Dive Brief:

• FedEx's recently changed dimensional shipping formula will increase packaging costs by an average of 3.9%, Packaging Digest reported Monday.
• Dimensional weight calculation will move from 166 to 139, meaning the smaller and tighter the packaging, the better the rate achieved. The move aims to enable the shipper to reduce air space within its trucks, allowing for maximized capacity in shipping.
• The dimensional weight calculation was last increased in 2011, where shippers were able to bargain with FedEx in an effort to avoid a higher charge, redesign their packaging to diminish empty air space, charge their customers or take the hit of the increase and lose money.

Dive Insight:

FedEx's price increases will have a greater impact than customers realize.

With the dimensional rate changing from 166 to 139, packages that actually measure 12x12x12 will now round up from 11 pounds to 13 pounds, a 2 pound weight increase. Costs increase exponentially as package size grows, such as when the weight of a 24x24x24 shipment expands from 84 to 100 pounds.  

Additionally, fuel surcharges will now be rated weekly rather than monthly, to align more closely with actual fuel costs. And, surcharges will also increase in areas of handling, address corrections, and fees for extended service area deliveries and oversize shipments. Customers along the supply chain must take a closer look at FedEx's increases to reassess the balance between cost and service.