Major shippers UPS and FedEx have rolled out a new way to price large packages.  Instead of charging boxes under three cubic feet by weight, boxes will be measured by dimensional weight.  This change is intended as a push to get customers to reduce package sizes.  However, instead of lightening the load, the new structure could cost small businesses more.

As outlined in “Small U.S. firms may struggle with new UPS, FedEx dimensional prices,” posted by Nick Carey on Reuters.com, retailers will need to multiply the length, height, and width of each shipping box and divide that by 166 to determine that box’s dimensional weight.  This extra math will determine the cost for shipping boxes with UPS and FedEx.  Carey offered an example of how this new price structure can go very wrong for some businesses.  According to Endicia, a two-pound woman’s shoulder bag that is shipped in a box that measures 19 by 15 by 5 inches will have a dimensional weight of nine pounds and cost 45% more to ship.

In order to save money, businesses may switch to smaller boxes or send their business to USPS.  Natura is one of those businesses, according to Carey, that may shift packages away from FedEx to USPS.  Natura estimates USPS will supply nearly 50% of their shipping needs, up from 40% in 2014, since USPS still uses weight to price shipments.  USPS also announced that they would offer price cuts to attract e-commerce businesses.

Shipping could become a burden to your business unless you can incorporate these new changes into your operations.  You can use your enterprise resource planning (ERP) solution to evaluate current logistics and associated costs with both incoming inventory and outgoing products to warehouses or customers.  You can then use this data to make projections on the potential future costs of those same operations and determine whether the new dimensional rate rules will impact your profitability.

A powerful ERP solution can also provide insight into your other business operations including financial activities, supply chain and inventory, manufacturing and distribution operations, human resources and payroll, and other core business processes.  Contact Premier Computing to learn more about using ERP to gain visibility and control over your business operations and protect your profit margins.

By Rob Gillespie, Sales at Premier Computing, Inc., a Microsoft ERP and CRM Partner out of Utah