How to save on shipping costs
Small businesses should consider best practices to optimize the shipping processes and find methods for how to save on shipping costs. One such consideration is how to address DIM weight. DIM weight could mean added shipping costs – but there are ways your business can save money
How to Save on Shipping Costs: Tackling the little item, big box scenario
Have you ever ordered a fairly small product online weighing only a few ounces, and it appeared on your doorstep in a much larger box than you expected?
But, sure enough, when you open the box, it is the item you were expecting, economically wrapped in a thin layer of plastic. Unless the item is fragile, it can be confusing to receive what seems to be an unnecessarily large box. Let’s use the example of a box that is 13 x 7 x 5 inches, with a single item inside measuring 6 x 4 x 1 inches. If you did the math, you could probably fit several of your purchases in that same box.
However, fitting as much product as physically possible into a box isn’t necessarily the best way to ship items, but it is still surprising to see a big box when you aren’t expecting a big purchase inside.
What is DIM weight?
Dimensional weight, commonly referred to as DIM weight, is a way for shipping providers to calculate shipping costs. DIM weight is primarily based on how much space the package takes up. In other words, DIM weight relies mainly on size, not actual weight. DIM weight is used to calculate shipments that are less than three cubic feet.
To calculate DIM weight, the dimensions of a package (length x width x height) are divided by 166. DIM weight is rounded up to the nearest number. As an example, let’s use the box mentioned earlier, which was 13 by 7 by 5 inches.
According to DIM weight, the package you received would have been charged at 3 pounds. This is because the result of the DIM weight calculation, 2.74, would have been rounded up to the nearest pound. However, the product itself only weighed a few ounces. So, the merchant you ordered from ended up paying shipping for a 3 pound shipment, even though the contents only weighed a few ounces.
This is a prime example of the types of shipments that are most affected by DIM weight: large volume, lightweight shipments. In most instances, DIM weight will increase the amount charged per shipment.
If you qualified for free shipping on your purchase, that means the merchant incurred the shipping charges for this bulky shipment. The merchant could have maximized their profits simply by using a smaller, volume-appropriate box to ship the item in.
How to save on shipping costs: How DIM weight affects businesses
UPS and FedEx both implemented DIM weight pricing in early 2015. This means the 2015 holiday season would be the first holiday season with DIM weight pricing in effect. DIM weight pricing affects many businesses, with B2C businesses affected most.
According to an article in the SupplyChainBrain (“How the New UPS and FedEx Pricing Formula Is Affecting Shippers”), to mitigate the effects of DIM weight pricing…
– 59% of businesses said they would consider alternative shipping options
– 20% said they would pass on the shipping charges to customers
– 10% said they were exploring new or small types of packaging
Small businesses that don’t have large shipping budgets will easily see the effects of dim-weight pricing. So the question becomes: How can small businesses reduce the impact of dim-weight pricing?
How small business can save on shipping costs
Practical Ecommerce’s Ignite 2015 conference hosted many sessions on how businesses can optimize their shipping practices. Here are some of the best tips from the conference. This will be especially beneficial for businesses using UPS and/or FedEx impacted by DIM weight pricing.
Your business may consider using USPS if not already doing so. For the most part, USPS is a cheaper option than using private shipping carriers. USPS also has options such as special handling for fragile items, shipping insurance, and signature confirmation. You can also request a pick-up for free via the USPS website. USPS is also a great source for packaging and packing materials.
- Optimized packaging/materials
Finding more optimized packaging and packing materials, such as smaller boxes or padded envelopes, is one of the best ways to reduce shipping costs. There are also customized boxes available for odd-sized items. Finding boxes and materials that are more appropriate in size for shipping your products will reduce shipping costs by shrinking its DIM weight. Plus, those on the receiving end may appreciate less bulky boxes and shipments.
- Shipping software
Shipping software is another shipping alternative to consider. Depending on the volume and types of shipments your business deals with, shipping software could not only save your business money but also time.
- Regional carriers
Regional carriers usually have less distribution points. This allows them to get shipments to their destination faster and for cheaper. According to an article in the Wall Street Journal (“A New Threat to UPS and FedEx”)…“Regional shippers typically can get a package between two points in one region—from New York to Boston, for example—faster than their national counterparts, and they are able to price shipments 20% to 40% below the national shippers because of their lower costs.”You may have to do some research on the regional carriers in your area(s), but they may be a cost-effective option for your business.
- Contract negotiations
It’s worth contacting your preferred shipping provider(s) about contract negotiations, especially if you ship in high volumes. Some shipping providers may be able to work out a deal based on your business’ standing and/or shipment volume. In some instances, prepaid contracts can be negotiated, which will prevent your business from the effects of any further shipping charge increases until the contract expires.
If your business has lots of inventory and many orders to fulfill, it may be worthwhile to look into partial or full 3PL. Depending on your industry and order volume, 3PL may reduce the amount of time, effort, and money your business allocates for order fulfillment. Learn more about 3PL in a blog article by Acctivate Onboarding Specialist Brad Bearden.