UPS Freight, the less-than-truckload (LTL) unit of UPS Inc., will make pricing that's based on a shipment's density rather than the commodity's classification available to all interested customers by year's end, a spokeswoman for the unit said Friday.
UPS Freight began piloting a density-based rates program about a year ago with a small segment of its customer base, according to Sandy Adkins, a spokeswoman for the unit, which is based in Richmond, Va. In May, UPS Freight expanded the program to more of its customers, according to Adkins. "Our plan has been – and will continue to be – to slowly and methodically expand our offering of this optional pricing structure," she said in an e-mail.
Jack Holmes, president of UPS Freight, has said the unit would not make such pricing mandatory, noting that some customers might be more comfortable with the traditional method of pricing LTL shipments based on a commodity classification code established many decades ago.
The LTL industry is moving, albeit slowly, to shift its pricing to a formula based on a shipment's cubic dimensions rather than how it is classified by the National Motor Freight Traffic Association, a nonprofit group that maintains the code. For decades, carriers have mispriced many shipments, especially those classified as "Freight All Kinds," or FAK, by charging rates based on weight rather than dimension. This has led to de facto rate discounts on bulky, lightweight products that should be charged more because they occupy a disproportionate amount of space aboard a trailer.
A move to density-based or "dimensional" pricing would allow carriers to determine the true cost of each shipment based on weight and space utilized, thus generating more revenue per shipment. In anticipation of the shift, YRC Freight, the long-haul unit of LTL carrier YRC Worldwide Inc., plans to acquire nearly 40 dimensioning machines that will scan a shipment and calculate its cube.