UPS Inc., like its rival FedEx Corp., is telling shippers to shape up their packaging or pay more for shipping.
In a move that was expected, UPS said it would reduce its "volumetric divisor," which is used to calculate the amount of space allocated to a shipment. The result is that shippers will be allowed less cubic space for the same shipment weight at current prices.
Shippers whose packages fall outside the new physical parameters because they can't shrink their shipment's cubic dimensions or add more weight to their shipments will pay as much as 17 percent more for domestic services and 19 percent for U.S. export services, according to a research note from analysts at JPMorgan Chase.
FedEx announced similar measures on Sept. 28.
The UPS change coincided with the release of the company's 2011 list, or non-contract, rates. Rates for ground shipments will rise by 5.9 percent, minus a one percentage point reduction in the carrier's fuel surcharge. Domestic air and U.S. air export rates will rise 6.9 percent, minus a two percentage point reduction in its fuel surcharge. The rate changes take effect Jan. 3, the same day FedEx's new 2011 rate structure becomes effective.
Karen Cole, a UPS spokeswoman, said the pricing formula change would affect less than 10 percent of its customers. Atlanta-based UPS, the nation's largest transportation company, has about 1.8 million worldwide customers who receive daily pickups.
She said the change allows UPS to price larger and lighter air shipments as well as oversized ground shipments in a way that more accurately reflects its true cost to provide service for these packages. Freight tends to cube out in a conveyance before it weighs out, and a less-dense item generally occupies a higher volume of space relative to its actual weight. As a result, carriers often charge more for shipments with higher "dimensional weight" ratings because of their relatively low density.
Cole noted that customers whose packages measure less than three cubic feet aren't affected by dimensional weight pricing. In addition, customers that ship heavier packages and are billed for the packages' actual weight may not be affected, she said.
Cole said UPS's customers "have two options: They can increase the weight of contents in their shipping container, or decrease the size of the container."
When it disclosed its change in late September, FedEx estimated that about 8 percent of its domestic packages have cubic dimensions that are outside its new formula. Those packages would be subject to higher shipping costs under the new formula unless shippers find a way to either add more weight to their packages or shrink their cube through better packaging methods.