UPS has just announced that it will be joining FedEx in its move to dimensional weight shipping pricing for its ground services (cue the consensual groan from etailers and retailers alike). Like FedEx, UPS ground prices will now be based on the higher of two calculations, dimensions (LxWxH) divided by dimensional factor or weight. So what does this mean exactly? To clarify, FedEx ground currently charges dimensional weight pricing only to packages measuring three cubic feet or greater but effective January 1, it will apply to all packages.  UPS also already applies dimensional weight pricing for UPS air services (domestic and international), UPS Standard™ to Mexico ground services and for UPS® ground packages and UPS® Standard to Canada packages measuring 3 cubic feet in size or larger. Effective December 29, 2014, dimensional weight will be utilized to calculate the billable weight of a shipment on all UPS ground services and UPS Standard to Canada packages. UPS Chief Operating Officer Alan Gershenhorn said in a statement, “UPS has been researching the potential expansion of dimensional-weight pricing for a number of years because it enables us to more appropriately align rates with costs, which are influenced by both the size and weight of packages.” According to a press release put out by UPS, “The company believes that as a result of the dimensional weight pricing method, more shippers will seek to optimize their packaging practices. These efforts will reduce excess packaging materials and overall package sizes, leading to related reductions in fuel use, vehicle emissions and transportation costs.” Jerry Hempstead, president of Orlando, Florida-based parcel consultancy Hempstead Consulting, said it best when he told Supply Chain 24/7, “This is a very big change in pricing. There is no additional cost for the carrier. There is no additional service they are adding. They are just going to charge more for that which they have been doing for years.” Retailers need to recognize the affect this will have on their business as this is the most dramatic increase in shipping costs we’ve seen in 15 years. Small to medium sized businesses will be most affected as they’ll likely need to adjust their pricing to make up for the increase in cost. Here are a few things for retailers to consider:
  • Consider diversifying your shipments with a provider who offers a solution  that does not charge for dimensional weight to offset the costs associated with a national carrier (you don’t have to put all your eggs in one basket)
  • Work with an end-to-end solution provider with the expertise necessary to offset additional fulfillment and shipping costs
  • Be sure to educate your team on fulfillment logistics that are affected by this price change (box selection, etc.)
  • Require transparency in billing from your carrier to avoid costly mistakes
Changes to UPS and FedEx pricing won’t be instated until the end of 2014 (December and January respectively) but now is the time for retailers to reevaluate their shipping strategies and prepare for the holiday season and beyond. There are other options out there and retailers should not feel stuck in the UPS/FedEx box.