FedEx and UPS have announced what may be the biggest price increase in their histories, and it is not on your rate sheet. Beginning in 2015, all parcel shipments will be subject to pricing based upon a minimum density of 10.4 lbs / Cu Ft. Any parcels shipped with a lower density than 10.4 Lbs /CF will have a new dimensional weight calculated for them This weight will be used for rating. This will apply to any package larger than 166 cubic inches, or 7”x6”x4”.
This will have a major impact on your shipping costs. When was the last time that you looked at the density of your shipments? If you do not know it already, calculate the average density of a sample of shipments. The percentage difference between your lower density and 10.4 lbs/CuFt is an estimate of the increase you will see in your parcel shipping bill.
You may think that you are immune to this, having negotiated a higher denominator factor (>166 Cu Ft). However, you may not have addressed the numerator, which has also changed. The new ruling now affects all packages less than 3 cu.ft.
What can you do about these changes? There are a number of steps that you need to take immediately.
- Assess the impact on your shipping costs. Determine how many of your packages are less than 10.4 lbs/CuFt. Calculate the financial impact on your shipping costs
- Review your packaging and dunnage to see where you can reduce package Cube and increase density
- Look at your product design and specifications to determine if there are opportunities in some or many of the products
- Review your contracts with FedEx and UPS to understand your exposure to the dimensional pricing effect
- Evaluate your packaging procedures to assure that your packers are picking the correct box for the shipment
- Conduct extensive renegotiations with your parcel carriers to mitigate or reverse the price increase. Seek to have your company grandfathered into the previous density structure
- Perform a structured RFP process to effectively renegotiate all of your parcel rates. This is the best way to reduce overall cost and get the best terms.
- Create a comprehensive program to accomplish all of the above items. This may require obtaining outside help and expertise with the skills in each of these areas.
The time to act is now. The deadline for completion is December 29th. An ounce of prevention is worth a pound of cure. Get Started And Get Help.
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