Dimensional Weight: Don’t Let It Weigh You Down

How to Optimize Packaging to Minimize the Financial Impacts of Dim Weight Pricing and Deliver a Better e-Commerce Customer Experience

A Sealed Air White Paper Sealed Air | Dim Weight White Paper | November 2014

Table of Contents

Background Page 3

• Overview of dim weight pricing • Calculating dim weight

Impacts of Dim Weight Pricing on Manufacturers and Retailers Page 5

Solutions for Increased Protection in Decreased Dimensions Page 6

• Test results from Sealed Air’s Package Design Centers • Packaging solutions

Beyond Dim Weight: Why Packaging Matters Page 10

• New research on packaging for e-Commerce success

Conclusion Page 11

• Ten tips for dim weight packaging success • Additional resources to prepare for dim weight changes

Page 2 Sealed Air | Dim Weight White Paper | November 2014

Background

In 2015, a new era in shipment pricing will go into effect when major carriers including FedEx, UPS and DHL implement dimensional (“dim”) weight pricing for all ground packages regardless of their size. For quite some time now, carriers have been using dim weight pricing for all of their air service shipments and ground shipments over three cubic feet. Beginning in 2015, packages shipped by ground service that are less than three cubic feet will be subject to dimensional weight pricing. It is important to note that the majority of cartons shipped are less than three cubic feet and will be subject to dim weight pricing in 2015. To better visualize approximately three cubic feet, imagine a medium sized microwave oven or a box measuring 17” on each side. This pricing change could have major financial implications for unprepared manufacturers and retailers.

What is dim weight pricing? Essentially, it is a method of determining price based on volume versus actual weight of shipments. The reason for this dimensional weight policy change is due to a growing number of packages from e-Commerce that are not being packed with regard to density of packing. Shipping containers are relatively large and light weight when compared to the items being shipped inside the container. This can fill up FedEx, UPS and DHL delivery vehicles before any weight limitation is hit, in shipping terms, cubing out before weighing out, and this costs the carrier money.

Calculating Dim Weight and Determining Billable Weight: Dim weight is calculated by determining the cubic size of a package – multiplying its length by width by height and dividing by 166 (for domestic shipments) or 139 (for shipments to Canada). When measuring, be sure to use the longest measurement in each dimension if the object is not cube-shaped. When dividing by 166 or 139 to get the dimensional weight, any fraction is rounded up to the next whole. The billable weight is the weight that is used to determine the shipping charge. Beginning in 2015 with the three cubic feet exemption no longer applicable, the billable weight is the greater of either the actual weight or the dimensional weight regardless of the volume of the shipment.

HOW TO CALCULATE DIM WEIGHT

Dimensional Weight L x W x H H = (lbs) 166

L = Length in inches W = Width in inches L W H = Height in inches Source: UPS

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Benefits of dim weight pricing range from better use of space on trucks to reducing fuel and transportation costs to more efficient packaging. Drawbacks for manufacturers and retailers, however, could include significantly increased shipping costs.

The good news is that by taking a proactive approach to evaluating packaging based on dim weight pricing changes, companies can not only keep shipping costs down, but also potentially improve product protection, sustainability and customer service through optimized packaging solutions.

This paper explores the following topics:

• Impacts of dim weight pricing changes on manufacturers and retailers

• Packaging for dim weight test results from Sealed Air’s Package Design Centers

• Information on specific packaging solutions that help optimize packaging to keep costs down while keeping customer satisfaction up

• Top tips for dim weight packaging

• Additional resources to help you prepare for dim weight pricing changes

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Impacts of Dim Weight Pricing on Manufacturers and Retailers

For manufacturers and retailers, the impacts of dim weight pricing changes include both financial and operational considerations.

On the financial side, it’s estimated that companies could pay up to $550 million per year more in shipping costs based on dim weight changes. To help avoid this scenario, companies should re-evaluate their packaging practices. First, companies will need to have more container sizes on hand and reconsider the packaging they are using to protect shipments. Having the right packaging materials is essential to provide adequate protection during shipping, while taking up the least amount of space.

Looking at dim weight changes from an operational perspective, the pricing changes add another layer of complexity to many of the challenges that have come with the rise in e-Commerce. These challenges mainly lie in the areas of processing and packaging shipments for online orders. According to new data from the Sealed Air 2014 Packaging for e-Commerce Success Survey, conducted by Harris Poll, 87 percent of Americans purchased items online in the past year, and 78 percent of Americans believe their orders should be processed in 24 hours or less.

