How Dimensional Pricing Will Affect Your LTL Rates
In response to the trucking capacity crisis, more LTL carriers are beginning to adopt the dimensional weight pricing model (DIM). While this is meant to discourage wasted space in trucks, a lot of shippers are seeing major rate escalations, even up to a 30% increase in shipping expenses.
What do you need to know about dimensional pricing, and how can you offset these costs when shipping with an LTL carrier?
What is Dimensional Pricing?
Dimensional weight pricing, also called space-based pricing or density-based freight, determines the rate for a package based on volume versus dimension. It considers the amount of space a package takes up in relation to its actual weight.
Carriers calculate the rate by multiplying the length by the height and width. They then divide by a DIM factor that’s set by the carrier. The billable weight will be either the dimensional weight or actual weight, whichever is greater.
FedEx and UPS were the first users of DIM back in 2014. Four years later, we’ve seen a surge in the number of LTL companies who are also adopting the dimensional pricing model. This shift from class-based rates or weight-based rates to rates based on size and space is a direct response to the e-commerce explosion and truck shortage.
What is the Purpose of Dimensional Pricing?
The goal of DIM is to discourage shippers from wasting space on trucks. This is especially critical during such a severe capacity crisis.
To optimize their drive, carriers would rather take smaller, heavier boxes on trucks as opposed to larger, lighter boxes. This is especially true for the LTL shipping model since they’re trying to fit as many boxes and shippers on one truck as possible.
DIM pricing encourages shippers to use more efficient packaging methods. Now, you’ll be charged extra for having too many packing peanuts or bubble wrap in overly sized boxes. It will pay to be more efficient and environmental in your packing processes.
We anticipate that this push for capacity efficiency will start to minimize the LTL’s trucking strain.
Will DIM Raise Shipping Costs?
The DIM pricing model has the largest impact for those companies shipping large, lightweight packages. In fact, some companies have seen a 10 to 20% increase for lower density goods. Along with other recent rises in fees, like the annual base rate increase and fuel surcharges, overall shipping fees have swelled by nearly a third for certain ite,s.
Rate increases are especially common for weirdly shaped goods, like bicycles or treadmills. These often require boxes that are large enough to fit the item, even though the item itself is light.
Anything that eats up space on the truck is going to cost more and raise your shipping costs.
How Can You Keep your DIM Costs Low?
Take advantage of package research
Some LTL carriers are offering package research services to their shippers. The shipping company can take a look at your operational processes to determine how to better optimize packaging and cut shipping rates and fuel costs. Make the investment to analyze your packaging, so you can cut shipping costs long-term.
Utilizing AI systems to pinpoint gaps in your packaging and operations can also help you streamline transportation management.
Cut your packaging
Packaging efficiency is the best way to avoid higher DIM costs. You want to minimize the size of your overall box so it takes up less space on the truck. Use boxes that are made to fit your products, and try to avoid excessive use of internal packing. Smaller boxes and less packaging generally also cost less, which will further help lower your shipping costs. You might want to consider ordering custom boxes to further save money on your shipping rates.
Learn more about the benefits of package optimization here.
Understand package measurements.
Different carriers will have different ways of measuring their shipping rates. Be familiar with the lingo to ensure you’re getting the best rate and option for your goods. For example, you’ll want to be aware of any minimum cubic capacity rules with your shipper.
Load pallets evenly
Some shippers won’t move your pallets around to help you save money or reduce your costs. The way goods arrive is the way they’re measured. So make sure you’re loading your pallets evenly. Keeping them even reduces the “space” that the overall shipment takes up. Don’t let small missteps cost you.
You want the packing process to be as standardized and consistent as possible. This might mean you implement training programs so your workers understand exactly how to pack goods for optimal efficiency.
You’ll also want to create a clear system for weighing and measuring before the package is sent to the carrier, so you can ensure their rates reflect your own numbers. Some businesses are investing in their own DIM measuring tech systems, so they can keep track of their own operations and shipping costs as well.
More LTL companies are shifting to dimensional weight pricing in order to fit more in the truck and maximize trucking efficiency. This shift is raising rates for shippers, but we anticipate that this pricing model will have a positive long-term influence on optimizing capacity and reducing environmental impact.