If you use FedEx or UPS to ship products to customers locally, regionally or nationally within the U.S., then you are probably aware that the volumetric divisor has been lowered — and this will drive up your shipping costs.
The volumetric divisor is used to calculate the dimensional (DIM) weight of parcels shipped domestically. In 2011, FedEx pegged the divisor at 166. However, as of 2017, it dropped to 139 – which is nearly a 20 percent plunge. Along the same lines, UPS has reduced its divisor for shipments that are bigger than one cubic foot.
As noted above, this change will lead to higher shipping costs. What’s more, as in the past, many smaller businesses that do not have a lot of negotiating leverage will bear a disproportionately higher cost burden. On a hyper-competitive landscape, this could result in a spike in shipping costs that erodes already thin profit margins, and in some cases, could force smaller firms to shutter certain products since it is no longer viable to deliver them (at least not to all areas of the country).
Fortunately, there are some proven strategies and best practices that can help you reduce rate hikes caused by DIM weight changes. These include:
● Optimize Packaging
Remember, DIM is a matter of dimensional weight – which means larger packages cost more to ship simply because they’re bigger, and not because they are heavier. As such, it is important to optimize how you pack items. This may include using smaller boxes or reducing filler that is not having a significant impact on protecting packaged goods.
● Innovate Packaging
Are you sure that you are using the most innovative packages to ship your products? Analyze this to ensure that this is the case. For example, some packages that are suitable for store displays are not necessarily the most efficient for shipping ( regarding packing material and overall size ).
● Re-examine Your Shipping Options
Looking at options like multi-carton shipments could help you save money. This would allow you to combine packages when shipping items of 200 pounds or more to a single location on the same day. Also, keep in mind that some parcel consolidation services (e.g. FedEx Smartpost) have not increased their DIM weight threshold.
The Bottom Line
In addition to the above best practices, it can also be highly beneficial to work with you order fulfilment company, who will help you mitigate or, better yet, offset these cost increases by helping you find new efficiencies, and take advantage of viable and practical options. If you are already working with a partner and they are not providing you with the results and relationship you expect, then it may be time to make a change. Your business’s success — and perhaps survival — may depend on it.