OMNICHANNEL SUPPLY CHAINS & UPS RATE ACTION

UPS follows FedEx action to charge dimension freight.  This pricing act will impact omnichannel / ecommerce firms and their supply chains.


UPS to charge dimensional weight, follows FedEx

Tuesday, June 17, 2014

By Jon Ross

In a much-anticipated move, UPS announced Tuesday it will shift to a dimensional weight calculation on ground services starting Dec. 29, bringing the rest of the company in line with pricing for UPS air services and UPS ground services for shipments measuring more than three cubic feet.
In early May, FedEx said it will change to a dimensional-weight policy on Jan. 1, 2015.
Dimensional weight pricing charges shippers what their packages would cost under full density instead of the actual weight. The practice has been used for some time in the air cargo industry and for boxes of a certain size on the ground. Both integrators have pointed to a decrease in package density coupled with an increase in package size as a reason for the change.
In the June issue of American Shipper, Jaris Briski, general manager of integrated parcel solutions at GENCO, said using FedEx’s dimensional weight calculations could increase a package’s landed cost by 50 percent. BB&T Capital Markets undertook an analysis on the FedEx change and found that the pricing switch will generate annual operating-income growth of $180 million.
"UPS has been researching the potential expansion of dimensional-weight pricing for a number of years because it enables us to more appropriately align rates with costs which are influenced by both the size and weight of packages," Alan Gershenhorn, UPS executive vice president and chief commercial officer, said in a statement.
BB&T's Kevin Sterling said everyone knew this announcement was coming and that some shippers have been preparing for what most have seen as an inevitable development.
"I believe shippers have already been looking at optimizing their supply chains, reducing packaging size," he told American Shipper. "I do think shippers are breathing a small sigh of relief that UPS is not implementing this change before peak season and that the implementation date is Dec. 29."
FedEx is slated to report its earnings Wednesday.