Order fulfillment is typically the biggest operating cost for ecommerce direct-to-consumer brands. Of all the factors that contribute to fulfillment expenses, shipping is the largest—so optimizing these costs is critical to achieving healthy margins and a profitable business. To do so, operators must understand the intricacies of retail logistics, including dimensional weight and how it impacts shipping costs.
Dimensional weight, also known as DIM weight or volumetric weight, refers to the amount of space a package takes up during transit. It’s a theoretical way for carriers to measure the cost of shipping a particular package since parcel carriers are limited by both the actual weight of their cargo and the number of packages they can physically fit on the vehicle (or plane, train, or ship). For example, a very large but lightweight box could be more costly for a carrier to deliver than a small, heavy box because there is less space to be optimized for transporting additional packages.
When calculating the cost of shipping, carriers look at both the actual weight of a package and the dimensional weight, then charge based on whichever is greater (called billable or rated weight). The dimensional weight is determined by dividing the volume of the package by the DIM factor.
A DIM factor is a specific number that shipping carriers use as part of their formula to calculate dimensional weight. Sometimes called the DIM divisor, the DIM factor varies based on the carrier and the shipping method.
Carriers set a standard retail DIM factor, and this divisor is negotiated per account. Public, non-commercial retail rates typically range from 139-166.
Commercial, negotiated dimensional divisors with carriers can reach into the 200s, meaning the larger the divisor, the lower the rated weight. A higher dimensional divisor is preferable.
While some carriers like FedEx, UPS, and DHL calculate dimensional weight on most methods, USPS typically only calculates DIM weight for domestic packages measuring more than 1 cubic foot—packages smaller than this are only charged based on actual weight. If the package is larger than 1 cubic foot or sent internationally, USPS charges by either actual or DIM weight, whichever is greater. USPS also caps DIM weight at 70 lbs.
To calculate a package’s dimensional weight, you can use the following formula, then round up to the nearest pound:
(Width) x (Length) x (Height) ÷ (DIM factor) = dimensional weight
For example, a 12” x 12” x 12” box shipped with a retail divisor of 139 would have a DIM calculation of 12.4 lbs., rounded to 13 lbs.
Because shipping carriers charge based on the higher “weight”—dimensional or actual—the DIM weight is an integral part of calculating and optimizing your shipping costs. Keeping your product and shipping packaging as dimensionally small as possible, packaging goods in a way that doesn't require an external shipping box (pick and stick), and shipping products disassembled are all strategies that can help keep your dimensional weight low, which in turn will help you save money.
Consider this example: A company needs to ship a 2 lb pair of boots in a shoebox measuring 11” x 5” x 3”. With a dimensional divisor of 139, if the company uses a 12” x 6” x 4” box, the billable weight would be 3 lb (the DIM weight). If the company used a 12” x 12” x 12” box, the billable weight would jump to 13 lbs. Your costs will skyrocket by merely increasing box size, even if you change nothing else about the shipment.
Custom packaging that is measured and designed to fit your average order composition is the best way to ensure you are preventing bloated costs, also known as “shipping air.”
Dimensional weight can have a huge impact on your business’ shipping costs, especially if you ship large goods. Companies with small, lightweight shipments typically do not need to worry about packaging optimization because there’s less potential for large dimensional weights.
Access to high volume, negotiated shipping rates and negotiated dimensional divisors is critical to lowering your costs if your products are larger in dimensions. Ecommerce companies can achieve these lower rates through multiple avenues, including label printing software and APIs if you self-fulfill orders, 3PL negotiated rates, or through shipping a massive volume of packages. For a typical ecommerce company, leveraging rates via label software or a 3PL is optimal. In some cases, if a company ships a high number of packages at a particular size or weight, they can negotiate with carriers to lower rates for their most utilized shipping methods, zones and weights, with higher costs for less popular methods, rates, and weights.
With negotiated, commercial carrier contracts, you can also access commercial-only methods that are optimized for particular shipment types. For example, cubic eligible shipping through USPS enables lower-cost shipping for heavy, small packages that meet specific weight and size criteria.
Keep in mind that the weight of the package is only one factor used in determining the cost of shipping. The price may vary depending on surcharges and shipping zones, too.
Airhouse offers competitive, customized pricing thanks to high-volume negotiation with shipping carriers, product and shipping strategy analysis, and tools that help provide transparency into landed costs. To learn how much you can save by shipping through Airhouse, schedule a call with us.
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