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Essential Questions and Facts about LTL Shipping Costs

Posted on Thursday, April 7th by Pallet2ship logo

Let us start by imagining the following scenario. You are looking for a carrier to help you deliver a package sized somewhere around one cubic foot. In the meantime, someone else is looking to have their own package delivered, one approximately twice as big in size. Normally, you might expect your package to be cheaper to have shipped. However, you need to also take into consideration the weight of the two packages. Thus, let us assume that yours weighs 600 pounds, whereas the other person's weighs 230 pounds only. So, in this context, which of the two packages will infer the higher costs? In other words, how does LTL dimensional pricing work? In a logical LTL shipping context, the smaller a package, the lower the shipping costs should be. However, this shipping method has proven rather confusing, causing carriers to turn to the so-called dimensional pricing model (DIM) in their attempt to establish a balance in terms of weight and size as decisive factors influencing the package delivery rates proposed to customers.

Does LTL shipping generate extra money for shippers?

According to some people, LTL pricing, also known as DIM pricing, is nothing but a shipping method used by carriers to increase their revenues. However, they are wrong. This particular shipping method is designed to encourage the effective use of LTL shipping space while limiting the costs to be borne by customers and also balancing the playing field.

Who does LTL shipping benefit?

Another popular theory circulating within the industry insists on LTL shipping being designed to benefit those individuals or companies requiring shipping services on a regular basis and not so much occasional shippers. However, this theory has also been proven wrong in the context of one of its main purposes being that of optimising the packaging processes. Thus, while one may believe that additional volume ensures an increased protection of the items being shipped, in fact it increases the risks of the items being damaged by other heavier packages during transportation. Moreover, additional volume normally causes the shipping costs to increase.

What is the feedback of customers on LTL shipping?

Generally, customers are offered free delivery services by retailers if the value of their purchases is higher than a certain given amount. Indeed, in the context of an expanding e-commerce industry, they are expected to be aware and willing to pay for shipping services. And generally, they do. In the end, their acceptance or refusal depends largely on whether these shipping costs are reasonable or not rather than on the retailer's transparency as to the factors determining those particular costs.

Is LTL shipping practical?

Last but not least, however much controversy DIM pricing may stir, it has been proven to be rather straightforward and practical, being based on a number of basic mathematical principles. In the end, in the context of the rates being established based on the weight and density of a given package, it only makes sense that the shipping costs may be equally high upon shipping a small but heavy package or a bulky light one.

DIM pricing among top carriers

As already mentioned, the dimensional pricing model has been developed to become one of the main pricing methods used on today's shipping market, with an increasing number of top carriers adopting it in their businesses. FedEx and UPS would be just two recent examples of well-consolidated carriers that have turned their look toward the dimensional pricing model. Despite the results being limited by the increased DIM factor rates and waivers, it has been confirmed that the shipping rates offered by the two companies would have increased at least 2.5 times if the dimensional pricing model had not been adopted. However, their increased revenues have proven the dimensional pricing model to provide a highly advantageous solution and play a major role in the growth of the shipping industry. More specifically, it has managed to provide accessible pricing solutions, thus keeping them afloat on the market and avoiding the risk of outrageous shipping costs and self-service shipping as characteristics of a market controlled by exclusive shipping service providers.

Basic LTL shipping terminology

It should be noted that the principles of dimensional pricing are bound to become clearer once familiarised with some of the basic terminology associated with it. Dimensioners would stand out as a good starting point in this sense. This particular term refers to the electronic devices used to measure the size of shipments, more specifically their height, width and depth. Similarly, the DIM factor rate would be another essential factor in this context, enabling the determination of the so-called DIM weight of a shipment. For starters, it should be noted that the DIM weight of a shipment differs from its actual weight. Thus, the volume of a given shipment, which is the product of its height, width and depth, is divided by the DIM factor rate, which is commonly set at 166, to determine the DIM weight of that given shipment. Once both the actual weight and the DIM weight of a given shipment have been determined, the higher value is used to calculate the shipping weight. In this context, shippers will inevitably seek that the shipments be packed as tightly as possible. Finally, should you fail to understand or comply with the DIM pricing requirements, you may rely on the carrier to perform a penalty assessment to assist you in that sense.

Final considerations on DIM pricing

According to experts in the field, the debate on LTL shipping and the DIM pricing model is bound to intensify in a context where new surcharges, regulations and accessorials are applied on a constant basis. Moreover, it is believed that although implemented to a limited extent only up to this point in time, the dimensional pricing model will reach full scale implementation once no exceptions or waivers apply any longer, forcing shippers to familiarise themselves with its principles and its impact on LTL shipping. In the end, the dimensional pricing model is designed to help improve sustainability and maintain a high level of competition within the shipping industry while encouraging the application of fair shipping practices.

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