To meet increasing e-Commerce demands, many retailers try to fulfill orders quickly and package density is being sacrificed for speed of packaging. Small or lightweight items often are placed in larger-than-necessary containers with little thought to the protective packaging around the item. The adoption of dim weight pricing will have a significant impact on these operations if companies don’t address their packaging prior to the shift. How much of an impact? The Wall Street Journal estimates that under the new pricing model, the cost to ship a two-slice toaster between 601-1000 miles will increase 35 percent.

Consumers returning packages and retailers offering free returns need to be aware of these changes too. Consumers often do not take the time to find an ideal box for their return shipments and most use the same box in which they received their original order. However, if they’re only returning one item from a multiple item order delivered in a large container, they’ll be paying much more than they need to when they return that item. This could impact their experience and overall satisfaction with retailers if they believe they are paying too much for returns. It could also drive up costs for retailers offering free shipping.

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Solutions for Increased Protection in Decreased Dimensions

Sealed Air recently conducted a packaging analysis in its Package Design Centers to identify opportunities to optimize packaging for some commonly shipped items to keep shipping costs down when dim weight billing is implemented. The analysis demonstrates that by using a smaller container and more efficient packaging, companies can realize significant savings.

EXAMPLE 1

Shipping a toaster oven in a 24-cubic-inch container versus in a slightly smaller 22-cubic inch container using Sealed Air’s Instapak® foam or Korrvu® packaging would save roughly $8.43 per package. If the company ships 50 toaster ovens per week on average, it could save $21,918 in the course of a year.

EXAMPLE 2

With a 10 lbs item packed in a 14” cube box (14” inner dimensions), the dimensional weight is 19 lbs when taking into account the thickness of the carton wall. Using a Sealed Air packaging solution that enables denser packaging while maintaining packaging protection would allow us to reduce the carton size to a 12” cube box. Doing so would save 20.1% when considering the reduction in cost for the shipping carton and the ground shipping charge.*

Even if increased cost were incurred with packing material, the savings are still compelling. If switching from 50 cents of a low-performance packing material to $1.00 of Instapak® foam or Korrvu® packaging in order to enable a reduction in carton size, shipping and carton savings would greatly outweigh these increased packaging costs. If a company were shipping 250 of these cartons per week, this would still result in a 16.1% savings equating to $31,200 annually.

*Reference prices for Uline single wall C-Flute boxes and FedEx website for 2014 ground shipping charges for zone 5.

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Thinking Inside the Box: A Look at Dim Weight Packaging Solutions: Sealed Air offers several types of packaging solutions that can help companies protect products and bottom lines with the advent of dim weight pricing. Two of these include Sealed Air’s Instapak® foam and Korrvu® packaging, which provide significant product protection during shipping while taking up minimal space in the container.

Instapak® foam expands in seconds to form protective cushions quickly and provide heavy-duty blocking and bracing because it forms to the item and eliminates void in the container. There are a variety of on- line Instapak® systems to provide on-site production, and Instapak Quick® foam packaging provides the same protection for smaller operations that do not require an on-line packaging system.

Instapak® Foam Packaging Instapak Quick® Foam Packaging

Korrvu® packaging uses a strong, highly resilient, low-slip film to surround products, protecting them from shock, vibration and impact. Its transparent film enables the packaging to serve as both a protective shipper and an effective display merchandiser, which is visually appealing. Korrvu® packaging also stores flat and contains at least 30 percent recycled content, an attribute that is highly appealing to consumers.

Korrvu® Retention Packaging Korrvu® Suspension Packaging

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In addition to the environmentally responsible Korrvu® packaging, Sealed Air’s automated void fill systems, the I-Pack® and Ultipack® systems, make packages made of 100 percent corrugated material that are “curb-side” recyclable. They are designed for fulfillment operations where the goal is to minimize costs – shipping, consumables, and operating – while optimizing productivity.

The I-Pack® system creates more compact packages by removing the unused void. The container forms around the contents, which ensures the containers fit the items and space is maximized to reduce shipping costs. This system also produces packages with appealing finished appearances to maximize customer satisfaction.

