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Delivery Drones are About to Revolutionize the Supply Chain Industry

Article by: Nikki Sneed

Published: 01/04/2017

Imagine placing an order online and receiving it within 30 mins. This is not a futuristic order fulfillment pipedream. The technology to do this is already here. It comes in the form of delivery drones. On December 7th, 2016, Amazon […]

How to Conquer Your January Sales Tax Filing

Article by: Jake Rheude

Published: 01/03/2017

January is an interesting month for sales tax compliance. Whether your eCommerce business files monthly, quarterly, or annually in a state, you will almost certainly have a sales tax filing deadline in January. That’s why we call January the “Sales […]

Local Businesses Pull Together to Support Wildfire Victims

Article by: Jake Rheude

Published: 12/07/2016

The fires in the Smoky Mountains that engulfed Sevier Country, just outside Knoxville, TN, will be recorded as the largest and most devastating for the state of Tennessee in a century. As it stands, fires have claimed more than 150 […]

What Happens in 60 Seconds Online?

Article by: Jake Rheude

Published: 08/18/2016

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 […]

eCommerce Education Links for Kids!

Article by: Jake Rheude

Published: 08/01/2016

Skills & Tools to Develop a Business Mindset in Today’s Youth Children learn by imitating the adults in their lives, like their parents, family members, teachers, and caregivers. Like so many other young boys, my first job was cutting grass […]

RSF Awarded Best Ecommerce Fulfillment

Article by: Jake Rheude

Published: 04/28/2016

Red Stag Fulfillment is honored to announce the recently awarded 2016 Best Ecommerce Fulfillment Service for Heavy & Valuable Goods by FitSmallBusiness.com, a top independent researcher of business solution providers. For any ecommerce or e-retail business, working with a fulfillment service […]

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

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) info@redstagfulfillment.com www.redstagfulfillment.com

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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.

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