The DIM factor and maximizing your margins

In 2015, parcel carriers have found a way to minimize wasted space, meet sustainability goals and improve profits. Smithers Pira breaks down the concept of DIM weight shipping and provides some key considerations for getting most out of your shipping and packaging costs.

With the increasing trend of e-commerce buying habits, there is a growing number of online retailers that offer mixed product shipments. This has led to the use of one-size-fits-all packaging, in which a retailer will pack varying items in the same-sized box, regardless of size or extra space. As a result, supply chain efficiency has decreased.

At the beginning of 2015, major parcel carriers, such as UPS and FedEx, changed the way they charge for U.S. ground shipments by migrating away from the standard shipping cost based on weight alone to a calculated dimensional (DIM) weight. Traditionally, shipping costs were based solely on the actual weight of a package. Carriers now determine shipping costs according to the dimensional (DIM) weight, or the theoretical weight of a package based on its volume and a carrier-determined optimal density. This theoretical weight, also known as dimensional (DIM) weight, is about 10.4 cubic feet, or 0.0060 pounds per cubic inch, which makes the current DIM factor for calculating dimensional weight 166 cubic inches per pound.

To learn more about the DIM factor and how to calculate dimensional weight, download our webinar “Considerations for More Efficient Packaging - DIM Weight Shipping".

Optimizing your packaging and controlling your costs

For companies that are impacted the most by this change, there are simple solutions to reduce shipping costs and avoid paying excessive fees:

  • Arrange items in a package to ensure that the density is comparable to the package weight.
  • Choose an appropriately sized package to minimize excessive space.
  • Decrease the amount of protective packing materials such as air strips and bubble wrap that can lead to the use of oversized packaging.

However, after decreasing the package size to offset the shipping charge, can you be assured that the package still works? The primary function of packaging is to protect and ineffective protection can result in damage during transit and additional costs to the manufacture / retailer to issue replacements, affecting the company’s total cost.

Distribution testing allows a company to validate package redesign and ensure superior performance in the supply chain. Testing evaluates the effect of the package change on the damage rate and estimates the total cost to supply a product. There are four major evaluation areas for distribution testing:

Conclusion

The key to optimizing your packaging for the best performance while keeping your costs under control is understanding how product requirements, damage rate, and current shipping costs versus future shipping costs each will affect the total cost. Balance the damage rate with the need for adjustments by evaluating your current packaging and validate by utilizing distribution testing. Use resources like the PACKSmart Cost Estimator and the experts at Smithers Pira to achieve the best possible results.