Supply chain logistics are important for all businesses that ship goods. It’s important that they know exactly where their products are going, how long it will take, and how much it will cost. However, the last of these three points might be the most vital to success.
This year, shipping costs will significantly increase thanks to new rules from FedEx and UPS regarding dimensional weight. Dimensional weight refers to the amount of space that a package takes up, not its actual weight. For 2015, UPS and FedEx are both changing their policy on dimensional weight measurements for ground packages, a move which is set to have a significant economic impact on businesses that ship their goods.
How are Dimensional Weight Regulations Changing?
Historically, dimensional weight was a shipping measurement that UPS and FedEx only charged for when packages were larger than three cubic feet. This meant that not every shipper had to be concerned about dimensional weight.
In 2015, however, UPS and FedEx have both announced that they will begin subjecting all ground and air packages to dimensional weight regulations. The reason for this is that the two major shipping companies found that when loaded, their trucks were reaching their full-volume capacity sooner than their weight capacity, leading to missed opportunities to include shipments on trucks.
This rate change is one of the biggest in the history of both FedEx and UPS. It should have a significant impact on both eCommerce business practices and customer buying habits.
How will the New Regulations Impact Shipping Costs and Logistics?
According to The Wall Street Journal, the packages that will be most impacted by these new shipping rates are the ones that take up a lot of volume but are not very heavy, such as diapers or toilet paper. Their research indicates that the price to ship a 32-pack of toilet paper, for example, could increase by as much as 37%.
The biggest issue that is yet to be determined is who is going to absorb these costs. With research showing that high shipping costs are already a leading contributor to abandoned eCommerce shopping carts, retailers may be hesitant to increase shipping prices and risk alienating more prospective customers.
Another concern regarding the new rates is what kind of impact they will have on supply chain logistics from the manufacturing and shipping side. In the interest of saving time and maximizing their manpower, many companies that ship smaller packages don’t bother recording the dimensions of the packages as well as the weight. As a result, they may have trouble properly calculating their shipping costs, which can wreak havoc on their forecasting capabilities and cut into profit margins.
It is still too early to tell how the majority of shippers and consumers will react. Some large-volume shippers may try to arrange a special deal with UPS or FedEx, while other companies may simply take their business to a logistics company with more favorable policies. Be certain that you stay on top of how supply chain logistics are impacted by this change so that you can make the right decisions for your company in light of this new shipping rate.
About Michael Wilson
Michael Wilson is AFFLINK'S Vice President of Marketing and Communications. He has been with the organization since 2005 and provides strategic leadership for the entire supply chain team. In his free time, Michael enjoys working with the Wounded Warrior Project, fishing, and improving his cooking skills.