting your 2017 shipping budget, FedEx will also be increasing its rates in general: 3.9% for FedEx Express and 4.9% for Ground deliveries!

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