It is a challenging time for manufacturers and retailers that must fulfill e-commerce orders faster and faster without compromising accuracy or economy.
Members of the Order Fulfillment Solutions (OFS) Industry Group of MHI provide order fulfillment solutions to these challenges by helping to manage rising transportation costs, improve channel strategies, create deeper visibility into the supply chain and develop automated material handling capabilities that can enhance speed and accuracy.
This year, FedEx and UPS both announced major pricing changes. As of January 1, 2015, FedEx will apply dimensional weight (DIM) pricing to all shipments. UPS will introduce DIM pricing on December 29.
DIM makes it expensive to ship air inside oversized cartons, a common order fulfillment practice. “Estimates indicate that you will see price hikes of 25 to 30 percent rise in FedEx and UPS shipping costs,” says Ed Romaine, vice president of marketing and chief marketing officer with OFS member Integrated Systems Design (ISD).
“It changes the game,” he continues. “Shippers will have to get the air out by using bags, a larger variety of box sizes or on demand box creation. Those that don’t will see a serious decline in profitability.”
As difficult as DIM is going to be for shippers, there may be a small benefit. Both FedEx and UPS are adopting DIM pricing to reduce the use of oversize packaging. As packaging gets smaller, more packages can fit into trucks.
Trucks that carry more material will reduce the number of trucks and drivers required for shipping. As you may know, trucking firms have battled a driver shortage for years. That affects trucking capacity. The Great Recession made matters worse by driving many smaller trucking firms out of business. These two trends have combined to severely cut trucking capacity—making it necessary to pack more materials onto fewer trucks.
By Michael Fickes