Dimensional weight changes to affect LTL shippers in 2015
Domestic LTL and integrator shippers will feel a change in 2015 as dimensional pricing impacts shipping costs.
International shippers by air and sea have always been acutely aware of the fact that the weight of their package and its size always determine the chargeable weight for a shipment. For air freight, the formula is length x width x height / 366 = chargeable weight (in kilos). For less than container load sea freight, it is whether or not the shipment weighs more than 1000 kilograms per cubic meter. If so, then a higher rate would apply based on the metric ton, as opposed to the cubic meter.
What is dimensional pricing?
Dimensional pricing is the practice of setting the shipping weight based on the package volume. Shipping costs are anticipated to rise by an estimated 20 to 30 percent in 2015 and affect more than 70 percent of shipments. A first cousin of dimensional pricing, LTL pricing by class (a calculation that also includes factors such as stowability, liability value and handling) also is being evaluated by many of the top nationwide LTL carriers because the complexities and rules do not benefit their customers, especially as supply chains are more global in nature and simplifying the formulas for calculation will ultimately make it easier to calculate price and last mile costs when delivering B2C shipments. A link to how UPS calculates their dimensional weight can be found here.
Picking for consumer delivery is unique.
Companies like Wal-Mart and Ikea have driven cost out of the supply chain by getting their vendors to rethink packaging with an eye to reducing wasted space in the shipping packages and maximizing space inside a trailer. As anyone who has ever received a container from Asia of product and seen how it’s loaded; floor to ceiling, nose to tail; every cubic inch is maximized because the more items that can be squeezed into a container and shipped, the lower the landed cost per unit.
Now look at a distribution warehouse that is picking orders, for instance for an eCommerce company, of items of different sizes and shapes. There can be dozens, maybe even HUNDREDS of boxes that pickers can choose from based on the size of the order. If your warehouse person is an accurate picker, but a bad volume estimator, today it just means an oversized carton; but come January, it means extra shipping costs.
The best solution: Technology to help your people.
KFS invests both in our people as well as our technology, and we know that just trying to “eyeball” something isn’t always the most accurate means of solving the problem. We work with our customers to determine shipping carton sizes and weights, as well as within our domestic distribution network, to insure that the best way to manage deliveries to customers is by reducing unused space in packaging and taking advantage of domestic LTL to the last possible mile, allowing for the most efficient and cost-effective solution to be selected and deployed.