Like other shippers across North America, Andrew Moonilal of Deeley Harley-Davidson Canada was forced to take a greater interest in the weights and dimensions of packages shipped from the company's DC last January. That's when major ground parcel carriers—among them FedEx Ground, UPS, and DHL—changed the way they calculated shipping charges for large, low-density packages.
That change had major implications for Deeley Harley-Davidson Canada, which is the exclusive distributor of Harley-Davidson and Buell motorcycles, apparel, parts, and accessories in that country. The company ships close to 1,000 packages from its Concord, Ontario, DC each day, 85 percent of which are tendered to small-package carriers.
What made things complicated for the distributor is that its products vary widely in size and density. Goods shipped from the DC, which handles some 15,000 stock-keeping units, range from dense items like motorcycle batteries to bulky but lightweight items like Harley-Davidson jackets. "A box can contain a T-shirt, a battery, or spark plugs," says Moonilal, who is senior manager of operations at the DC.
And that's where things can get tricky—particularly if the package is light and bulky. Under the carriers' new dimensional weight, or "dim weight," rules, a shipper tendering a large, low-density package must determine both the package's weight and its dimensional weight. If the dimensional weight exceeds the physical weight, that becomes the basis for the freight charge. Dimensional weight is calculated by multiplying the pack age's length by its width by its height and dividing by 194 (or by 166 for Canadian shipments) to arrive at the dimensional weight in pounds. The dimensional weight rating also applies to any package in excess of three cubic feet or 5,184 cubic inches. That would be, for example, a box measuring three feet long by a foot high by a foot wide.
It's important to note that the net effect of the rules change has not been an across the-board rate increase. Although costs rose for light, bulky products, shippers have found that they declined for some denser, heavier shipments.
But the advent of dim weight rules has undeniably changed the economics of shipping. That's led many shippers to rethink their shipping patterns—changing packaging, consolidating orders, and so on to minimize transportation costs. Shippers have also been forced to take on the added responsibility of obtaining precise information on package weights and dimensions to ensure that their shipments are properly rated. If their ratings are incorrect, shippers risk being hit with charge-backs and penalties.
A whole new dimension
With the new rules looming, Moonilal says his immediate challenge was to find a way to get a better handle on shipping costs. "We needed to capture the density of our shipments and better understand our freight mix," he says. In particular, he wanted a way to obtain information on package weights and dimensions internally, with less reliance on data from the carriers. He also wanted to bring greater awareness of freight costs to distribution center employees.
Moonilal's solution was to buy a "cubing" or "dimensioning" system, a device that automatically determines the dimensions and weights of parcels and pallets. These days, his DC is using a cubing system developed by ExpressCube, a Mississauga, Ontario-based manufacturer of dimensioning and weighing equipment. "We run everything through it," he says. "It tells us what boxes we are putting less weight in and if the cube is greater than the weight."
This was not Moonilal's first experience with dimensioning equipment. He says that his previous employer made regular use of the equipment. "When I came to this company, I said there is a lot to be learned from understanding cubing," he says. That included exploring ways to reduce shipping costs, better understand the freight spend, and assuring that carrier charges are accurate.
His goals now are to ensure that shipping personnel use the best box for a shipment and take the time to determine if additional goods destined for the same dealer can be added to a particular box. "We look at how goods are packed and if there are voids where we could fit more product in," he says. "It helps us with package processing, and it helps us determine if we have enough weight or too much weight."
Moonilal adds that he considers the dimensioning system "a real good education piece. It helps us understand the freight we are putting out the door."
While he notes that his company has a ways to go before it's taking full advantage of the information provided by the dimensioning system, Moonilal reports that the distributor's freight spend has already dropped. In particular, he says, reweigh bills from couriers have fallen by 85 percent. "As our packaging management gets smarter, that will bring more savings," he says. "I can almost guarantee that by spring, we will have the machine paid for."
High interest rate
Moonilal is not alone. Since the new dim weight rules took effect in ground transportation at the beginning of the year, shippers have shown "significant interest" in dimensioning systems, says Randy Neilson, director of sales and marketing for Quantronix. Based in Farmington, Utah, Quantronix markets the Cubiscan line of cubing and weighing equipment.
Though dim weights aren't exactly new—dimensional weight charges have been used in the air transportation industry for years—Neilson says many shippers found the transition rough and, sometimes, expensive."What shippers are finding out as they ship packages is that UPS and FedEx Ground are beginning to dimension those and shippers are getting charge-backs," he says. "They have already billed their customers, so they have to absorb the difference. That can amount to a lot of money—thousands of dollars a day."
The ability to capture accurate dimensional information allows shippers to both understand their true shipping costs and bill their customers correctly, Neilson adds. "Shippers have to understand that [under the new system,] they could have significant increases in shipping costs,"he says."If you have those, you want to be able to pass them on to consignees. If you don't have a dimensioning system, you are going to be missing some extra shipping costs."
Ignorance and confusion aren't the only potential problems for shippers. If their parcels are close to hitting the point where dimensional weight may exceed the actual weight, shippers have little choice but to measure any parcels outside of standard-sized cartons. And that can be cumbersome: On its Web site, Mettler Toledo, a Columbus, Ohio-based manufacturer of weighing and cubing equipment, cites cases of customers who had employees devoted to measuring packages with tape measures before they converted to automated cubing equipment.
Along with bringing clarity to the process and streamlining operations, dimensioning equipment can also help shippers identify opportunities to save on shipping charges. "Take, for example, a shipper sending a package that exceeds the three-cubic-foot requirement," says Neilson. "That potentially can be dim'ed for additional freight charges. But if you can pick a smaller package, maybe you can save yourself or your customer some money on freight."
Gartner, Inc.