The implementation of dimensional (DIM) weight pricing by the parcel services shook up shipping forever. The new algorithm no longer charged businesses to ship based on how much their packages weighed, but instead by how much space they took up in their trucks.
Overall, this generally increased the prices for shipping—eating into margins for eCommerce sales. Not only was the new pricing model expensive, but it was more complicated. There’s math involved, and if you really want to ship as cheaply and efficiently as possible, you probably need to spend some time playing around with box sizes and what products can fit where to get the best deal.
However, just when you thought you’d cracked the code to DIM pricing, the parcel services are shaking it up again. They realize that they’re in a lucrative industry. As your eCommerce business booms, so does their business. They’re changing the algorithm, and ultimately, it’s going to cost you more.
Luckily, we have all the information you need to tackle this head on and hopefully turn it around in your favor.
A Refresher Course on Dimensional Weight Pricing
A package’s dimensional weight, or DIM weight, is calculated by multiplying the package’s length, height, and width, and then dividing it by the parcel company’s DIM factor. The equation looks like this:
(L x H x W) / DIM
Eg. (12 x 12 x 12) / DIM
What is the advantage for the parcel services of starting to price packages like this? Well, for them, it is about the space they have to transport your packages and goods. As the eCommerce industry has boomed, parcel services have realized that their transportation is a huge part of the economy. And with that, they realized that it is not so much about how much the packages weigh anymore, but how much precious space these packages take up on their ever-growing routes.
DIM pricing allows the parcel services to price packages based on their cubic volume, or how much room it will take up in a parcel company’s van or truck.
Now, a lot of people think “Well, I ship small and light things, so this doesn’t really affect me.” However, that’s a common misconception. Let’s look at it like this. Say you’re shipping a new, ultra-light carbon fiber motorcycle helmet in a 12” x 12” x 12” box. Between the helmet, box, and packing filler, the total actual weight of the parcel is 5 pounds.
But with DIM pricing, that doesn’t mean that your parcel will actually be billed at 5 pounds, as they will also take into account cubic volume. So, let’s say the DIM is 166:
DIM Weight: (12 x 12 x 12) / 166 = 10 pounds
Actual Weight: 5 pounds
It’s also good to know that, in the end, the parcel services have no problem moving their DIM pricing aside if they can squeeze more money out of you.
For example, let’s say you’re shipping a 50-pound kettlebell. The kettlebell is relatively small, fitting into a nice 12” x 12” x 14” box. so the DIM weight will actually be lighter than the weight of the package.
DIM Weight: (12 x 12 x 14) / 166 = 12 pounds
Actual Weight: 50 pounds
In the end, the parcel service will charge you for the actual weight over the DIM weight, pretty much just because they can.
The New 2017 Dimensional Weight Pricing Rules
DIM pricing was introduced back in 2015, and after two years of testing out their new methods, the parcel services realized they could improve (on their margins, that is). So, they’re switching up their old algorithms, meaning that all of your old calculations, calculators, and tricks to make the system work in your favor aren’t going to work.
However, don’t fret. Red Stag Fulfillment understood the frustration for those with eCommerce businesses and decided to create an easy-to-use DIM weight pricing calculator to help you figure out the new prices, and hopefully find a way to make the pricing work for you and your business.
Along with this helpful tool, Red Stag also explains the new changes and how they’ll affect pricing this year.
FedEx DIM Pricing
FedEx has changed its DIM factor from 166 to 139. This may sound like a good thing, but if you remember your math from school, this means that DIM weights are actually going to be heavier than they were last year.
For example, in 2016, if you shipped a 10” x 10” x 10” package that weighed 5 pounds, your old DIM weight calculation would be: (10 x 10 x 10) / 166 = 7 pounds dimensional weight. You would be charged for shipping a 7-pound package, since the DIM weight is greater than the actual weight.
With the new DIM factor at FedEx, the dimensional weight of that same package is now 8 pounds: (10 x 10 x 10) / 139 = 8 pounds. In this case, your FedEx shipping charges would be based on the DIM weight of 8 pounds, since it’s greater than the actual weight.
FedEx has also switched up its base billing rates, giving UPS a small price advantage in Zones 2 through 4.
UPS DIM Pricing
Then there’s UPS, which has kept its DIM factor the same at 166, but only for packages under 1,728 cubic inches—which is a standard 12” x 12” x 12” box. Now, as of 2017, parcels bigger than that will use a DIM factor of 139.
For example, if you shipped a 10” x 10” x 10” package that weighed 6 pounds, your UPS DIM weight calculation would be (10 x 10 x 10) / 166 = 7 pounds dimensional weight. You would be charged for shipping a 7-pound package since the DIM weight is the same as the actual weight. This is the same shipping charge as last year. For this package, UPS’s DIM weight is 1 pound less than FedEx’s DIM weight.
However, a package carrying that same 6-pound item in a less-optimal 12″ x 12″ x 14″ box would see the UPS DIM factor drop to 139, causing the billed weight to increase to 15! For example: (12 x 12 x 14) / 139 = 15 pounds.
UPS has also changed its base billing rates, giving FedEx a slight edge over them in zones 5 through 8.
Now, Here’s How To Make The New DIM Work For Your Business
The new DIM pricing isn’t the end of the world. It is not going to take your booming business down, but it can affect your margins if you’re not smart about it. So take the time to understand how the math works. Be sure to understand all your options.
- Try reducing the parcel size
Not everyone can pull this off, but re-evaluating your box sizes and packing methods may help you fit more product in smaller boxes, which could bring down your DIM price
- Negotiate your DIM factor
Yes, you absolutely can negotiate DIM pricing. If your business is putting out a large volume of parcels per day, you have some good leverage to negotiate your DIM Factor with FedEx and UPS. Once again, try to remember your lessons from high school algebra. The larger the denominator, the smaller the solution. That means that you should negotiate that DIM factor back up closer to the original factor of 166 that it was back in 2015.
- Consider partnering with a 3PL
A strong third-party fulfillment partner has probably already negotiated a much better DIM factor than what you can get because they put out so much. Depending on the negotiating skills of the 3PL, partnering with them could essentially eliminate the downsides of the DIM factor altogether.
Okay, Get To Work!
Remember to use the new pricing calculator, go over all the math, and review all your options, and you will tackle these new DIM prices with ease.