Update on FedEx and UPS Dimensional Weight Changes.
With carriers looking to recover higher cost by moving a greater number of online orders, the announcement on rate changes from FedEx comes as a surprise for eCommerce shippers and carriers. Additionally, FedEx’s dimensional weight (DIM) changes, decreasing divisor to 139, has resulted in the increase of shipping cost of millions of online parcels.
While announcing its rate increase late last year, UPS refrained from taking a similar action as FedEx, but it did leave the door open for any such steps by the year end. Now after a period of three months of the FedEx announcement, UPS has announced a similar move, decreasing divisor to 139, with exemptions for domestic parcels measuring not more than one cubic foot.
The new proposal came into effect January 8th 2017. UPS will follow in the footsteps of FedEx by levying additional handling charges on any shipment measuring more than 48 inches in one side. Additionally, UPS will raise the over-maximum package charge to $150, exempting shipments by UPS Freight.
Come February 6th 2017 and the U.S. fuel surcharge from UPS will be changed from monthly to weekly. FedEx Freight’s extreme length surcharge has been effective since January 2nd 2017 onward, which will be applicable to orders with dimensions of 12 feet.
Besides, there will be a rise in the UPS fuel surcharge on imported orders. These shipments will not be assessed as part of the U.S. export fuel surcharge.
As a result of these announcements, there is a significant rise in the cost of shipments, which is the highest in history. However, there is still a disparity among published rates, fuel surcharges, dimensional weight policies, and accessory related charges between FedEx and UPS. This further complicates things for shippers when it comes to making an accurate comparison between both.
Impact of the Announcements
Experts still do not see any adverse effect of the dimensional weight changes on the business of both FedEx and UPS, with little to no migration to other carriers.
There are a few parcel shipping consultants that believe that merchants should better consult their carrier representatives to conduct a “dilution study” to understand how the latest changes will impact their business. This will help them plan accordingly, especially those retailers that offer free shipping.
With a rise in transportation cost, profit margin for a shipper is eroded so much so that even the slightest change in shipping cost has the potential to turn into a significant loss. The impact can be visualized only until the first quarter ends after the full implementation of the changes.
The majority of eCommerce shipments weigh less than 13 lbs., which means they will bear the brunt following the latest announcement from FedEx and UPS. Shippers need to redesign their packaging following the announcement from UPS, as eCommerce shipments tend to be small, less dense, and over-packed.
Experts believe that the FedEx changes, particularly the dimensional weight changes, are expected to help improve revenue based on the smaller, less dense online packages.
Here are more Shipping and DIM (Dimensional Weight) Pricing posts to read.
The 411 on DIM – What is Dimensional (DIM) Weight Pricing?
Shipping Tips – 3 Quick Tips: 3 Shipping Tips for Your eCommerce Business.
Should you offer FREE or FAST Shipping? – Free Shipping Versus Fast Shipping for eCommerce.