David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
Parcel shippers may be in for a shock when they open their first parcel shipping bills of 2015. By that time, FedEx Corp. and UPS Inc. will have implemented what is known as "dimensional weight pricing" for all of their ground packages, including those measuring less than three cubic feet that were previously exempt from dimensional weight, or dim weight, pricing.
For the first time, parcels falling under the three-cubic-foot dimensional threshold will be priced based on a combination of weight and carton dimensions, not their weight alone. For shippers of lightweight items with packaging heft to them, this could spell double-digit price increases because the parcels will be rated based on the amount of space they occupy in a van. No longer will the carriers haul Styrofoam popcorn and other cushioning materials that amount to little more than air for free.
The companies say the pricing changes will foster greater packaging efficiency for shippers, reduce fuel consumption through better truck utilization, and result in a smaller carbon footprint. They are also likely to generate for the carriers hundreds of millions of dollars in additional revenues without significant fleet investments. "The simple reason for the new pricing structure is it is much cheaper for [FedEx and UPS] than buying more trucks and airplanes. They want to get more product into the trucks and airplanes they already have," says Jack Walsh, director of sales and marketing for CASI, a company that provides dimensioning and weighing systems.
Before the Internet changed shopping (and shipping) habits, a large portion of parcel loads involved business-to-business shipments that were optimally packed by the manufacturer. Things are different in the age of e-commerce. Speed has now taken precedence, and for most DCs doing e-commerce fulfillment, it is faster for workers to grab a larger carton than necessary than risk having to repack an order because the carton originally selected was too small.
Jack Ampuja, president of the packaging and supply chain consulting firm Supply Chain Optimizers, says an order picker chooses the wrong sized carton about a quarter of the time. "We have all gotten that small item, such as a flash drive, packed in a breadbox-sized carton," he says.
Such packaging habits result in wasted space. "Forty percent of total shipping volume is unnecessary air," says Hanko Kiessner, CEO of Packsize, a company that provides on-demand packaging systems that enable users to build custom cartons. "If we can reduce shipping volume by 40 percent, we can actually increase fleet efficiency by 66 percent."
KNOW YOUR NUMBERS
So how can companies avoid high parcel shipping charges? The first step is to talk to the carriers. Many companies have negotiated rates, so it remains to be seen if, or by how much, the pricing changes will immediately affect them. Experts emphasize that the time for shippers to act is well before their contracts are up for renewal. "If your water bill goes up, you turn off the sprinklers," quips CASI's Walsh.
The second step is to know what is actually being shipped. "You can't make intelligent packaging decisions if you don't know the [dimensional] volume of your products," says Walsh. Few companies know their product characteristics, especially those companies that have a constant churn of stock-keeping units (SKUs). But knowing the actual weight and size of products can pay big dividends. It can make handling easier, optimize storage space, and save on shipping costs. If you know the size and weight of each item shipped, you can then optimize how the items are packed so you're not paying to transport air.
As for how you can get those dimensions, there are a number of ways. Sometimes, suppliers will provide you with that data. But more often than not, shippers have to gather the data themselves. They can measure and weigh products manually using a tape measure and a scale, but this can be very time consuming. Another option is to use automatic dimensioning and weighing systems. Not only are these systems much faster and more accurate, but they can help take the guesswork out of the carton selection process. The systems can transmit the weight and dimensional data they capture to a warehouse management system and shipping software. The software then guides packers in choosing the best packaging for the product, including the correct size carton and the amount of dunnage needed to protect its contents. Some systems will also tie into a computer screen to display the optimal way to arrange products within the carton—for instance, with heavier items on the bottom and lighter ones on top.
In addition to being used to collect data on individual SKUs handled at the facility, automated dimensioning systems can be installed at the end of the line to capture information about each package in a shipment. This information is then passed along to the carrier and can also be used for customer billing. "It is important for shippers to include the dimensions of the parcel when processing their ground shipments. If they don't, they are likely to receive significant 'back-charges' from their carrier, which cannot be passed back to the shipper's customer," notes Randy Neilson, director of sales and marketing for Quantronix, the manufacturer of CubiScan dimensioning systems. "The system will collect the parcel's ID/order license plate number as well as its length, width, height, and weight," he says. "All of this information is then electronically transferred and integrated with the user's shipping software system."
Such systems are certified as legal-for-trade dimensioning and weighing systems. Therefore, the information they gather may also be useful in settling any billing disputes that might arise with the carrier or customer.
CARTON CORRECTION
Another way to address shipping costs is to evaluate the packaging you're using to see if the cartons you employ are the best ones for your needs. Consultants like Ampuja can help shippers determine carton characteristics, the number of cartons that are ideal for their products, and the sizes those cartons should be. "Six box sizes are about optimum for manual operations," Ampuja says. Companies that use computers to select the proper box size really have no limit on the number of boxes they employ but typically use about 15 to 18 boxes, which will provide more freight savings, he says.
Ampuja notes that shippers are sometimes reluctant to increase the number of boxes they use because they feel it will complicate their operations. However, expanding their carton lineup can save money if the cartons are a better fit for their products, he says, especially if computers handle the carton selection. "The money is in the freight, not in the box," Ampuja says.
Making even minor changes in the boxes' dimensions can also greatly affect the dim weight. For example, simply trimming a half-inch off the length, a quarter-inch off the height, and so on can save significant money when multiplied by thousands of boxes.
Obviously, consideration should be made for the types of products shipped—how heavy and fragile are they? What is the ideal corrugated thickness and design to assure the products are protected? The cartons should not be too weak or too strong, but as Goldilocks would say, "Just right." Another matter to consider is the optimal amount of dunnage to use to ensure the product will survive the journey while at the same time making the most efficient use of space.
"ON-DEMAND" PACKAGING
Another option for companies looking to eliminate wasted space is to go the custom carton route. They can do this by installing an on-demand packaging system that allows them to make custom cartons on the spot. Using measurements obtained from dimensioning systems, an on-demand packaging system forms the correctly sized box for the product being shipped. In short, these systems can neutralize the effects of the new dim weight charges, as the package is already as compact as it can get. "Our solution can actually help customers see a reduction in their shipping charges even with dim weight pricing," says Packsize's Kiessner. He says customers using his company's on-demand packaging solution currently obtain at least a 20-percent overall savings even before dim weight pricing kicks in. The savings come from lower shipping charges as well as a reduction in the amount of corrugate and dunnage needed.
Using a carton of the correct size also reduces the potential for product damage. "There is no better protection for any product than the best fit, so that there is no shifting inside the box," explains Kiessner.
On-demand packaging can be especially useful for companies shipping irregularly shaped items. One such shipper is CarPartsDepot Inc., an online store that sells automotive body parts, such as bumpers, fenders, grills, radiators, hoods, and headlights. Not too many of these parts fit neatly into a standard box. For that reason, CarPartsDepot relies on a Packsize system to create the oddly shaped boxes it needs.
"We have around 6,000 SKUs. Every one has a different shape, so we need a perfectly shaped box for each item," says Tony Chiu, CarPartsDepot's general sales manager. He says the retailer captures each part's dimensions, which are then stored in a computer until it's time to create the box for the shipment. About 1,200 to 1,500 parcels ship daily from his facility. He adds that he is not worried about dim weight pricing as he is already optimized for parcel shipping. "We are saving 15 percent now and will save even more comparatively when the dimensional weight [pricing] starts."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.