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warehousing order fulfillment cost

What Does Order Fulfillment Cost?

Article by: Jake Rheude

Published:

Top-notch order fulfillment is the heart of every successful eCommerce company. Fulfillment cost is also one of the bigger operating expenses. Whether you do your order fulfillment in-house or use a fulfillment company, you may have hidden order fulfillment costs […]

Modern warehouse

The History of ECommerce

Article by: Jake Rheude

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Online shopping feels like a natural and essential part of our modern world. It’s hard to remember that it’s only been around for a few short decades. Even 20 years ago, most internet connections were through slow dial-up modems. The […]

Amazon FBA is a fulfillment service for ecommerce sellers.

Is Amazon FBA Right for Your Business?

Article by: Jake Rheude

Published:

The choice of whether to use Amazon FBA (Fulfillment by Amazon) for your eCommerce store is not an easy one. The comprehensive fulfillment service seems attractive at first look. But there are downsides, some of which aren’t apparent at first. […]

2021 Ecommerce Predictions

ECommerce Predictions: Trends to Watch in 2021

Article by: Jake Rheude

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After 2020, it feels a little risky to make eCommerce predictions – or any kind of predictions. However, underneath the chaos that was this past year, some eCommerce trends emerged. One of the primary trends for eCommerce was that the […]

Modern warehouse

10 Influential Factories that Shaped the Modern Warehouse

Article by: Jake Rheude

Published:

The modern warehouse is equipped to handle the challenges of 21st century eCommerce. That means integrated operations and the ability to change quickly in response to changing business needs. Today’s warehouses also employ cutting-edge technology to make it all work. […]

FedEx UPS logos

UPS and FedEx 2021 Rates

Article by: Jake Rheude

Published:

Ecommerce has been on a wild ride in 2020. Consumers turned to online shopping to stay safe during a global pandemic. Order fulfillment warehouses and eCommerce shipping carriers felt the strain of the extra volume. UPS and FedEx 2021 rates […]

Amazon shopping

Amazon Listing Optimization

Article by: Jake Rheude

Published:

When you become an Amazon seller, you gain access to the biggest online marketplace in the world. More than half of product searches happen on Amazon, not Google or another search engine. But all that traffic doesn’t help you if […]

warehouse layout

Guide to Warehouse Slotting Strategies

Article by: Jake Rheude

Published:

Warehouse slotting is an inventory management tool that can increase the efficiency of your operations. Before you dive into slotting, it’s important to collect data on your past sales. You should also understand the storage and handling needs of fragile […]

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.

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