As retailers are well aware, parcel carriers UPS and FedEx have been increasing shipping costs based upon box sizes steadily over the past several years. They have applied various rate increases and surcharges based upon box size, box length and box weight.
There are numerous combinations of box dimensions and/or weights that will begin to trigger dimensional weight and various size-based surcharges, which can range from as low as $3/package on the low size up to $18/package or more on the high side.
A Tale of Two Box Sizes
For one e-commerce retailer, these changes packed a huge punch based upon these rules — and one that could be avoided by paying very close attention to box size.
In this example, the shipper was sending out a pajama-like onesie with a hood. The material was a thick cotton. The e-tailer decided to roll the item and ship it in a box that was wide enough to accommodate the item without folding it in half.
The actual shipment weighed just 2 lbs. and the box size and billed weight per the DIM Factor* were as follows:
- 24” L x 10” W x 7” D = 1,680 cubic inches/ 139 DIM Factor = 13 lbs. for Billed Weight
Had the retailer shipped the same exact item, but in a shorter and narrower box, the Billed Weight would have been significantly less:
- 10” L x 10” W x 6” D = 600 cubic inches/ 139 DIM Factor = 5 lbs. for Billed Weight
The difference in box size would have allowed this item to have come in an entire 8 lbs. less in Billed Weight, with the following advantages:
- The shipping charges, at list rate, would have been $3.09/package less, or a whopping 18 percent less costly.
- If this retailer is sending 150 of these packages daily, the annual savings would be $116,802.
- At 500 packages per day, the savings goes to a massive $389,000/year.
All because of a shorter, narrower box.
Granted, this shipper might not choose to fold this item in half for presentation purposes for the consumer experience, however, the point of the example is to demonstrate that the rules of parcel shipping create a complex maze of box sizes and weights that can cause vast swings in shipping costs — often to great expense and loss of margin for the shipper.
A Whole New Category of Additional Handling Charges
Recent increases from UPS and FedEx effective this year have created an entirely new category of Additional Handling Charges, per the chart below:
As shown in the illustration above, all packages with dimensions highlighted in yellow are now subject to an Additional Handling fee of $16.00.
Certain retailers will experience having shipments that previously had no Additional Handling fees and now have $16 in Additional Handling fees for certain box sizes. And since these packages have just begun receiving this surcharge in the past several weeks, the impact for many is just starting to show up on the bottom line.
Since the application of the new Additional Handling fee could equate to a 30 percent rate increase or more on certain package sizes, that impact can be massive for those with packages in this range.
For example, a shipper with 200 packages/day that now fall into the $16 Additional Handling Charge would be subject to over $800,000/year in increased rates from new Additional Handling fees alone if it did nothing to their box size(s).
Zone-Based Additional Handling is Coming
And in a new twist, come April 2021, Additional Handling Charges will become zone-based with UPS, which means that the longer the shipment zone, the greater the Additional Handling Charges will be. FedEx is expected to follow this new method of applying zone to this size-based surcharge as well. Therefore, new calculations will need to be done to account for zonal charges as well.
The Bottom Line
Given the integrated carriers’ current constraints with regard to capacity, which in turn have increased overall shipping rates and surcharges, a detailed review of package sizes is one way to take control over shipping costs.
If this is something your organization hasn’t reviewed recently and in depth, it could be a way to make a huge impact to your organization — and its bottom line.
*DIM Factor — this is the common denominator used by FedEx and UPS to determine the weight at which to calculate Billed Weight. The current published DIM Factor for both carriers is 139 for domestic express and ground packages. The calculation is Length x Width x Height/139. The greater of the actual weight or the dimensional weight is the weight at which the package will be invoiced or the Billed Weight.