For most people, the holidays are a time for family and fun and maybe one party too many. If you are an ecommerce seller, your holiday season is probably hectic as well as full of good cheer. After all, there’s […]
We're a third party fulfillment provider that approaches things a little differently.
Our business is being the successful extension of your business.
When a customer makes a purchase from your eCommerce business, he is not thinking about all of the steps needed to turn his order from pixels on a screen into a box on his doorstep. As every eCommerce retailer knows […]
In September, a British jury found Amazon UK guilty of shipping hazardous materials by air without proper labeling or packaging. The e-commerce and order fulfillment giant had shipped lithium-ion batteries, which have the potential to explode and catch fire, as […]
Did you know that 96 of the Fortune 100 companies use third-party logistics (3PL) providers? The fact that Third Party Logistics services (3PL) are employed by thousands of businesses around the world is a testament to the efficiency and effectiveness […]
Supply Chain Management (SCM) is a career choice that is exploding due to the rising demands of the private and public business sectors. If you look on the internet, you will find hundreds of online and onsite courses, certifications and […]
There are a lot of things that can happen in just one minute, just ask the distraught owner of the Shelby Mustang GT 500 who was on the list of cars targeted by Randall “Memphis” Raines in the classic car-heist […]
One of the major disadvantages ecommerce companies have is their customers can’t touch, taste, hear, see, or smell the product. With traditional retail stores, consumers get to try it before they buy. Not so with an online store. Many consumers […]
Every economic system has segments that produce products and consumers who need them. Between these segments is the distribution system. Sometimes the distribution system is itself made up of several segments and sometimes it controls production as well. In […]
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.
- Will It Be The End of Your Business? WHAT IS DIMENSIONAL PRICING?
- 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).
- 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.
- 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
- 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.
- 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
- 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?
- Solutions Take the Air Out Negotiate your dimensional factor Find a partner with negotiating power (E.g. a 3PL)
- 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
- 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
- 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
- FOR HELP REDUCING COST OF DIMENSIONAL PRICING 800.815.STAG (7824) email@example.com www.redstagfulfillment.com
We know what it's like searching for a fulfillment partner...
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.