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Preparing for UPS and FedEx Dimensional Rate Changes in 2017

Successful Business ResultsExpert Insights into the Impact of UPS and FedEx 2017 Rate Changes on Your Freight Budget

Now that UPS has changed its dimensional pricing rules in a similar fashion to FedEx, how will this play out for shippers and their transportation budgets? We invited one of our partner experts, David Faour, Sr. Director of Strategy & Analytics for Shipware, to weigh in. 

Effective January 8, the dimensional divisor was reduced from 166 to 139 for all packages over 1728 cubic inches or one cubic foot. Packages below this will be rated using the dimensional weight factor of 166.

As a reminder, parcel carriers multiply a package’s length, width, and height, then divide by a dimensional divisor and round up. Carriers such as FedEx and UPS charge the shipper the amount for whichever is higher – the actual weight or dimensional weight.

The lower the divisor, the greater the impact it has on pricing. Conversely, the larger or higher the dimensional divisor is, the less impact it has. For customers with less dense, large packages, this change will certainly increase the actual price hike.

Following are examples of potential price increases that will result for various shipping scenarios and sample box configurations.

Dimensional Weight Factor, the Stealth Price Increase

The table below illustrates significant increases in billable weights for UPS packages over one cubic foot, and for all FedEx packages. (Note that this change will not immediately impact customers with custom dimensional weight factors in their contract.)

Fig 1. Top 25 Box Sizes & Minimum Billable Weights by Dim Divisor

Top 25 Box Sizes chart
Click to enlarge.

Consider a UPS Zone 5 shipment of 15 lbs. and measuring 18x12x12 or 2592 cubic inches.

  • Effective January 2, this box is now being billed at 19 lbs, 3 lbs. higher than the 16 lb bill weight based on 2016 rules.
  • At list prices, the net increase for this package ranges from 8.48% to 20.17%, which is much higher than the announced “average” rate increases.

Fig 2. Combined Impact of GRI and Dimensional Changes at List Rates. FedEx, Zone 5 18x12x12.

GRI and Dimensional Changes at List Rates. FedEx, Zone 5 18x12x12 chart
Click the diagram to enlarge it.

Let’s look at the same package, with example discounts for a mid-sized shipper.

Fig 3. Sample Discounts for a Mid-Sized Shipper

Sample discounts for a mid-sized shipper chart
Click the diagram to enlarge it.

Fig 4. Combined Impact of GRI and Dimensional Changes With Discounts. FedEx, Zone 5, 18x12x12.

GRI and Dimensional Changes With Discounts. FedEx, Zone 5, 18x12x12 chart
Click to enlarge

Applying the discounts has reduced the dollar amount, while the percentage price increase remains the same.

The next chart shows how prices change for this shipment beginning with the 2016 rate with a 166 dim factor, adding:

  • The GRI – the 2017 rate for the same weight, and
  • The cost of the dim weight – or the difference between 19 and 16 lbs for 2017, which is 3 lbs.

Fig 5. Contribution of Dimensional Weight and GRI to Total Price Increase. UPS, Zone 5, 18x12x12.

Dimensional Weight and GRI to Total Price Increase. UPS, Zone 5, 18x12x12 chart
Click the diagram to enlarge it.

With smaller box sizes, UPS offers lower pricing than FedEx in 2017. Consider a Zone 5 box measuring 12x12x12. If you’re shipping via FedEx, this box will be charged a minimum of 13 lbs. compared to 11 lbs. for UPS – since UPS shipments under 1 cubic foot are not subject to dimensional pricing in 2017.

Fig 6. Comparative price increase from 2016 to 2017 FedEx vs UPS. 12x12x12 Zone 5 shipment with actual weight 10lb.

price increase from 2016 to 2017 FedEx vs UPS. 12x12x12 Zone 5 shipment with actual weight 10lb chart
Click the diagram to enlarge it.

The FedEx price increases are more marked due to the higher required bill weight for boxes under one cubic foot (1728 cubic inches).

Summary

Managing transportation spend in 2017 is more complicated than ever. Consider these examples of the changes:

  • FedEx and UPS 2017 published rates are no longer at parity. Different dimensional pricing rules now apply for FedEx and UPS:
    • For FedEx, the dimensional weight divisor has reduced from 166 to 139 for all shipments.
    • UPS reduced dimensional divisor to 139, but only on shipments larger than 1 cubic foot.
  • Fuel surcharges do not match.
  • Fuel surcharges will be subject to weekly adjustment. This is in effect for both UPS and FedEx.
  • For all shipments, the AHS size threshold reduced from 60” to 48” for both UPS and FedEx.

For both FedEx and UPS, expect to see surcharge increases for AHS, Address Correction, Dangerous Goods, Delivery Area Surcharges, COD, Signature Options, Oversize Package, Residential Delivery and many more.

  • Surcharges no longer match for FedEx and UPS.
  • AHS and new dimensional rules to apply to UPS SurePost.

With all these changes, it is now more difficult than ever for shippers to easily compare UPS and FedEx pricing and services. Also, since not all shipments impacted in the same way, it’s important that shippers are clear on the differences between UPS and FedEx and thoroughly model the impact of all carrier pricing changes to their unique distribution.

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Logistyx Technologies is a provider of carrier-agnostic e-commerce fulfillment software and shipping software solutions that enable shippers to manage all their small parcel, LTL postal, regional, national and international carriers on one platform. We also help companies automate their reverse logistics process for greater efficiency and lower cost. Contact us today. 

We would like to thank our partner, Shipware, and David Faour for sharing their expertise with our readers. David Faour has earned an MS in Computer Science from the Georgia Institute of Technology, an MBA from the University of Florida, and a BS from the University of Central Florida. David welcomes questions and comments and can be reached at 858-879-2020 Ext 107 or david@shipware.com.

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