Is Dimensional Weight Pricing Coming to All Modes of Shipping?
If your company has noticed an increase in the dollar amount of your shipping invoices over the last few years, dimensional weight pricing (DIM) might be to blame. In 2014, UPS and FedEx began charging for shipments based on DIM weight. This pricing change had a significant impact on companies that ship large, lightweight residential and commercial packages. It was not long before other carriers started rolling out this type of pricing.
What Is DIM?
Dimensional weight pricing enables carriers to price based on package volume, the amount of space a package takes up in relation to its actual weight. This discourages shippers from sending large parcels that contain mostly air or light packing materials, which is unprofitable for carriers since these types of shipments take up a lot of room.
DIM is a calculation of the length multiplied by height and width and divided by a DIM factor. The DIM factor is a constant number that is set by the carrier. The billable weight is either the dimensional weight or the actual weight, whichever is greater.
LTL Follows Suit
Following UPS and FedEx’s lead, many freight companies now use DIM to calculate the price of lightweight packages, especially for LTL (less-than-truckload) service. The use of DIM weight pricing in LTL services has created freight classes that are determined by weight and the space occupied on the delivery truck. This eliminates the age-old issue for LTL carriers in which lightweight packages take up space in the trucks, but cost way less to ship.
Many carriers, such as FedEx Freight, YRC Worldwide, and Old Dominion, are investing in three-dimensional size measurement capturing machines that will more accurately charge shippers based on the dimensions of their shipments.
With volume playing a bigger role in LTL shipping, costs have risen by 20% or more for some shippers that use LTL carriers. When added to the annual base rate increase, fuel surcharges, and other fees, shipping fees have increased by 30% for some.
DIM Weight Pricing Benefits
The growth of the e-commerce market combined with driver shortages has left many carriers with serious capacity issues. The expectation is that this pricing model will alleviate some of the hits carriers have taken in recent years.
Carriers view DIM weight pricing as a way to encourage shippers to use efficient packaging and maximize the use of existing capacity. Some carriers have even allowed shippers access to their packaging research to help them optimize packaging. This pricing model is also a way to cut fuel costs and ease the burden on an already taxed trucking industry. This is on top of the anticipated revenue from the profit the price increase will bring.
Dimensional weight pricing will eventually spread across the majority of transportation methods. The reduction in fuel costs, vehicle emissions, and transportation costs will be seen by many carriers as an incentive to adopt this pricing method.