Background
The freight charge for FedEx and UPS packages are billed based on service, distance (measured in zones) and weight. The weight is determined by comparing the actual weight with the dimensional weight (the weight equivalent based on the length (L), width (W), and height (H) of the package).
What is a DIM Threshold?
Most companies know they can negotiate a higher DIM divisor, so that low-density shipments are not as impacted by the DIM adjustment. An alternative approach to consider, especially for companies who have a small package profile is to get a DIM threshold. A DIM threshold means that packages below a certain size (determined by multiplying L*W*H) do not receive a DIM adjustment and are billed based on the actual weight.
Depending on your package profile you benefit from pushing harder to increase the DIM divisor or getting a DIM threshold instituted (or some combination of the two).
Benefits of a higher DIM Divisor
- The DIM divisor generally applies to all shipments in a given mode including larger shipments while a DIM threshold is only for smaller shipments. (The exact size varies depending on the threshold negotiated).
- The impact of reducing the billed weight on heavier shipments is often more significant since the adjustment is bigger (a 10 LB shipment adjusted to 9 LB vs 100 LB shipment down to 90 LB).
- Unlike small shipments, these shipments do not have the impact mitigated by hitting the minimum charge
Benefits of a DIM threshold
- Completely removes the DIM divisor for the shipments it applies to
Which is best for you?
- Companies who only ship small packages are likely to do better with a DIM threshold as it can eliminate the DIM impact
- Companies who have heavier shipments or whose light packages are primarily hitting the minimum charge will generally benefit more from negotiating the DIM divisor
- Companies who fall somewhere in between (who have a mix of packages, sizes, densities and services) may need to try and measure the impact of each to determine which approach is better
Final Note
Note that the only shipments that matter for these considerations are ones that have their weight adjusted by the DIM divisor. Companies who ship dense packages may not be impacted by the DIM divisor at all and would do better focusing on other areas of their contract.
