Calculating Freight
For a long time, freight carrier charges were solely based on the weight of each package. This meant that large, lightweight packages were unprofitable by themselves, and shippers of heavier items paid a disproportionate amount of the total cost of the overall air shipment. As a result of this inequality among shippers, more and more freight carriers have shifted to a tariff based on dimensional weight, and most carriers use the greater of actual weight versus dimensional weight to calculate the freight charge.
Dimensional weight uses a theoretical minimum weight density, which is chosen by the carrier. The density can vary based on a domestic or international shipment, or the region the package is being sent to. The number is calculated as (Length x Height x Width)/(Dimensional Factor). Using US measurements, the dimensional factor for domestic shipments is typically 194, while it is 166 for international shipments.
To give an example, for a carton of goods going to Western Europe measuring 20″ x 20″ x 20″, the calculation would be as follows: (20x20x20=8000)/166 = 48.2 pounds. Freight would be charged on 48.2 pounds, unless the package weighed more than this in which case the higher weight would be used.
A Sea Change
All of the major air freight companies – FedEx, UPS and DHL – have already shifted to this method of freight calculation, as has the US Postal Service and Canada Post.
This method of calculating freight is leading to greater efficiencies in the warehousing industry. Many warehouse operations now employ Cartonization Optimization Technology which uses computing power to assess the content and dimensions of an order and then determine the appropriate size carton to use for that order. Previously, a human worker would have to make these decisions, which took time and often resulted in the use of a carton that was larger than necessary. This in turn led to higher freight costs, and reduced profitability.
The shift to freight charges based on dimensional weight has resulted in a more equitable system where the costs of a freight movement are borne proportionately amongst all shippers. This is turn has resulted in greater warehouse efficiencies and reduced the volume of the freight being carried, thus lowering costs further at each stage of the logistics chain. The net result should be a lower price for the consumer, and increased profitability for the shipper.
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