Check it Out: Boxing Solution to KO DIM Pricing

In case you haven't heard — although it's likely you have — next year the major parcel freight carriers (i.e., UPS, FedEx) will be shifting from pricing based on package weight to package size. What does this mean for online retailers? The short answer: it's going to cost you more to ship your packages. Upwards of 20 percent more, according to some industry reports.

The move to dimensional (DIM) weight pricing will affect 55 percent to 65 percent of all ground packages between FedEx and UPS, says Shipware CEO and Retail Online Integration blogger Rob Martinez, adding that the changes will amount to one of the largest parcel rate increases in history. The new pricing model will go into effect for UPS customers on Dec. 29, 2014, while FedEx makes the change on Jan. 1, 2015.

With the impending rate change hanging over online retailers like a dark cloud, they've been left scrambling to find solutions that will mitigate the effect on their businesses. From renegotiating current freight contracts to considering alternative carriers — the U.S. Postal Service won't be changing to a DIM pricing model and could be a cheaper alternative — to opting for deferred ground services such as FedEx SmartPost to redesigning consumer packaging to make it smaller, retailers are looking for ways to offset the impact of DIM pricing. They may want to take a look at Box On Demand.

As its name would suggest, Box On Demand enables retailers to quickly and cost effectively produce custom corrugated packaging on-demand. With DIM pricing on its way, the savings from producing a box that minimizes package size — not to mention cuts down on the use of dunnage — would be significant.

"By allowing retailers to size each shipping container to the product(s) being shipped, companies using Box On Demand find savings in three major areas: DIM weight pricing is minimized; void fill usage is reduced or eliminated; and overall corrugated usage/costs are typically reduced," says Rick Proskow, marketing manager for Box On Demand.

Carolina Biological Supply (CBS), a B-to-B retailer that sells science and math products to schools (think lab supplies), has been a Box On Demand customer for a little more than a year and is reaping the benefits. With a diverse product assortment that comes in a lot different shapes and sizes, Box On Demand is proving to be a cost-saving tool for CBS.

"We have a wide variety of products, lots of different shapes, sizes and weights," says Jeff Humble, logistics engineering manager for CBS. "We found we were shipping a lot of air. Our goal with Box On Demand was to make a custom box that fit our product, and we've been successful with that. We've been able to reduce our packages that ‘dimmed’ out for air and ground by 45 percent."

CBS went from 23 percent of packages that dimmed out in 2013 to 11 percent in 2014, a significant cost savings for the retailer.

Speed to Savings
Implementing Box On Demand's system is a fairly easy process, taking on average less than a week (and that includes training the operators). The machine can fit a 15-foot by 30-foot warehouse space, often less space than retailers’ previous box inventory did. Furthermore, Box On Demand technology seamlessly integrates with existing inventory and order management systems.

Prior to using Box On Demand, one person at CBS was responsible for packing an order — everything from selecting the box, placing the product in, placing the void fill in, closing the box and sending it on. Now, CBS has four people in an assembly line to fulfill an order.

"It's multiple hands touching the same order instead of one person doing it all," says Humble. "That's allowed us some efficiency gains by streamlining the process."