Use Fulfillment Service to Negotiate Shipping Prices

Fulfillment Service and Shipping Prices

In previous articles,  annual shipping cost increases have been discussed and provided were some useful tips on packaging optimization and how to work with your fulfillment service house in order to effectively manage the higher costs. This week, the topic will be continued by discussing yearly contract negotiation to focus on the importance of the dimensional factor that is being applied to your shipments through a fulfillment service.

While negotiating contracts with your carriers and fulfillment service, it’s not enough to focus on just the price that you’re paying on a rate sheet.

You also need to pay close attention to the dimensional factor that is being applied to your shipments. The dimensional factor, or DIM, is a number your carrier uses to assess the effective weight of a shipment based on its density, and it can be adding more to your total cost than you may realize. Basically, the dimensional factor is the amount of space the package takes up per pound, in a truck or a fulfillment service warehouse. If this weight is heavier than the actual weight of the package, your carrier will charge you according to the higher weight.

To make this concept a little easier to grasp, we’ll pretend we’re shipping 10 pounds each of bricks and feathers. Ten pounds of bricks can easily fit into a 10x10x10 box, making the volume of that box 1,000 cubic inches. If you divide the cubic inches  bya the 2011 domestic dimensional factor of 166 – – your dimensional weight is about 6 pounds. Because this is lower than the actual weight of the package, your charge would be rounded up to the 10-pound rate.  Now, consider you’re shipping 10 pounds of feathers. This would require a much larger box, say, 15x15x15 inches. If the dimensional factor remains the same, and your volume is 3,375 cubic inches, the dimensional weight would then be 21 pounds. Although you’re shipping the same actual weight in feathers as you are bricks, you would  be charged at the higher 20-pound rate due to the dimensions of the package.

THE REASON CARRIERS USE DIMENSIONAL FACTORS IS OBVIOUS. EACH TRUCK HAS A FIXED AMOUNT OF SPACE, AND THEREFORE CAN ONLY FIT SO MANY PACKAGES PER RUN. IN ORDER TO PROTECT THEIR PROFITABILITY, CARRIERS HAVE TO CHARGE A HIGHER PRICE FOR A LARGE BOX OF FEATHERS THAN A SMALL BOX OF BRICKS, REGARDLESS OF THE FACT THAT THEIR WEIGHT IS THE SAME. ALTHOUGH  THE STANDARD DIMENSIONAL FACTORS  ARE DETERMINED BY THE CARRIERS EACH YEAR, IT IS POSSIBLE TO NEGOTIATE A BETTER RATE. THIS IS PARTICULARLY TRUE IF YOUR COMPANY SHIPS A SIGNIFICANT AMOUNT OF PACKAGES THAT ARE FREQUENTLY BEING ASSESSED AT A DIMENSIONAL FACTOR. WHILE YOU CAN UTILIZE PACKAGING OPTIMIZATION TO REDUCE DIMENSIONAL FACTOR-RELATED COSTS, ONE OF THE BEST POSSIBLE OPTIONS YOU HAVE IS TO HIRE A 3PL FULFILLMENT SERVICE COMPANY TO HELP YOU ANALYZE YOUR UNIQUE SHIPPING CHARACTERISTICS AND/OR TO CONSULT YOU REGARDING CONTRACT NEGOTIATIONS.

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