Dimensional Pricing on Ground Shipment - 50% cost increase on final mile delivery for CPG industry

Major parcel service providers FedEx and UPS will be implementing Dimensional Pricing model to all their ground shipments in North America, effective next year. New pricing structure can potentially increase shipping cost for final mile delivery by 50%. The new pricing model will charge the shippers based on dimensional sizes rather than weight of shipment, bringing in additional cost on shippers who have high volume low density shipments. The article will be focusing on impact on the CPG industry and measures to be taken to reduce the impact of new pricing model. Introduction Growth of express industry has a strong correlation with GDP and global trade activity. CEP industry is expected to reach $99bn by 2015 in USA. UPS and FedEx are the market leaders in US parcel market followed by USPS whose major revenue is from mail delivery. However, it is slowly expanding its services into e-commerce deliveries. FedEx is ranked second to UPS in terms of revenue in spite of being market leader in package volume handled FedEx and UPS have announced extending dimensional pricing mechanism for shipments above 3 cubic feet volume to ground shipments of all size. The new pricing rules will be effective from 29 Dec 2014 for UPS and 1^st Jan 2015 for FedEx¹   Author: K J Afsal