Q&A with the PArcel exPerts

the DiM Outlook for 2015

in mid 2014, Fedex® and UPs® announced a major change to their pricing models for ground service shipping:

in mid 2014, Fedex® and UPs® announced a major change to their pricing models for ground service shipping:

the billable weight for All ground packages will now be determined using the dimensional (DiM) weight calculation.

An example of domestic ground DiM weight calculation:

Actual package weight: 1-11 lbs.Box size: 10" x 12" x 15" 10” x 12” x 15” = 1800 c.i.1800 c.i. ÷ 166 = 10.8 lbs.

10.8

An example of domestic ground DiM weight calculation:

Actual package weight: 1-11 lbs.Box size: 10" x 12" x 15" 10” x 12” x 15” = 1800 c.i.1800 c.i. ÷ 166 = 10.8 lbs.Net Result:

the package will

be billed at the

11 lb. Rate

here are a few that our experts have answered for our clients...

this may be the largest price increase in the history of these carriers—which raises a lot of questions.

Does this mean that my expenditures for all ground shipping will increase in 2015?

Q:

$$$

$$$

Does this mean that my expenditures for all ground shipping will increase in 2015?

Q: A:Our preliminary analysis shows 5-30% increases are possible. lightweight shippers and those with inefficient packing practices will be impacted the most. Very large volume parcel shippers should be able to alleviate some of the impact through special discounts.

how does this affect those of us with a minimum charge in our contracts?

Q:

how does this affect those of us with a minimum charge in our contracts?

Q: A:it should not have a material impact on large shippers with aggressive minimum charge reductions. For others, there could be a significant increase—and each percentage point increase is money away from your bottom line. Analyze the minimum charge reduction to see how many cells are covered in your rate card. if the change is significant, look at several factors: DiM factor, minimum charge, weight distribution and actual discounts which will all play a role in the final outcome.

Does actual weighteven matter any more?

Q:

Does actual weighteven matter any more?

Q: A:shippers of very dense products like nuts and bolts and books/magazines will not be affected by the change. the cwt (hundred weight) tiered pricing was always based on density. Now the small package rate has caught up. shippers in cwt tiers 5, 6 or 7 will be impacted the most.

Q:what about regional carriers, do they use DiM pricing?

what about regional carriers, do they use DiM pricing?

Q: A:some carriers do and some do not, and some use different divisors than UPs and Fedex. Do your homework!

Q:should i reevaluate my program to add regional carriers to the mix?

should i reevaluate my program to add regional carriers to the mix?

Q: A:Great idea, but it may not work for all cases. Analyze the impact of the announced changes on your organization. then, analyze what would happen with adding regional carriers. if the cost savings is found to be significant, it may make sense to put a regional carrier into play.

Q:should i invest in a cubing system so i can be sure the carriers are charging the right amount on my invoices?

Q: A:that could help—but before making an investment of that nature in your operations, spot check them to make sure the carriers are capturing the dimensions correctly.

should i invest in a cubing system so i can be sure the carriers are charging the right amount on my invoices?

Q:to remain competitive, i offer free shipping. should i add a surcharge to lightweight bulky items to offset the cost increase?

FREE

Q: A:Not necessarily. First, perform a comprehensive analysis to see the impact of the changes. there are likely many other ways to mitigate the risk without sacrificing customer service.

to remain competitive, i offer free shipping. should i add a surcharge to lightweight bulky items to offset the cost increase?

FREE

Q:should i take this as an opportunity to find other ways to save, by re-engineering my entire parcel shipping operation?

Q: A:You should always be looking at finding ways to re-engineer your supply chain operations and drive out cost. Do it now, and continue to monitor it indefinitely.

should i take this as an opportunity to find other ways to save, by re-engineering my entire parcel shipping operation?

Q:what can i do now to be ready for next year?

Q: A:it’s imperative that you have an analysis done on your package and shipping data. Many answers about this and other issues are in your data.

what can i do now to be ready for next year?

Q: A:And here are a few other ideas: Get to know your contract. It’s complicated but there are almost always opportunities for optimization.

Understand your package sizes and weights. Make adjustments to reduce empty space.

involve your cross-functional teams. Marketing, merchandising, finance, packaging and operations should all work together!

what can i do now to be ready for next year?

have questions of your own? Get a Free One-on-One consultation from one of these parcel experts:

todd Benge has 20+ years of UPS corporate pricing experience and parcel program expertise to share with BirdDog clients through Parcel Program Engineering projects.

Glenn Gooding is a leader in small parcel audit services, with more than 20 years of network and operations management experience with UPS.

Jeff eischen is an industrial engineer with nearly 20 years of UPS experience to use when designing UPS and FedEx parcel programs.

David sullivan is a consultative logistics professional with more than 12 years of carrier contract and pricing optimization experience.

BirdDog Solutions partners with the world’s largest shippers to strategically design and execute custom

parcel programs. Your business goals are achieved by leveraging our unique combination of industry expertise,

proprietary technologies, and actionable insight.

www.birddog.com | info@birddog.com | (800) 464-3137 | Alpharetta, GA