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COVID-19 Response

COVID-19: Implications for Fulfillment Operations

Article by: Jake Rheude

Published:

Red Stag Fulfillment Operational Status: The status of the global supply chain changes on a daily basis due to the current pandemic. At Red Stag Fulfillment we want to keep you updated on COVID-19 implications for fulfillment operations. We will […]

How to Sell on Amazon: The Complete Guide

Article by: Jake Rheude

Published:

Amazon is an online marketplace used by millions of people globally. From clothing to electronics to toiletries, you can find almost anything on Amazon.

Wondering how you can get in on the action? All you need is a small monetary investment to get started and the knowledge of how to run a successful listing.

What Is Landed Cost and How Do I Manage It?

Article by: Alex Selwitz

Published:

Landed costs cover the cost of getting a manufactured good to your distribution center so you can send it to a customer after they buy from you. It seems simple, but the math behind the term is more complex than […]

SKU and UPC codes

Guide to SKU Numbers

Article by: Jake Rheude

Published:

SKU is short for stock keeping unit. SKU numbers help you automate inventory management. For new eCommerce sellers, SKU numbers aren’t a requirement. As your business grows, however, you will find that SKUs help you understand sales trends and grow […]

5 Ways to Boost Supply Chain Optimization

Article by: Alex Selwitz

Published:

Managing and optimizing a local or global supply chain is one of the most important activities an ecommerce business or online seller can do if they want to control spend and put themselves in a position for growth. What is […]

Amazon Problems

7 Pitfalls of Amazon FBA

Article by: Jake Rheude

Published:

Fulfillment by Amazon (FBA) lets sellers in the Amazon marketplace take advantage of Amazon’s giant logistics operation to ship their orders. FBA items are eligible for Amazon Prime shipping and Amazon handles your angry customers (which Amazon considers its customers, […]

Wish.com logo

How to Sell on Wish.com

Article by: Jake Rheude

Published:

Would you like to sell on the marketplace app that currently has the most downloads in the US? Then you need to sign up to sell on Wish.com. The site has a fraction of the sales volume of Amazon or […]

glass vase

How to Ship Fragile Items

Article by: Jake Rheude

Published:

There is almost nothing that can’t be ordered online and shipped to customers. ECommerce companies have taken over product categories once reserved for brick-and-mortar stores because they were considered too hard to ship. Businesses now routinely ship heavy and large […]

What Is Shipping Insurance and Do I Need It?

Article by: Alex Selwitz

Published:

When eCommerce companies first start shipping their orders, they tend to grab shipping insurance on every package just in case. This is an excellent practice for when you’re starting, but there might be some alternatives to consider. Let’s take an […]

Dimensional Pricing

What is dimensional pricing? Will it be the end of your business?

On January 2, 2015, FedEx and UPS changed how they will price shipments. We detail how this could greatly increase shipping costs for e-retailers and other businesses that use companies like FedEx and UPS to ship their products.

In addition, we breakdown why the carriers are making the change and provide examples of how the new calculations work.

Lastly, we provide possible solutions for companies that would like to reduce their shipping costs and help minimize the impact that could come from dimensional pricing.

Transcript

  1. Will It Be The End of Your Business? WHAT IS DIMENSIONAL PRICING?
  2. How does pricing work now? The historical way for calculating costs to send a package was based on a very simple method; Carriers use a table that assigns a “base rate” for every combination of weight (1-150 lbs.) and distance (Zones). The heavier the package and/or the farther you ship, the more it costs. Other surcharges and fees are then added to the base rate as they are applicable (E.g. fuel surcharge).
  3. Does it work? Historically, this pricing structure was ideal because transport trucks could use these same variables in their formulas to calculate transportation costs, and therefore determine the profit margin for each truck transporting goods.
  4. What is dimensional pricing? In other words, many of the lightweight packages you ship today could see A BIG INCREASE IN COST!!! Every package you ship will now have two weights – actual weight and dimensional weight. The larger of these two will be used to calculate the cost of your shipment (Height x Width x Length) Dimensional Factor* = Dimensional Weight * The standard Dimensional Factor that UPS and FedEx will use is 166
  5. Why the change? The convenience of online shopping with in-home delivery, has resulted in an increase in the number of lighter weight packages in bulkier boxes being shipped to homes across the world. Consumers now purchase bath robes and teddy bears online! Bigger boxes take up more room in a truck; so less space and less weight = less revenue per truck for the carriers.
  6. How will this affect my shipping cost? 3 lbs. x Zone 8 $9.84 Base (Daily Pickup) Rate 3 lbs. package shipped in a 12” H x 12” W x 18” L box From: Knoxville, TN (ZIP 37923) To: Reno, NV (ZIP 89501) TRADITIONAL (12 x 12 x 18) / 166 = 15.6 lbs. 16 lbs. x Zone 8 $18.86 Base (Daily Pickup) Rate DIMENSIONAL
  7. 3 Questions to Consider What will my margins be if I eat the cost? If I pass this cost on to my customer – how many will I lose? Will I still be in business 1 year from now?
  8. Solutions Take the Air Out Negotiate your dimensional factor Find a partner with negotiating power (E.g. a 3PL)
  9. Take the Air Out Deliberately engineer packaging to remove as much “air” as possible. If additional packaging is added when preparing to ship, educate your packing team on the effects of their decisions. This should be the first step for any company looking to avoid large dimensional weights You might be surprised how much opportunity there is
  10. Negotiate Dimensional Factor Larger Dimensional Factor = Smaller Dimensional Weight = Less Effect on Your Business Must negotiate with each carrier you use (i.e. FedEx and UPS) There are no guaranteed outcomes Shipping Revenue = Power
  11. Find a strategic partner Quality 3PL fulfillment operations minimize effect to their clients Strategic Partners help with these various strategies Examples: Negotiating power with Carriers Package consolidation Packaging engineering
  12. FOR HELP REDUCING COST OF DIMENSIONAL PRICING 800.815.STAG (7824) info@redstagfulfillment.com www.redstagfulfillment.com

We know what it's like searching for a fulfillment partner...

We've been there before! Red Stag Fulfillment was born out of necessity as the sister company to support a fast growing ECommerce business. You can read more about the story of our development here.

Our business is being the successful extension of your business, and a big part of that is providing tools to help you evaluate us, and other fulfillment companies. That's why we openly share our Fulfillment Provider Questionnaire, as a tool for you to use when selecting your fulfillment partner.

Download a blank questionnaire, or the questionnaire with our answers for your own internal use.
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