I-Pack® System I-Pack® Packaging

The Ultipack® system is similar to the I-Pack® system in the way the tray is formed, but it uses a corrugated wedge to secure the items in the tray before placing the lid on the container. The Ultipack® wedge increases box strength by adding product protection, and the wedge cost is half that of traditional void-fill material.

Ultipack® System Ultipack® Packaging

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The Mailer Advantage: Another way to save money with dim weight shipping is to use mailers whenever possible. Because dim weight shipping charges more for mailing a container than a flat envelope, it makes sense to mail books, DVDs and other small items that do not require a lot of protection in mailers versus other packaging.

Sealed Air manufactures the most complete line of cushioned, non-cushioned and rigid protective mailers in the industry, which can be used for a wide range of applications. Jiffy Mailer® products reduce shipping weight by eliminating the need for dunnage material, void fill or cushioning.

Another option for companies that like the idea of using Jiffy Mailers® but prefer a more automated solution is the PriorityPak® system. This system is a high-speed product containment and protective packaging solution with advanced sensor technology that makes it the perfect solution for fluctuating volume and variable packaging requirements. It creates a compact, custom package that reduces postage costs compared to packaging with corrugated containers and void-fill materials.

PriorityPak® System PriorityPak® Packaging

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Beyond Dim Weight: Why Packaging Matters

Our recent study referenced earlier in this paper – the Sealed Air 2014 Packaging for e-Commerce Success Survey, conducted by Harris Poll – shows that packaging is playing an increasing role in consumers’ overall experience with retailers. According to our survey findings, nearly seven in 10 (68 percent) Americans say they are more conscious of packaging materials and design today than they were five years ago.

How much of an impact does packaging have? Additional survey findings revealed that:

• Consumers believe that packaging tells them how much a retailer cares about them and their order (66 percent) • Consumers say their relationship with a retailer would be impacted in some way if they received a broken or damaged online order (58 percent) – Almost two in five (38 percent) say they would consider purchasing from a competitor before purchasing from the retailer again – One in five (20 percent) say they would never use that retailer again • Consumers feel that packaging reflects the value of the shipment – the better the packaging, the better the product inside (48 percent) – This viewpoint is more prevalent in younger purchasers – nearly three in five (59 percent) between 18 and 34 years • Packaging is also seen as reflecting a retailer’s environmental commitment (34 percent)

Packaging Reflects on Retailer Packaging Conveys Value of Shipment

59% Retailer Cares

66% 48% 44% 45% 40% Value of Shipment 48%

Environmental Commitment 34%

Age Range: 18-34 35-44 45-54 55-64 65+

Survey findings demonstrate the importance of packaging in the e-Commerce customer experience. Dim weight pricing changes add another challenge to keeping customers happy while keeping costs down. The key is to determine ways to maximize packaging efficiency while still delivering on customer expectations for packages that are visually appealing, reflect the value of and protect the products inside and, in many cases, also protect the environment.

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Conclusion

Dim weight pricing changes do not have to weigh heavily on manufacturers and retailers from a financial or an operational perspective. By taking proactive steps to prepare for the pricing changes up-front, companies can help ensure that they are protecting their customers’ products, their reputations and their bottom lines.

Below are ten tips for dim weight packaging success:

1. Remember that size matters: choose the appropriate package based on the size of the item, and don’t forget mailers as an option. 2. Always use high-quality materials for your package, considering strength, cushioning, durability and, critical for dim weight pricing, space consumption. 3. If paying based on actual weight rather than dim weight, be conscious of heavy packaging materials increasing the weight of your package and shipping cost. 4. Optimize your packaging, using only what you need and relying on Sealed Air Package Design Centers for help. 5. Blocking and bracing items is essential. If your item is stationary and unable to move during shipping, it will be less likely to sustain damage. 6. Remember that “Fragile” and “Handle with Care” labels do not replace careful packaging. 7. Measure the actual outside length, width and height of the container after packaging when determining dim weight, as the measurements provided by a box manufacturer are inside dimensions of the container and do not reflect exterior dimensions of a package. 8. Talk to your carrier representative and examine your agreement to understand your particular dimensional weight pricing. 9. Keep track of your total shipping charges monthly to make sure you’re not being incorrectly charged the dimensional weight price. 10. Don’t forget the returns process. Educate your customers that if they are returning one item from a multi-item order, they should find a smaller package for that one item versus using the original packaging.

For more information on how to prepare for dim weight pricing changes, please contact your local Sealed Air packaging professional or call 800-648-9093.

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