Understanding DIM Weight Pricing
The 2014 holiday season marked the last Q4 end-of-year sales period that was not directly affected by UPS and FedEx’s new pricing structure known as Dimensional (DIM) Pricing. The increasing number of purchases made online coupled with new criteria being evaluated to calculated the cost of shipping products, some companies are learning the hard way that their business models need a reevaluation come Q1 2016.
So what is DIM Weight pricing? Put plainly, DIM weight pricing is a way of calculating the fee associated with shipping a parcel based on that parcel’s size.
Why DIM Weight Pricing?
An obvious constraint for UPS and FedEx is the amount of real estate available in trailers and delivery vans. This “real estate” has become more and more valuable as the online retail industry continues to grow. So rather than simply taking the weight of a parcel, and calculating the shipping fee based on the zone, or distance the package will travel, DIM Pricing means that packages can be priced based on their cubic volume in relation to the parcel’s actual weight. Lets look at an example.
Let’s say you’re shipping a new, carbon fiber motorcycle helmet in a 12”x12”x12” box. Between the helmet, box, and packing filler, the total actual weight of the parcel is 5 pounds.
With the introduction of DIM Pricing, that doesn’t mean your parcel will actually be billed at 5 pounds though. To calculate your DIM Weight, we take the box dimensions multiplied by a DIM Factor.
(Height x Width x Length) / DIM Factor = DIM Weight
So in our example:
(12 x 12 x 12) / 166 = 10 pounds
Actual Weight = 5 pounds < 10 pounds DIM Weight
Effect of the DIM Weight Factor
Obviously, this new pricing model has massive implication to many businesses. If you’re shipping kettlebells, you probably won’t feel the effects. But Costco’s 93” teddy bear is now on an even field as a refrigerator. The good news is that there are ways to minimize the negative effects of DIM Pricing for you and ultimately your customers.
- Reduce Parcel Size: This isn’t always an option, by reevaluating your box sizes and packing methods may help you fit more ‘stuff’ in smaller boxes.
- Negotiate your DIM Factor: If your business is outputting a large volume of parcels per day, you can negotiate your DIM Factor with FedEx and UPS, the same way you’ve likely negotiated shipping rates. Just be sure to remember your lessons from high school algebra, the larger the denominator, the smaller the solution. UPS and FedEx use 166 as the standard DIM factor, so you’ll want to increase this number as much as possible.
- Partner with a world-class 3PL: A strong fulfillment partner is likely going to have negotiated a much better DIM Factor than a single small or medium sized company can do on their own. This depending on the negotiated DIM Factor, a strong 3PL can eliminate the effects of DIM Pricing for your business.
For more information about DIM Pricing and its effects on your business, you can view the Red Stag DIM Pricing Calculator, or give us a call at 1-800-815-STAG (7824).