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Dim Weight: One Year Later

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Dim Weight: One Year Later DIM WEIGHT: ONE YEAR LATER ©2015 Neopost USA Inc. All Rights Reserved. Agenda • What is Dimensional Weight and why is it here now? • What have we seen so far? • What are we seeing as trends? • What is likely to happen in the future? • How can you prepare for the rest of 2015 and beyond? • Q & A ©2015 Neopost USA Inc. All Rights Reserved. 2 Today This Is How Most of Us Ship ©2015 Neopost USA Inc. All Rights Reserved. 3 DIM Weight: An Unavoidable Occurrence What is Dimensional Weight? L" x W" x H" (parcel’s cubic volume) DIM = weight volumetric divisor (parcel’s density) 166 It was inevitable… – Price Increase Based on Package Sizes – Common Sense • Shipping Companies = Cube (Vehicles + Fuel + Facilities) + Labor ©2015 Neopost USA Inc. All Rights Reserved. 4 How Has DIM Weight Evolved? Up to 2011 Dimensional L x W x H Weight (lbs.) DIM Weight 194 L x W x H 2011 - 2014 Dimensional Weight (lbs.) 166 DIM Weight 3 cubic feet + 2015 - ? Dimensional L x W x H Weight (lbs.) 166 DIM Weight >1 lb. 1. DIM Weight used to use a 194 divisor; it is now 166 2. DIM Weight used to be in place only for packages 3 cubic feet+; it now applies to all parcels 3. DIM Weight used to only apply to all weights with air services; they now apply to both air and ground *Dimensional weight calculations based on publicly available carrier rate information ©2015 Neopost USA Inc. All Rights Reserved. 5 Concepts to Remember Actual Weight Dimensional Weight Billable Weight ‒ Measuring Dimensions: Round Up or Down (depends on carrier) • UPS rounds up or down • FedEx uses actual for calculating the package measurement ‒ Calculating the finaL DIM Weight—ALWAYS Round UP! ©2015 Neopost USA Inc. All Rights Reserved. 6 Dimensional Weight Rounding • Calculating the Dimensions ‒ Box Measurement L" x W" x H" (parcel’s cubic volume) • 11.6” = 12’’ (UPS) • 11.6” = 11.6” (FedEx) volumetric divisor (parcel’s density) 166 • Calculating DIM WEIGHT ‒ 13.66” x 13” x 13.3 = 14.23” (always round to dim weight of 15”) • A shipper is billed the greater of actual weight or dimensional weight ‒ Based on outside box dimensions ‒ It’s the dimensions of the box WITH PRODUCT INSIDE that matters ©2015 Neopost USA Inc. All Rights Reserved. 7 Domestic Versus International • The calculation is L X W X H/166” inches for US domestic ground and air packages ‒ Fractions of inches are rounded up or down • US Export International Ground and Air packages utilize a divisor of 139” With international fees, surcharges, duties & taxes and DIM as a factor, managing costs becomes more important for international shipping than ever before ©2015 Neopost USA Inc. All Rights Reserved. 8 Who Does It This Way? Packages subject to DIM Weight Calculation used (domestic services) FedEx Express® and FedEx Ground® Services Length X Width X Height, divided by 166 UPS Air® and UPS Ground® Services Length X Width X Height, divided by 166 USPS® parcel services (excludes USPS Parcel Length X Width X Height, divided by 194 (packages traveling 1000 miles Select®) or greater) & if package exceeds 1 cubic foot in size) UPS SurePost® Length X Width X Height, divided by 166 FedEx SmartPost® Does not currently charge for DIM (as of June 2015) OnTrac (regional parcel carrier) Length X Width X Height, divided by 194 Spee-Dee Delivery© (regional parcel carrier) DIM only applies for packages with combined length and girth over 130”. Packages 130”-170” < 100lbs = flat dimensional fee; > 100lbs + flat fee Lone Star Overnight® (regional parcel carrier) DIM applies for to all parcels greater than 1,728 cubic feet with a divisor of 166, for both its ground and express services. Any package smaller than 1,728 cubic inches will be billed at actual weight. Eastern Connection™ (regional carrier) Length X Width X Height, divided by 194 PITT OHIO (regional carrier) DIM applies for parcels 3 cubic feet (5184) or greater at a divisor of 194 Prestige Delivery Systems © (regional carrier) DIM applies for parcels 3 cubic feet (5184) or greater at a divisor of 194 LaserShip® (regional carrier) DIM applies for parcels 3 cubic feet (5184) or greater at a divisor of 194 * All information in the chart above is based on publicly available sources as of June 2015 or direct contact with the carrier and their policies. Neopost USA strongly recommends contacting individual carriers to understand their latest policies on dimensional weight rating. Note that carrier policies can be subject to change. ©2015 Neopost USA Inc. All Rights Reserved. 9 Effects of DIM Weight Pricing Men’s Kid’s Product Toy truck Toaster sneakers backpack Price by $8.05 $7.17 $7.17 $7.17 Weight* Price by $9.11 $9.11 $9.47 $9.66 Dimension Percentage UP 13% UP 27% UP 32% UP 35% change in price* Note: Percentages rounded. Rates calculated using zone 5 shipping rates for one carrier ©2015 Neopost USA Inc. All Rights Reserved. 10 How Have Shippers Reacted? Changing Packaging & Operations Utilizing Different Services Rate Shopping Carriers ©2015 Neopost USA Inc. All Rights Reserved. 