FedEx Freight tests dimensional LTL pricing

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FedEx Freight is testing dimension-based pricing for select LTL customers, which considers the space a shipment occupies in the bed of a truck in bids in addition to weight and shipping speed, the company announced on Tuesday.

According to a FedEx FAQ, measurement-based pricing, which FedEx calls “space and speed,” can reduce shipping costs for customers who value space efficiency when packaging their shipments. The company calculates the price based on the dimensional weight or the actual weight of the package, whichever is greater.

“With the simplicity of space and pace pricing, we aim to build trust with our customers by ensuring they receive accurate pricing on the frontend to reduce the frequency of rate adjustments and disputes on the backend,” Mike Lyons, Vice President of LTL Revenue quality said in a statement.

The pilot simplifies FedEx Freight’s pricing structure by eliminating the need for complex freight classifications under the National Motor Freight Classification pricing system, which FedEx says is based on factors such as density and stowability.

“Imagine how often people ship with oversized packaging,” says the FAQ. “In order to stabilize the contents, these oversized boxes need extra padding. These overstuffed boxes fill shipping trucks with cubic feet of unneeded corrugated cardboard, air bags, and air bags. In some cases, people are literally paying for air transportation.”

In the dimension-based pricing pilot, customers specify the weight, dimensions, origin and destination zip code of their shipment. FedEx Freight’s Dimension in Motion technology then verifies the weight and dimensions of the shipments, and the carrier issues a simplified invoice to the shipper.

To calculate the dimensional weight of a shipment, multiply its width, length, and height in inches and round each measurement to the nearest whole inch. Then divide the result—the cubic size of the package—by 139 for shipments to the US, Puerto Rico, and internationally. (For shippers who prefer not to do the math themselves, FedEx offers a dimensional weight calculator.)

Aside from potential rewards for shippers who pack more efficiently, the new pricing system also offers a key advantage for FedEx. “Increasing shipment density often allows us to pack more product onto our trucks and planes,” the company said in the FAQ.

The pricing pilot follows FedEx CEO Raj Subramaniam’s strategy to improve revenue quality and increase operating margins at each of the logistics giant’s four operating companies. FedEx is gearing up for moderate peak demand and trying to use excess capacity to onboard new customers during the holiday season.

Following the pilot phase, which will be limited to a select number of customers, the airline plans to offer size-based pricing to the remaining customers going forward, although it hasn’t given a timeline.

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