Changing the Shape of Pricing

Some shippers say they are trying to head off what could amount to significantly higher costs in the near term and industry experts predict even larger changes in the long run as UPS shifts its pricing for oversized parcels to a more fine-tuned, accurate and likely more expensive system of "dimensional weight" measurements. Parcel industry observers say the impact of the change will reverberate across domestic shipping. Industry officials say the very shape of pricing is shifting for shippers, across competing modes of freight transport. UPS would not specify how much volume would be affected, but said the oversize categories account for less than a million packages out of nearly 11 million its ground operations handle each day. The new formula will target the lighter, larger boxes that take up more space with less weight or density, for years singled out under an OS rating. Under OS-1, OS-2 and OS-3, shipments over certain measurements of length, height and width added together jumped to rates based on 30 pounds, 50 pounds or 70 pounds. Under the new system, length, height and width are multiplied and then divided by 194, the so-called dim factor. Tim Sailor of Navigo Consulting, a consultant to parcel shippers, said "certain shippers" could see shipment costs rise by large percentages. avoiding dim weight charges by going to other carriers may not be possible for long. The dim weight model is being reviewed, considered at FedEx Ground as well, as it prepares its own 2007 rates, spokesman David Westrick said.