July 5, 2010
Every shipping department and mailroom needs a measuring tape and a scale. The reason is that in order to calculate the correct postage or shipping charges, you have to know the DIM factor.
A DIM Factor is an acronym for Dimensional Weight Factor. It is a mathematical factor for calculating the dimensional weight of a package. UPS, FedEx, DHL, the US Post Office, and some regional carriers use dimensions as a factor in determining the cost to send a package. For example, the USPS has a DIM factor of 1 cubic foot or 12″ x 12″ x 12″. If a package exceeds a cubic foot in volume, instead of the weight of the package, they use the volume of the package to rate it.
Here are the steps for a 12 ” x 12″ x 13″ package:
- Multiply 12 x 12 x 13 = 1,872.
- Next, divide the total by 194. 1,872/194=9.65.
- Round up the result to the next whole number to get the dimensional weight of the package. 9.65 = 10 pounds.
- If the dimension exceeds the actual weight, you would use this number to calculate the shipping charges. So, in this case, even if you had a 5 pound box, (which is what happened to me) you will be charged for a 10 pound box.
For more information on how USPS calculates dimensional rate, click http://www.usps.com/prices/USPS_prices_dw_pop.html
For UPS, click http://www.ups.com/content/us/en/resources/prepare/dim_weight.html#How+To+Measure+the+Cubic+Size+of+Your+Package
For the FedEx dimensional weight calculator, click http://fedex.com/be/tools/dimweight.html
For the DHL dimensional weight calculator, click http://www.dhl-usa.com/IntlSvcs/dimweight/dimweight.asp?nav=Inttools/DimWeiCal
The USPS has a different factor than UPS and FedEx for domestic packages. You should compare rates between carriers based on package dimensions. For USPS, if the result exceeds 1,728 inches, you must use the dimensional weight. For UPS and FedEx, if the result exceeds 5,184 inches, you pay the dimensional weight.
Domestic is different than International. Here are the current factors:
- Domestic you divide by 194
- International you divide by 166
June 17, 2010
In my last post I challenged you to figure out why the USPS was more money for a light-weight residential package weighing five pounds. Congratulations to Steve Foster of the US Post Office. He noticed that the dimensions of my package were 12 x 12 x13, which put it in the category of a Large Package. The USPS charges more for packages that are larger than one cubic foot. So in my case, if that package were just 1″ smaller, it would have only cost $11.76 and the USPS would have been my least expensive carrier. That one inch cost and extra $9.59!
The lesson learned is this: when you are comparing rates and services amongst various carriers, make sure you include the dimensions of the package. Failure to do so will cost you plenty!
April 24, 2010
What do you hate about your parcel carrier? The number one complaint about UPS and FedEx was accessorial charges. (Morgan Stanley Parcel Annual Best Practices 2009 Survey)
Accessorial charges are better known as surcharges, additional charges, ancillary fees, or adjustments. There are more than 90 of these add-on charges! Here is a link to the UPS 2010 Surcharge and Accessorial Price Increases.
The survey also found that in 2009, 11.5% of the overall transportation costs were for accessorial charges. What are these charges? Here are the top ten:
- Fuel Surcharges
- Address corrections
- Residential delivery
- Delivery Area Surcharges
- Rural Area Surcharges
- Dimensional charges
- Saturday delivery
- Declared value (insurance)
- Additional Handling
- Large Package
The big reason why businesses hate these charges is that most of these additional charges are not included in the published price and are added to your bill after you have shipped the package, making it difficult if not impossible to recoup from your customers. If you are processing your packages using technology, you have to correctly maintain your technology and enter all the data fields. As you may recall from my last blog entry, How Are You Losing Money in Shipping?, one of the reasons a client was losing over $100,000 a year in shipping because the person processing the packages was not entering the dimensions of the packages in the carrier’s shipping system.
How can this happen you wonder?
In this particular case, the problem was that my client had outsourced her shipping to a third party logistics company. I called them to find out why they were not entering the dimensions and was told that they didn’t do it because dimensional rating was only for air shipments, not ground. They are wrong! This was a company that bragged about their expertise in shipping packages that had been doing this for 30 years and they did not know that UPS and FedEx charge based on the dimensions of the package for ground shipments as well as air! Here is the link to how to compute a dimensional weight, A Quick & Easy Way to Calculate Dimensional Weight and also here is a link, Parcel Shipping Ain’t Easy, to a very funny video about it. My client was depending on an expert and the expert didn’t know that they didn’t know!
April 10, 2010
Are you throwing your shipping dollars down the toilet?
As you may recall from the last post, I met with a client that was surprised when she discovered that she was losing over $100,000 a year in shipping. It did not seem possible because they were billing their customers for shipping at the published rate that the carrier charged. Let me provide a specific example, they shipped a package UPS 2nd Day Air and the published charge was $34.25; the billed charge was $26.71 because they have negotiated a 22% discount with UPS (which is poor but we will leave that for another time). So logically, you would think that they made a $7.54 profit on shipping this package, which would be great. However, on the UPS invoice there was an adjustment of $19.16. This additional charge shows up on the invoice after the package the shipped and after the customer was invoiced. So the result was that instead of making $7.54, this company lost $11.62 on this package!
Let’s look deeper and discover how and why they are losing money.
The first step is to review the carrier’s detailed invoices. In our example, we see that UPS made an adjustment. This additional charge shows that the package was re-rated at 14 pounds and it says Dimensions =20 x 15 x 9. What that means is that this package was charged based on the dimensions, not the weight. Let’s look further.
The next area to examine is what the shipping system computed for the shipping charge. In this case, my client has a UPS WorldShip software program for processing shipments, sometimes referred to as a shipment execution system or a manifest system. You can generate a report from this system or lookup a specific transaction. We researched the UPS 2nd Day Air package in question and saw that according to the UPS shipping system, it cost $34.25. So what was the difference? Why was my client charged $19.16 more?
- The person that shipped the package did not enter the dimensions of the package and the parcel carrier based its charge on the package dimensions. For details on how parcel carriers compute this type of charge, see my previous post, A Quick & Easy Way to Calculate Dimensional Weight. These type of errors occur because the person does not know to enter the dimensions or skipped it for some reason. It is generally a process error or training issue. If they had entered the dimensions, the system would have computed the correct base charge, but there was another problem.
- The UPS WorldShip did not add the 7% fuel surcharge to the published charge. Why? Because it was not setup properly so that the fuel surcharge is added to the base charge; this requires a knowledgeable person to configure the shipping system and to constantly maintain it!
The consequence was that my client was not really charging their customers the correct published charges because the shipping system was not properly calculating the rates due to setup and processing errors. The customers are invoiced based on data from the shipping system, not the actual invoices. Accessorial charges come after the customer has been charged. In this case, it was 33%of the published rate!
How to audit your parcel shipping:
- Review the Delivery Service Invoice item by item from your carrier; find all shipping charge corrections or adjustments.
- Research all adjustments by comparing the invoiced amounts to the charges in the shipping system.
Find out why they are different and fix the system, create a process, and or train the operator.
To be continued…