Understanding how parcel carriers structure their Rate and service Guides is just as important as working with a carrier or 3rd party to help negotiate yourself the best service and rates. In this segment, we'll cover Dimensional weight (Dim Weight).
Dimensional weight became an important factor to pay attention to for all shippers in 2015 and 2016. The major carriers, FedEx and UPS implemented this new rule that would charge you based on the higher of the two: Actual Weight or Dimensional Weight.
Below is a friendly reminder to those that know already and a breakdown for any new shippers of how the carriers determine Actual weight, Dimensional Weight and Chargeable weight.
Dim Weight - How it's calculated?
Both FedEx and UPS calculate Dim weight using the following Formulas:
Length X Width X Height Divided by 139 = Dim Weight
This 139 above, is called a Dim Factor.
The USPS uses the same formula but uses the Dim Factor of 166, meaning their formula looks like this: Length X Width X Height Divided by 166 = Dim Weight.
Actual weight Vs. Dim Weight
Using the formulas above and a scale, you can determine how the carrier will charge for a package you're going to ship. Use the following examples as a guide to help you determine the chargeable weight.
See the image to the left and you'll see we're working with two boxes each 14 X 14 X 14 (14 Cube) for two shipments. One shipment is for a cuddly Teddy Bear that weighs 3 Pounds and the other shipment is a set of dumbbells with a total weight of 100LBS.
Using what we know from above, FedEx and UPS would use a Dim Factor of 139 and rate these as follows:
Teddy Bear
Actual Weight: 3LBS
Dim Weight: 19.74 LBS (rounded up to 20LBS)
Chargeable Weight: 20LBS
Dumbbells
Actual Weight: 100LBS
Dim Weight: 19.74 LBS (rounded up to 20LBS)
Chargeable Weight: 100LBS
As you can see from the above, the greater number of the two (Actual/Dim) wins and is how the carriers would determine the applicable weight for each shipment.
How can I save money when up against Dim Weight?
As Carrier Rate Guides change every year and new surcharges come into existence or are increased, it's important to always stay on your toes and adapt when and where you can.
How can a shipper lessen the impact of Dimensional weight? Here are some suggestions Bellhop can make for you and your business:
Reducing Packaging Size
It's all about surface area being taken up on the trucks, so if you decrease the size of your boxes/packaging for the lighter SKU's in your product line, you will shave off weight and help decrease your costs. For example the Teddy bear from above; if you had shipped that in a smaller box and one that was more form fitted to the product, you decrease the surface area and decrease you're chargeable weight.
Some clients use vacuum sealing as a method of decreasing the product size and then place the sealed Teddy Bear in a poly bag or very small box. Now that the size has been decreased, your base rate charge can be drastically reduced as well. The Vacuum Sealing is a great option for: Plush, Apparel, certain foods, etc.
Negotiating a better carrier contract
Understanding that how we package an item is equally as important to what we've negotiated in our carrier contract, is essential to reducing your overall shipping costs. Did you know that the standard Dim factor of 139 is not the end all be all? There are shippers that have a dim factor upwards of 200 and the higher the Dim Factor, the lower your dimensional weight. To test that fact, using the 14X14X14 example we've reviewed, now divided by 200 would meant that Teddy Bear ships at14LBS. That's a 5LB decrease in chargeable weight and that is more money in your pocket!
The known issue by working with any carrier directly is the fact that the more volume will be needed before FedEX or UPS will give you any kind of handout. If you do have volume, you should without a doubt work this into your next Quarterly Business Review (QBR) with your carrier partner and make sure the carrier is offering you the best contract, rates and service. If you're not being offered a QBR or your representative is not coming to you with more and more solutions every time, there is something to be considered...
Working with a Third Party Logistics Provider (3PL)
The 3PL model is only as good as it's service and we at Bellhop Logistics lead with what we know best: GAPS.
What Gaps in my supply chain am I experiencing by going the traditional route and working with the carriers directly?
Is the carrier visiting with you frequently (quarterly at minimum) and reviewing your account and finding ways for you to pay them less?
Do you have key contacts at the carrier that help you with pricing, contract questions, and accounting needs?
Are you avoiding having to jump through hoops to get any help (e.g. give them more volume, bundling your Freight (LTL or International) etc.?
Is the carrier your partner in logistics and providing you the support, communication, visibility and resources (even if it's elsewhere) to help you and your business thrive?
If you answered NO to any of the above items, you need to work with a 3rd party.
Some folks will tell you differently, but the biggest reason to work with a 3rd party is you have someone on your side, between you and the carrier that can help you through their knowledge and expertise, to push on the carrier to give you the best possible contract and rates.
Bellhop is also directly partnered with transportation providers of all kind to help you and your business access rates and programs that are not normally available to general public. With no obligation, no minimums and no additional fees, we can help get the service and competitive pricing you deserve!
Visit us at www.bellhopship.com
Call us at: 855-623-5546
Email us at: info@bellhopship.com
