Ever been confused about the various rules in LTL shipping? Cubic capacity and Linear Foot rules were always somewhat confusing, but now that carriers are taking a strong look at dimensional pricing shippers are faced with new challenges.
Imagine you need to use a carrier’s LTL shipping services. Your package is approximately about one cubic foot. Next to you, another shipper is sending a package that is more than double this size. Now, you would think the other larger package is going to incur the higher shipping cost. However, your current package weighs 600 pounds, and your counterpart’s package weighs 230 pounds. If both packages were assigned purely on weight, you could end up paying more, even though your package is technically smaller. So how does this change with LTL dimensional pricing?
This just does not make common sense, and carriers are moving towards a dimensional pricing model (DIM pricing) to help level the playing field when shipping products of different weight and density. Essentially, smaller packages should have lower shipping costs than larger packages in LTL shipping, and DIM pricing enables this ideal.
At NASSTRAC’s 2016 Conference, the CEO’S of some of the largest LTL trucking companies said that the debate over dimensional weight pricing has shifted from if to when it will be applied to LTL freight. Right now, dimensioners are being used in many LTL terminals to check freight classification and rebill shipments, but eventually these will enable dimensional pricing in place of class-based rates. This equipment can scan a palletized shipment and provides the cubic dimensions and weight needed to check the shipment classification.
Many shippers see this as a rate increase and the number of shipments that are being rebilled lend credence to that belief. To date, much of the use of dimensioning has been limited to checking and rebilling freight at truck terminals. However, by capturing more dimensional shipment data, LTL carriers are laying the data foundation needed for the expanded use of dimensional pricing.
Myths of LTL Dimensional Pricing
“It's a way to get more money.”
LTL dimensional pricing, often called DIM Pricing, is not a means of getting more revenue for carriers. DIM pricing allows carriers to make the most effective use of LTL shipping space, while still maintaining lower rates and equality across the playing field.
“It’s only for frequent shippers.”
Some shippers may argue LTL DIM pricing is only beneficial to shippers who frequently ship products. In reality, LTL dimensional pricing is beneficial to all the shippers as it implies the need to be more efficient in packaging processes.
For example, a shipper may feel adding extra volume to a package increases security, but bulky, oversized packages are more likely to fall, be destroyed, or become otherwise damaged from heavier items. Furthermore, bigger packages imply a higher packaging cost for the shipper, and as a result, shippers who turn towards a more efficient packaging standard would actually save money.
“It's going to anger customers.”
Most major retailers offer some form of free shipping if a purchase is above a certain amount. In reality, the annual growth of e-commerce at 15 percent would lead retailers and shippers to assume customers are willing to pay shipping costs as necessary. Basically, customers do not care how the shipping is calculated, so long as shipping is calculated reasonably.
LTL dimensional pricing is logical, and it takes advantage of basic math principles. Bigger products will have a higher density, and smaller products will have a smaller DIM weight.
This month’s NASSTRAC View will feature a representative from UPS Freight who will walk us through the ins and outs of dimensional pricing and answer your questions as Shippers prepare for this new advance in LTL pricing. Seats will fill up quickly, so reserve your spot now.