11 Shipper’s Reaction: Packaging & Operations • Limiting box sizes (procurement) • “Right sizing” packaging to product ‒ Reducing unused space per carton (cube utilization) ‒ Corrugated boxes • Consolidation ‒ Less overboxing ‒ Palletizing/LTL • Alternative packaging options ‒ Padded envelopes ‒ Airbags/pouches ‒ “Fold down” on mailers ‒ Packaging built on-demand • Package testing/labs • Technology & measurement tools ‒ Dimensional scanners ‒ Accurately weighing packages ‒ Accurately measuring box dimensions *“Attack the Data, not the Divisor,” Brittany Beecroft, Director of AFS Parcel Pricing. Parcel Media, March 2015 ©2015 Neopost USA Inc. All Rights Reserved. 12 Don’t Forget: DIM Affects Mailers Too! • Carriers use scanning technology measuring all angles • Scanning technology creates a “virtual box” when measuring mailers measurement purposes • Folding down unnecessary space can reduce DIM for mailers • Switching to a mailer can qualify you for mail injection or last mile services (final mile delivery by the USPS) *Image and content information on this slide courtesy of Sealed Air Corporation ©2015 Neopost USA Inc. All Rights Reserved. 13 Shipper’s Reaction: Packaging & Operations What consumers believe when it comes to packaging Tells how much a retailer cares about them (66%) Relationship with a retailer would be impacted if order received was damaged/ broken (58%) Reflects the value of the shipment – the better the packaging, the better the product inside (48%) *Sealed Air & Harris Poll White Paper: Dimensional Weight—Don’t Let It Weigh You Down (2015) ©2015 Neopost USA Inc. All Rights Reserved. 14 Shipper’s Reaction: Packaging & Operations Mandating employees to weigh & measure EVERY package w/technology tools Getting rid of manual air waybills Billing back shipping charges Auditing invoices Returns: what packaging is used? ©2015 Neopost USA Inc. All Rights Reserved. 15 Shipper’s Reaction: Packaging & Operations • Returns ‒ 1 in 5 packages is a return ‒ Largest inhibitor of B2C e-commerce ‒ Common scenario: return one item of a multi-piece purchase in the original packaging ‒ Many customers return items in packaging that is not optimal (i.e. shoebox) ©2015 Neopost USA Inc. All Rights Reserved. 16 Shipper’s Reaction: Negotiating with Current Carriers 1. Negotiating a tiered DIM structure ‒ Below a certain threshold (e.g. 3 lbs), a certain divisor is used 2. A reprieve for one to two years from the DIM change 3. Negotiating the actual billed weight Don’t forget about returns or inbound shipments as part of dimensional weight calculations! The three scenarios described above are highly unlikely to be accepted by a carrier and generally only reserved for larger shippers. ©2015 Neopost USA Inc. All Rights Reserved. 17 Shipper’s Reaction: Utilizing Different Services & Carriers • Work-share products (final mile) • Postal Injection products ‒ Overall price point is considerably lower • Going back to using air/overnight services ‒ Better negotiating; reduce overall spend • LTL/consolidation • Density-based pricing is being discussed • Multiweight/Hundredweight services • Regional parcel carriers • USPS® • Flat rate shipping options ©2015 Neopost USA Inc. All Rights Reserved. 18 Shipper’s Reaction: B2B • Package consolidation, palletized LTL freight, hundredweight/multi-weight or zone skipping services ‒ What are hundredweight or multi-weight services? • Discounted rates, on a per lb basis, on multiple parcels going to same Ineligible for hundredweight services address (or zip code, depending on carrier) ‒ What is a zone skip? • Shipper consolidates orders/packages and sent en masse to a sorting facility in a closer zone • Not recommended for time-critical shipments Eligible for hundredweight services ©2015 Neopost USA Inc. All Rights Reserved. 19 Impact: Isn’t It Just Nickels and Dimes? The value of your divisor matters—but it’s not everything ‒ Current DIM Divisor is 166 Customer Example 1* 2015 Dimensional Weight Impact: 173 Divisor DIM Logic Used Affected 4-Week Cost Annualized Cost Cost Increase over Volume 2014 2014 DIM Logic 268,653 $1,183,808 $15,389,504 173 Divisor (Dim Logic) 268,653 $1,355,019 $17,615,247 +$2,225,743 Customer Example 2* 2015 Dimensional Weight Impact: 300 Divisor DIM Logic Used Affected 4-Week Cost Annualized Cost Cost Increase over Volume 2014 2014 DIM Logic 140,848 $600,629 $7,808177 300 Divisor (Dim Logic) 127,805 $596,744 $7,757672 +$176,345 Key Takeaway: It’s not just the divisor that impacts managing the cost of DIM Weight changes *“Attack the Data, not the Divisor,” Brittany Beecroft, Director of AFS Parcel ©2015 Neopost USA Inc. All Rights Reserved. Pricing. Parcel Media, March 2015 20 DIM Case Study: Ashley Stewart • Among fastest growing national retail brands • Ranked as one of the most engaged brands on Facebook & social media • Omni-channel sales & marketing leader • Unprecedented levels of profitability—but profitability could have been affected by DIM changes ©2015 Neopost USA Inc.
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