From shipping industry's point of view, the two most important factors that determine the cost of transporting a package are (a) weight, and (b) size. This is because their transportation vehicles (trucks, airplanes, ships, etc.) can only carry a maximum weight and a maximum volume.
If you are shipping heavy machinery, your package is more likely to cause the carrier vehicle to reach its maximum weight limit vs. the maximum space limit. On the other hand, if you are shipping potato chips, swim noodles, or computer parts, your package will most likely cause the vehicle to use up the available space much quicker than crossing the maximum weight limit. In either of the above cases, the revenue expectations of the carrier are met by varying the charges in either of the above type of cases. This is achieved by either charging by the actual weight or by the dimensional weight.
Dimensional Weight refers to the space a package occupies in relation to its actual weight. It is also known as DIM Weight, volumetric weight, cubed weight, etc. If the package is high density, actual weight is used for shipping charges. However, for a low density package (light weight for its size) charges are based on the volume that package occupies at a standard density the carrier has decided to accept. This density determines the dimensional factor used in the DIM weight (dimensional weight) calculation.
Actual Weight = 2.28 lbs
DIM Weight = 20.09 lbs
Actual Weight = 3.02 lbs
DIM Weight = 5.63 lbs
Up until 2014, Dim weight was used as the chargeable (billable) weight by the carriers, only for packages that were above a certain size. For all other packages, actual weight was used as the chargeable weight to determine the shipping cost. UPS and FedEx have recently announced that starting 2015, the chargeable weight and hence the shipping rate for all packages (ground and air), will be determined by greater of actual versus DIM weight (Dimensional Weight) of the package. This change is especially going to affect the shipping costs of packages which are light-weight but much bigger in volume/packaged space. Thus, if parcels are not optimized to utilize the packaging box space most effectively, businesses may end up paying much higher shipping charges, as the billable weight changes from actual weight to DIM weight. As DIM weight pricing has taken effect, shipping charges have typically increased by 20% - 40%.
To keep the shipping costs to the minimum, it is important to optimize packing by maximizing space utilization and/or by splitting the shipment into multiple boxes/cartons for most cost effective packaging. Our Parcel shipping cost optimization software (OSCO) helps you do just that!
OSCO uses all three dimensions and weight of individual items per order to determine which box/boxes should be used for shipping so as to minimize chargeable weight, and limit the application of oversize and multi-box surcharges. Not only that, OSCO presents the exact packing instructions for the packer to use, further reducing shipping costs by eliminating labor time spent in figuring out the perfect box to ship an order. Our customers have been able to reduce dim weight by as much as 20% using OSCO.
FedEx: http://fedex.com/cgi-bin/crg_dim_weight.cgi
UPS: http://www.ups.com/content/us/en/resources/ship/packaging/dim_weight.html
DHL: http://www.dhl-usa.com/IntlSvcs/dimweight/dimweight.asp?nav=Inttools/DimWeiCal