Parcels Losing Weight
It’s nearly two-thirds into 2007 and shippers are still trying to get a handle on how to handle dimensional rate pricing for parcel shipments.
UPS announced the plan late last year and rolled it out in January, granting some shippers waivers that have just ended. FedEx, DHL and even the U.S. Postal Service soon followed suit.
Dimensional pricing is likely to further fade the line between air express and ground parcel service. The new metric also could affect trucking operations and alter freight classification standards as the express and parcel carriers look to bring the disciplines of that side of the business into their growing less-than-truckload subsidiaries.
Whether they take a dim view of the changes or not, shippers are already adjusting their shipping patterns to pare down what could be large cost increases under older standards.
UPS contends dimensional costing offers shippers something they’ve clamored for – a simpler pricing method. Dim-weight pricing, the company says, more accurately reflects the true costs for handling and delivery.
Some industry analysts say the impact of the new pricing standard has yet to be fully felt.
For shippers, say the experts, the issue is entirely about dimensions of the impact the changes will have on their costs.
Tim Sailor of Navigo Consulting, which advises parcel shippers, predicted some shippers would see their costs rise by large percentages. For example, a 50-pound Oversize-2 tier box costing USD 27.73 to ship under the old system would be about 75 pounds under dimensional-weight shipping, and the shipping cost would rise by nearly a third to $36.43 – about 30 percent more.
On its Web page, Home Harvest Garden Supply says an oversize package measuring 12 inches by 24 inches by 36 inches that weighed 20 pounds previously would have been billed at an oversize 30 pounds rate by UPS.
That same package will now be billed at 54 pounds.
For some, that means setting new calculations on what mode to use.
“Shippers also tell us that they have diverted as many hundredweight shipments as possible to LTL carriers until the parcel carriers are willing to give greater discounts on dimensional weight pricing,” Greene said in his parcel report.
Shippers may use various tactics to minimize the impact, and most will absorb the higher costs over time.
Still, Jindel says, the ripple effect over time may turn out to be greater than the immediate impact on shipping boxes this fall. It would help eliminate differences between express and ground services in pricing and accessories, he said, which could lead to a single parcel service without a distinction between ground and express.
