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 Page 3 Sealed Air | Dim Weight White Paper | November 2014 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 Page 4 Sealed Air | Dim Weight White Paper | November 2014 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. Page 5 Sealed Air | Dim Weight White Paper | November 2014 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. Page 6 Sealed Air | Dim Weight White Paper | November 2014 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.