Are You Packing for Success? Overwhelmed By Parcel Shipping Claims?
When thinking logistics, there are plenty of things to be aware of throughout the shipping process. However, how your cartons are packed should be close to the top of the list, as the wrong choice can take an unexpected chunk out of your profits. With parcel shipments outpacing other forms of freight 10-to-1, space has become a premium. Parcel and LTL carriers have responded by expanding dimensional-based (DIM) rating policies making it harder to quote accurate shipping which leads to higher parcel shipping claims.
Add the fact that shipping costs are rising at twice the rate of inflation, and it is more important than ever for warehouse personnel to pack or palletize orders in the most transportation cost-effective way possible to avoid any unnecessary DIM fees.
How DIM rating works
DIM weight rating is the pricing technique carriers use to determine shipping costs based on weight, distance, and carton size instead of just weight and distance. DIM weight is calculated by multiplying the length, width, and height of a package and then dividing that result by a special number known as a “dimensional weight divisor,” “DIM divisor,” or “DIM factor.” The shipping cost is priced according to the higher of either the DIM weight or the actual weight. In 2017, FedEx and UPS lowered their standard DIM factor from 166 to 139 making it more likely that shipments are subject to DIM rating. The U.S. Postal Service applies DIM factors to Priority Mail shipments to zone 5 and beyond. Although larger shippers may have the leverage to negotiate higher DIM factors due to their volume, most shippers can no longer afford to ignore how they pack cartons.
Unfortunately, it’s difficult on your own to know what to expect for DIM charges. Too often shippers have relied on guesstimates and rules of thumb for shopping cart rate calculations, order entry shipping quotes, and order packing processes in fulfillment. The problem with that is, guess wrong and not only do you risk a tremendous impact on the prices you are paying to ship items—and your profitability– but the impact on the receiver’s experience as well.
Below are three of the most common mistakes made by shippers when trying to fake it until they make it around DIM rates.
Go big or go home
Almost everyone has received a package stuffed with paper, bubble wrap, air pillow, and even Styrofoam peanuts surrounding an item that could have safely been packed into a carton half the size. When shippers pick boxes that are too large for the order, it can impact your profits by dinging your bottom line with DIM fees. But, there is more damage done in the way of wasted materials, environmental impact, and damaged items. While these may not impact profits as directly as DIM fees, they can have a tremendously negative impact on the customer’s overall experience costing you your reputation as well as customer retention and referral opportunities.
Big things come in small packages
One reaction a shipper may have to the DIM rating challenge is to overreact. Often, shippers decide to use small cartons to pack items. However, this can result in higher costs because each box has a minimum cost associated with it. There are some cases where it is cheaper to go with a larger box with a higher DIM rating than shipping multiple small boxes. Of course, the challenge comes from figuring out the best way to ship and estimating shipping charges early in the process during order entry or packing in fulfillment. Again, beyond the higher monetary hit to the budget this makes, unclear upfront costs can lead to cart abandonment and unhappy customers that wind up with multiple cartons to recycle.
You better shop around
Much like looking for the best insurance coverage or other services and products for you and your business, shopping around can find you the best value when it comes to shipping and carrier DIM rates. Carrier DIM weight shopping takes into account and compares the different rates and DIM factors for multiple carrier services.
There is no doubt about it. As the demand for parcel shipments continues to grow, and more customers expect free or low-cost shipping, the time for guesswork has passed and the time for a cost-effective cartonization process is here.