Spend Matters welcomes another guest post from Jim Haller of NPI, a spend management consultancy focused on eliminating overspending on IT, telecom, and shipping.
Last week, UPS announced that it will move to dimensional weight pricing for all ground shipments in 2015. You can read more here. This move isn’t shocking – FedEx made a similar announcement just six weeks ago, and the industry has been waiting for UPS to follow suit.
For certain packages, the impact of UPS’s changes is huge. For lightweight shipments in packages less than three cubic feet, the price increase could be 30 percent or more. As we noted when FedEx announced their dimensional weight pricing in May, many shippers won’t be able to handle these cost increases without passing it on to their customers – especially those in industries like retail, where margin is razor thin and consumers are accustomed to low-cost or free shipping options.
If you are using FedEx or UPS ground services to ship in 2015, you need to do the following things immediately:
Analyze the short- and long-term effect of changes to dimensional weight pricing and fuel surcharges. Define how these changes will affect your shipping costs in 2015. While you are at it, be sure to also factor in average increases to general rate, surcharge, and accessorial costs that occur every year like clockwork.
Tune your packaging. If the DIM weight change is going to affect you, you have runway before the changes take effect to explore and implement packaging alternatives that minimize the cost increase. So make that a priority. While it may be disruptive operationally, it is worth noting that in addition to potentially neutralizing the carrier price moves, condensing excess packaging is a good thing for capacity.
Quantify carrier cost-to-serve. Uncover where UPS and/or FedEx is making excess margin based on your unique shipping profile and behavior. Use this information to optimize your carrier relationships.
Explore hybrid alternatives. There are some good hybrid service offerings that can be used to ship affected packages. Examples include FedEx Smart Post, UPS Sure Post, DHL Global Mail and regional couriers.