At the end of this month, when FedEx and UPS begin charging delivery fees based on package dimensions, delivery costs for companies that use these carriers could increase up to 30%.
Since the 1930s, most carriers calculated shipping rates based on a carton’s weight vs. the distance it was being shipped. But FedEx, UPS and other carriers will begin charging based on a carton’s dimensions, or “dim pricing“, instead.
About 77.9% of businesses that ship products to consumers and 76.9% of businesses that ship to other businesses are expected to be effected by the change.
Packaging Inefficiencies
Many companies use between 5 to 12 sizes of shipping cartons to ship most of their products. But under this dim pricing, these companies may end up paying more because carton space not containing products are filled with air pillows, kraft paper, foam peanuts and other shipping materials that help protect the carton’s contents.
But some companies are responding to this new “dim pricing” model by turning to on demand packaging.
Custom-Made Cartons Per Package
On demand packaging involves using specialized machines that build a carton that closely matches the dimensions of the product or products to be shipped in it. This helps keep the box as small as possible, reducing its dimensions and saving on shipping costs under the new dim pricing model to be used by FedEx, UPS and other shippers.
Surge in Interest in On Demand Packaging
Packsize International is a Swedish company that specializes in on demand packaging. The company’s CEO, Hanko Kiessner, said his company has seen a huge increase in inquiries in the wake of the dim pricing announcements.
“Making the box on-demand as part of the packaging process eliminates guesswork,” Kiessner said. “There is almost no material handling other than replenishing the corrugated at the machine. Designing and implementing the system focuses on attention on the process details, wasted movement is stripped away, and best practices are identified and standardized.”
Benefits of On Demand Packaging
On demand packaging has many benefits besides lowering dim pricing shipping costs:
- Eliminated box/packaging inventory
- Reduces corrugated costs
- Cuts or eliminates costs for packaging materials such as bubble wrap, paper and foam peanutes
- Reduces waste
- Helps reduce on-hand inventory
- Minimizes damage due to shipping
- Improves customer satisfaction
- Speeds up productivity
- Improves throughput
Brandon Brooks, VP of strategy and marketing at Packsize, said the company hopes to capitalize on the increased demand for on demand packaging by installing its machines in its client’s facilities for free.
“The user pays only for the corrugated material,” Brooks said. “It’s a low-risk way for users to try out on demand packaging, plus helps us better align with our customers’ needs.”
Dim Pricing Here to Stay
Dim pricing is partially the result of new technological breakthroughs. It uses three-dimensional scanners to measure the size and shape of a package, which is then used to calculate how much the shipper should charge based on how much space the package will take up in the vehicle. That allows shippers to charge more and still be able to maximize the space in cargo holds.
“Dim” machines will be used by FedEx and UPS beginning later this month, and other of the world’s biggest carriers — including YRC Worldwide, Old Dominion and Saia — may soon follow suit.