Tuesday, May 17, 2016

A DIM Prospect

LTL carriers lay groundwork for change to dimensional weight pricing.

Previously in this space, we discussed problems facing the LTL (less than truckload) carriers, and said they would pass costs on to shippers to recoup lost revenue. One major way they will do this is by imposing the dimensional-weight pricing that has become standard in the parcel shipping world. The debate over dimensional-weight or DIM pricing has shifted from if to when it will be applied to less-than-truckload freight, the CEOs of some of the largest LTL trucking companies said at the 2016 NASSTRAC Shippers Conference in April.

“The genie is out of the bottle,” Michael Ducker, president and CEO of FedEx Freight, the largest trucking company and LTL operator, told shippers. FedEx Freight has announced it will add eight dimensioners to the 45 already in use at its LTL terminals. “I think you’ll only see an increase in dimensioning,” initially to check freight classification and rebill shipments, but eventually to enable dimensional pricing in place of class-based rates, Ducker said. “You see many carriers deploying dimensional systems today.” In addition to FedEx Freight, XPO Logistics, YRC Freight and other LTL carriers have been installing equipment that can scan a palletized shipment and provides, combined with scales, the cubic dimensions and weight needed to check the shipment classification.

The trucking executives predicted the end of the long-established NMFC, or National Motor Freight Classification, system of codes for freight shipments, saying “at the end of the day, we sell space, not weight.” Visualize the amount of space taken up by a ton of ping pong balls versus a ton of hockey pucks, and you see the issue from the carriers’ side.

Shippers aren’t exactly thrilled by the prospect. Many believe dimensional pricing amounts to a rate increase, and the number of shipments rebilled once they go through a dimensioner lend credence to that belief. They’ve also seen costs rise as a result of dimensional price changes at parcel carriers.

Don’t count the NMFC codes out just yet. The NMFC system for LTL freight has proven resilient, not the least because it is embedded deep within many U.S. shippers’ pricing and transportation management systems, especially at larger companies shipping high volumes of freight. But in the long haul, the prospects for LTL shipments are looking DIM.

Kirk Shearer
800-989-0054 x103

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