All FedEx Ground Packages Now Subject to Dimensional Weight Pricing.
Effective January 1, 2015, FedEx Ground will apply dimensional weight pricing to all shipments. Currently, FedEx Ground applies dimensional weight pricing only to packages measuring three cubic feet or greater...Dimensional weight pricing is a common industry practice that sets the transportation price based on package volume—the amount of space a package occupies in relation to its actual weight.
Can you recall the last time a major small package carrier in the US made a pricing announcement for the upcoming rate increase eight months early?
I can’t either. There is a very calculated reason why FedEx decided to make this announcement on a Friday afternoon in early May, which will indeed have catastrophic rate impacts on nearly all of their customers. They wanted it to get buried. They certainly don’t want their customers to remember this announcement come January when the new rule actually goes into effect.
What is the dimensional weight pricing rule FedEx will put into effect?
Simply put, packages less than three (3) cubic feet will now be subject to dimensional pricing when they were previously exempt. What does that mean? First, let’s forget about cubic feet and look at these packages like we all look at our packages, in cubic inches. The new rule reads: packages less than 5,184 cubic inches are now subjected to dimensional weight pricing.
Previously, only ground packages over 5,184 cubic inches were subject to dimensional pricing. Every package less than 5,184 would simply get rated at the actual weight of the shipment. For example, a 14x15x17 package weighing 9 lbs would get charged the 9 lb rate because it is only 3,570 cubic inches, less than the old trigger point of 5,184 cubic inches. At a zone 8, that package would have a list cost of $12.88. With the new rule in place, the total cubic inches will be divided by the dimensional factor of 166 yielding a dimensional weight of 22 lbs, for a list cost of $24.65. That is an increase of 91.4%!
Sure, that example may be on the extreme end of the spectrum, but it is a real world example and you most likely will have packages that fall into that extremely high increase. Basically, all packages over 166 cubic inches will now be susceptible to dimensional pricing. A 1 lb package with 5x6x6 dimensions will now be billed at 2 lbs. Of course, for those with discounts, that package probably won’t show a monetary increase as they will both be charged the minimum rate. For those of you with packages in the 2,000 to 5,184 cubic inch range are the most vulnerable to this change.
We have a dimensional factor adjustment in our contract, am I still affected?
YES! You are still affected, but your dimensional factor adjustment will certainly lessen the blow. If you have a custom factor of 200, for example, you will still apply that to all packages under 5,184 cubic inches. In our previous example, the factor of 200 will dim the package out to 18 lbs, instead of 22 lbs, but still much higher than the 9 lbs you were previously being billed.
This change is so dependent on your actual box sizes that every single shipper will experience a different level of this increase, but you will all experience it. The following chart shows the new automatic billable weight that packages at different cubic inch sizes will be charged. Take a few of your current boxes and actual weights, and see how many more pounds you will be billed with this new rule by plotting it on this chart. Multiply the length by the width by the height to calculate cubic inches of your package. Our example box of 14x15 x17 (3,570 cubic inches) at 9 lbs can be seen below.
I can’t either. There is a very calculated reason why FedEx decided to make this announcement on a Friday afternoon in early May, which will indeed have catastrophic rate impacts on nearly all of their customers. They wanted it to get buried. They certainly don’t want their customers to remember this announcement come January when the new rule actually goes into effect.
What is the dimensional weight pricing rule FedEx will put into effect?
Simply put, packages less than three (3) cubic feet will now be subject to dimensional pricing when they were previously exempt. What does that mean? First, let’s forget about cubic feet and look at these packages like we all look at our packages, in cubic inches. The new rule reads: packages less than 5,184 cubic inches are now subjected to dimensional weight pricing.
Previously, only ground packages over 5,184 cubic inches were subject to dimensional pricing. Every package less than 5,184 would simply get rated at the actual weight of the shipment. For example, a 14x15x17 package weighing 9 lbs would get charged the 9 lb rate because it is only 3,570 cubic inches, less than the old trigger point of 5,184 cubic inches. At a zone 8, that package would have a list cost of $12.88. With the new rule in place, the total cubic inches will be divided by the dimensional factor of 166 yielding a dimensional weight of 22 lbs, for a list cost of $24.65. That is an increase of 91.4%!
Sure, that example may be on the extreme end of the spectrum, but it is a real world example and you most likely will have packages that fall into that extremely high increase. Basically, all packages over 166 cubic inches will now be susceptible to dimensional pricing. A 1 lb package with 5x6x6 dimensions will now be billed at 2 lbs. Of course, for those with discounts, that package probably won’t show a monetary increase as they will both be charged the minimum rate. For those of you with packages in the 2,000 to 5,184 cubic inch range are the most vulnerable to this change.
We have a dimensional factor adjustment in our contract, am I still affected?
YES! You are still affected, but your dimensional factor adjustment will certainly lessen the blow. If you have a custom factor of 200, for example, you will still apply that to all packages under 5,184 cubic inches. In our previous example, the factor of 200 will dim the package out to 18 lbs, instead of 22 lbs, but still much higher than the 9 lbs you were previously being billed.
This change is so dependent on your actual box sizes that every single shipper will experience a different level of this increase, but you will all experience it. The following chart shows the new automatic billable weight that packages at different cubic inch sizes will be charged. Take a few of your current boxes and actual weights, and see how many more pounds you will be billed with this new rule by plotting it on this chart. Multiply the length by the width by the height to calculate cubic inches of your package. Our example box of 14x15 x17 (3,570 cubic inches) at 9 lbs can be seen below.
Contact an AFMS Vice President, Managing Director, or Sales Associate to schedule a complete Dimensional Weight New Rule Cost Impact Analysis and get ahead of the curve before this rule goes into effect at the start of the year.
AFMS - 1.800.246.3521
AFMS - 1.800.246.3521