Logistics News: What Can You Do About Rising Shipping Costs

Just about everyone who ships anything is facing higher and higher shipping cost.  For some they have about doubled in recent months.  Escalating fuel cost is a contributing factor that is expected to continue well into the foreseeable future.  With no relief in sight, and no way to pass the increases on to customers, shippers are looking for ways to get some control over this rising cost dilemma?

For well over a year now many carriers including, UPS, FedEx Ground, and DHL have been calculating ground shipping charges for larger-sized packages based on dimensional weight referred to as “DIM weight”.  For these carriers, if the package size is 5,184 cubic inches (three cubic feet) or greater, DIM weight may apply; otherwise the actual weight (whichever is greater) is still the billable weight (smaller volume packages are billed at actual weight alone).  For package shipments within the USA, you calculate the DIM weight by divide the cubic size in inches by 194 and rounding up to the nearest whole number.

Here are a few retail examples of how this can affects shipping cost:

• A 20 lb. box measuring 24” x 24” x 20” under the old definition would have been classified as OS1 and cost $10.05 to ship.  Based on DIM weight calculations, the same package has a Dim weight of 60 lbs. and will cost $16.54 to ship.  That’s an increase of 65%!
• A musical instrument retailer formerly shipped two guitars together in a large box, which under the old system was less expensive than shipping each separately.  Now under DIM weight rates, shipping the guitars individually is more cost effective.
• Based on the DIM weight system, many ground packages that weigh less than 30 lbs. ship at weights greater than 30 lbs.
• In some situations there may be confusion resulting in some level of frustration. This occurs when the shipper manifests low-density freight by weight only, and the carrier later dimensions the freight so that a more accurate, DIM weight based tariff may be applied.  When this happens, the shipper has no option but to absorb the additional carrier imposed back charges, which can rarely be reclaimed by the shipper from the customer and can amount to significant, unnecessary costs.

As the volume of packages subject to DIM weight rates increases, so will shippers’ need to obtain precise information on weights and dimensions of packages leaving their DCs with parcel and express carriers.

How can DC Managers Combat this Problem?

With the growth in the small-parcel business due to catalog and internet shopping, DC managers can control shipping cost by packing or re-packing shipping cases more densely so that actual weight, not DIM weight, becomes the billable weight – which equates to more bang for your shipping buck.

There is a vast range of dimensioning technology and systems available to assist in this effort, such as ultrasound, lasers, vision/CCD cameras and infrared light, to scan an item or package length, width and height.  This technology can be combined with others, such as barcode scanning systems, label printers and in-line or static weighing systems to provide a complete dimensioning, weighing and tracking system.  Once you know the cube and weight of each item on a customer’s order, the data then can be sent to a real-time host system or to a warehouse management system to automate the calculations and determine the most economical shipping case size based on DIM weight pricing.

Of course the cost of deploying automatic or semi-automatic cubing and weighing technology depends on many factors.  However, industry reports indicate that most systems pay for themselves in months by reducing the labor cost and eliminating the inaccuracies associated with hand weighing and measuring.  In addition, back-charging bills from carriers will be greatly reduced.

The job of building pallet loads can also be made easier with dimensional data.  Identifying and sorting the heavier cases first and placing them on the bottom of a pallet, with lighter items above can speed up the process.  Information on case dimensions can be used to provide slotting and picking strategies to provide workers with a case palletizing sequence that assures a tight, stable load making it more likely to be able to double stack loads in the container or onto the trailer.  In addition, pallet weight and cube information can be used to determine the most efficient loading pattern when loading pallets onto a trailer.

You Can Teach An Old Dog New Tricks

Dimensioning systems are not new.  My research revealed that the Department of Defense commissioned the first systems in the mid 1980 to optimize storage at its supply depots.  Twenty eight years later, it has evolved into a tool that can do much more than just optimizing storage at a warehouse.  Now, this “born-again” technology can prove invaluable in helping assure that the proper shipping charges are passed on to customers.

Agree or disgree with our expert's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.