Maximizing Parcel Margins in Light of Evolving DIM Costs

Parcel shipping costs and the factors that influence them are constantly in flux, and new rules have many carriers rounding up fractional inches on each dimension before calculating weight. Relying on dimensional (DIM) weight pricing to gauge how much space packages occupy in a delivery vehicle increases the billable weight on many shipments. For shippers and e-commerce companies, this pricing model can quickly erode margins if they aren’t diligent when it comes to selecting the most cost-effective packaging for their shipments, as even slight packaging inefficiencies can cost companies significant dollars at scale.

While the standards for determining pricing for parcel shipping will continue to evolve, shippers can take several important steps to prevent costs from escalating out of control. Having regular operational reviews around the following factors can better position shippers for reduced DIM cost exposure while staying on top of changing requirements.

• Right-size packaging. While both weight and volume are considered when calculating costs for traditional shipments, with parcel DIM measurements, shipping calculations are primarily based on volume rather than actual weight. For shippers, having appropriately sized boxes and reducing the amount of unused space in a package can help avoid inflated shipping costs. To stay ahead of potential changes, companies should audit their top SKUs quarterly in case any changes are made to product packaging and adjust their packaging strategies as needed. Regular reviews can help to ensure packages are shipped in the smallest container possible to help save costs.
   
• Use flexible packaging where possible. Not every shipment requires a box. For small, lightweight items like clothing or small accessories, padded or poly mailers are great options as they conform to an item’s shape while eliminating air space and still providing sufficient protection. They may even eliminate DIM charges entirely since billing for lightweight items is based on weight. In some cases, switching to padded or poly mailers can save companies as much as $2.00 per order.
   
• Evaluate order packing design. Reviewing the methodology and packing processes can also help to pinpoint areas for potential cost savings. In some cases, shipping multiple smaller packages can be less costly than shipping one oversized package. Bundling products that typically ship together or using flat or collapsible formats can minimize costs. By regularly analyzing internal data on which orders trigger high DIM charges, companies can assess where savings opportunities lie.
   
• Minimize shipping distances. In most cases, the further a package needs to be transported, the higher the shipping rate will be. Utilizing warehousing, distribution and fulfillment hubs that are in closer proximity to the majority of delivery locations can lower shipping costs, as well as any fuel, labor or operational expenses that may be incurred when shipping over longer distances.
   
• Work with partners on DIM optimization. Strategic partnerships can help shippers reduce exposure to DIM costs. For example, high shipping volumes may support rate negotiations with carriers and result in more cost-effective pricing. In addition, working with a 3PL partner that has a broad packaging inventory, regularly audits packaging types and designs optimal packaging strategies can keep costs low while notifying the partner when parcel shipping may no longer be the most cost-effective option. 

The Bottom Line

As carriers continue to adjust measurements and requirements for parcel shipping, shippers can expect DIM costs to increase for the foreseeable future. However, treating packaging as a strategic factor in the overall shipping strategy and committing to regular reviews of operational processes and packing strategies can help identify opportunities for savings.

A trusted 3PL can help companies develop strategies for controlling DIM costs while helping to protect their margins at scale. Whether it’s determining the proper warehousing locations for optimal inventory positioning, streamlining operations or assessing current packing strategies for potential ways to reduce DIM costs, NXTPoint Logistics’ team of skilled experts is available to identify opportunities for improved efficiencies across your organization to help support continued growth.

Don’t let DIM parcel costs ruin your margins. Reach out to our experts today to learn how NXTPoint can turn this potential cost center into a competitive advantage.