'We actually need to do something with our packaging process, but we don't have time for that right now'. A commonly heard answer to the question of whether distribution centres are already ready to start working with customised packaging. Yet the day is approaching when these companies will face high costs. Major parcel services such as FedEx and UPS have already introduced dimensional weight pricing for ground transportation in America. Here, not only weight plays into the rates, but volume also becomes an important calculation factor. What does this mean in practice?
Now, transport costs are mainly based on weight, with generous volume tiers applied in addition. With the Dim Weight calculation, volume becomes an important calculation factor in transport costs, so far in America this applies to all parcels >1 m3 . The reason for the introduction of Dim Weight for ground transportation is mainly the booming e-commerce market. This challenges shippers to optimise packages in size. This new development means that transport costs for packages with a lot of air will become significantly more expensive, especially for light products.
Also read: What you need to know about DWP: parcel shipping price based on size rather than weight
It was only formally revealed in September 2014 that FedEx and UPS were going to implement this new calculation in North America from 1 January 2015. Only four months time to adjust the packaging process? In practice, not an easy, or impossible, task. The big distribution centres think it will not be such a big deal because they have made good and clear agreements with their parcel services. But what will it really look like if the big parties decide to make DIM Weight the standard for ground transport in Europe? Then transport costs could rise as much as 60%. This will be at the expense of the margin on the product, resulting in!
What to do in preparation?
- Use a box that fits the contents exactly, or a customised box. Make sure you do not transport unnecessary air or padding materials along, as this leads to extra costs. Nowadays, there are so-called Box On Demand systems, which allow you to produce a box with complete flexibility in terms of size and box type when it is needed. With a calculation tool, you can determine for yourself whether such a system could be interesting at the moment. Note that this assumes current transport rates, so with the introduction of Dim Weight, the ROI becomes even more favourable.
- Uses letterbox boxes if possible, to require transport costs
- Engage with the parcel service(s) in good time, to conduct and record any negotiations and agreements in good time. The DIM factor is negotiable in many cases.
- When applying a customised box, in many cases it is advantageous to apply pick to box, minimising the number of operations, resulting in savings in time and labour costs.
- Are you dealing with pallet loading, then the optimal loading needs to be revisited as the size of parcels changes.
- How to deal with pricing towards the customer? The shipping structure needs to be adjusted to the new calculation including volume.
- Check with various parcel services to see what the rates are like. Some parcel services are cheap in small door-to-door parcels and others focus on the large parcels delivered B2B.
Don't be surprised by a development you know will be implemented here too: Dim Weight Pricing. Despite explosive growth and high workloads, this topic cannot fade into the background.
This article comes from guest columnist Peter de Martines, packaging expert and owner of Cretech BV. It also previously appeared on PackagingProfs.
