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UPS & FedEx Price Increases

Posted by Naruby Schlenker on

What You Need to Know About UPS & FedEx Price Increases in 2015

by Naruby Schlenker

fedex_price_increases

Did you know that UPS and FedEx are revising their pricing for ground delivery for 2015? Let’s take a closer look at what’s happening to make sure you are prepared for the change.

First, lets understand the concept of dimensional weight pricing.

Carriers determine shipping-rate based not only on distance and weight, but also the box size. Let’s consider two scenarios:

  • You have a huge box that weighs just 1 lb, but takes up a lot of room in a delivery truck
  • You have a small box that weighs 5 lbs, but takes up very little room in a delivery truck

In the second scenario, with the smaller the box, delivery companies can fit more packages in a truck or a plane and thus the smaller box is more cost effective for the shipper. To incentivize using smaller boxes to ship, despite the heavier weight, FedEx and UPS charge a premium for bigger boxes – and that’s dimensional weight pricing.

The Change

Up until 2015, UPS and FedEx waived dimensional weight pricing for packages measuring 3 cubic feet or less. In 2015, dimensional weight pricing will apply to all Ground shipments.

What does this mean in plain English?

Say you ship a box that measures 12” x 12” x 12” (ie. one cubic foot) and weighs 4 lbs. Until 2014, you would pay the rate for shipping a 4 lbs package. From 2015 onward, you will pay the rate for the dimensional weight of 11 lbs*. The same package just got ‘heavier’ by 7lbs!

Why the change?

Ecommerce shipping trends have resulted in a decrease in package density thus increasing the costs per package – think big boxes with lots of packaging material that don’t weigh much but take up lots of cargo space. Shipping carriers have reacted to this by removing the 3 cubic foot exception to align rates with costs and to incentivize shippers to optimize their packaging practices.

What can you do to prepare for the change?

* Dimensional weight of a 12” x 12” x 12” box weighing 4 lbs = (12 x 12 x 12)/166 lbs, where 166 is the dimensional divisor