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UPS and FedEx using DIM Weight (Dimenional Weight) Pricing

What is DIM Weight Pricing?

Larger e-commerce retailers have been prepared for this for a long time. Smaller organizations, probably not so much and it’s likely to hurt their bottom line because they will not be able to immediately switch their packaging materials and processes. This is good news for USPS though, who is still shipping based on weight and announced some price cuts, in July (2014), to target e-commerce.

DIM-Weight

The new Dimensional Weight (DIM Weight) Pricing is calculated on the measurements of the package, not it’s actual weight. DIM pricing was previously only used by FedEx and UPS for packages larger than 3 cubic feet. Now, it’s being used for all packages. UPS Ground started the new pricing Dec 29, 2014, and FedEx began using it Jan 1, 2015.

“We believe this (dimensional weight pricing) will encourage customers to reduce their package sizes,” Bill Smith, UPS vice president of marketing, told Reuters.

You are buying space on their trucks and planes. I would like to imagine that you can get a discounted rate for have a partially rounded package to better fit in the cylindrical cargo-hold of their 757’s.

I do want to know if they will then calculate all the packages sizes and print some sort of planogram for them to pack the truck perfectly …

… or will it be standard pack-and-go like these two?

How to Calculate DIM Weight Pricing

How to Calculate DIM Pricing
Example: Shipping a 1 lb. package using UPS Ground

Step 1: DETERMINE PACKAGE CUBIC INCHES

Box size: length x width x height = total cubic inches of package

Example: 12″ x 12″ x 8″ = 1,152 cubic inches

Step 2: DIVIDE CUBIC INCHES BY DIM DIVISOR

Divide total cubic inches by DIM Divisor, which is a set number determined by each carrier. Here are DIM divisors for the three major US carriers:

UPS – 166 domestic, 139 international
FedEx – 166 domestic, 139 international
USPS – 194 domestic, 166 international
Example: 1,152 / 166 (for UPS) = 6.93, or 7 lbs.

Step 3: DETERMINE THE SHIPPING RATE

If DIM weight is greater than the actual weight of the package, you will be required to pay the DIM weight, not the actual weight.

Example: 1 lb. package from Los Angeles to Atlanta (Zone 8)

12″ x 12″ x 8″ = 1,152 cubic inches / 166 = 6.93 or 7 lbs.
1 lb. actual weight cost = $10.70 UPS Ground
7 lbs. DIM weight cost = $14.39 UPS Ground <<< you pay this amount
Extra cost for DIM = $3.69

What’s the next step for these Major Shippers?

My prediction is that in a few years, when they still aren’t making enough money to appease their higher-ups and share-holders, they will implement pricing based on demand much like Hotel and Airlines do now. Holiday season shipments will cost more because the space on their trucks and planes is much more precious now. There will be peak and off-peak pricing all year long, it will fluctuate day-to-day and we will see some cool websites and apps come out of it, like skiplagged.com – maybe SHIPLAGGED.com?



Sources:
Packed UPS Truck image from Reddit: http://www.reddit.com/user/mattfuckingwaters
http://www.stamps.com/whitepapers/how-to-calculate-dim-weight-guide.pdf
http://www.dailyfinance.com/2014/12/31/fedex-ups-recalculate-raise-rates/

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