We have been talking about product pricing and customer segmentation in past articles but one thing we need to discuss is how to deliver parts and products from the origin to the end customer. The best products in the world are no good if you cannot deliver it to your customers in an effective and affordable manner. Therefore we need to talk about Volumetric Weight and Density to understand shipping costs.
So what is volumetric weight? It is the amount of space that a shipment occupies. Airlines, ocean carriers, and trucking companies either charge based on weight or space, or both whichever is greater. I need to define a few terms first, and I will need to provide a few formulas to make sure the concept is clear. In past articles I have avoided going into mathematical models but with this topic there is no way to avoid it.
Actual Weight: This is the weight of a shipment as if you put it on a scale regardless of its size.
Volumetric Weight or Dimensional Weight: These terms are interchangeable. There are some technical or legal differences but from a marketing and pricing point of view they are the same thing. This is the amount of space that a shipment occupies based on a formula that converts the size into volumetric weight which is then billed to the customer. The formula in centimeters is (H x W x L)/Dim Divisor (see Dim Divisor definition below).
Chargeable Weight: To be precise chargeable weight is the higher of the actual weight or the volumetric weight (Dimensional weight). This is what the customer will be charged, hence the name chargeable weight.
Dim Divisor: This stands for Dimensional Divisor and is the denominator in the volumetric weight formula (H x W x L)/Dim Divisor.
The international air cargo dim divisor is 6,000 cc/kg, and the integrated courier companies such as FedEx, UPS, DHL and TNT use 5,000 cc/kg for international shipments. Ocean carriers can have something different, and domestic airlines and trucking companies in various countries also have different dim divisors. It is always important to ask your shipping company what their dim divisor is so that you can understand your shipping costs. The smaller the dim divisor means the higher the result, which means volumetric weight will be greater and cost more. Therefore, a dim divisor of 3,000 cc/kg will result in twice the volumetric weight as a dim divisor of 6,000 cc/kg. (Just a note, most people drop the units cc/kg and just refer to the number such as 6,000 or 5,000 or 3,000, etc.)
When I shop online I am always amazed at how companies ship their products and waste so much space. Often, I order a small item and it comes in a big box with lots of dunnage (dunnage means packing materials) such as bubble wrap, styrofoam peanuts, or other materials. The key to saving money is to pack products in the smallest box possible while ensuring it is protected in order to maximize density. So what is Density?
Density: The ratio of mass to volume, specifically (Weight / H x W x L) x 1003 = kgs/m3 which is one of the standard measurements in the transportation industry.
Let me share an example:
So in this example this 10 kg box has a density of 147.7 kgs per cubic meter. The box is not actually one cubic meter in size but this formula standardizes the weight as if it was one cubic meter so it can be a reference with other shipments that are of all different sizes.
Next, I will provide a graphical illustration of density. Each box weighs 10 kilograms but are of different sizes and density.
Logistics and transportation companies prefer high density shipments, and so do shippers because it costs less since it occupies less space. With lots of high tech and precision parts nowadays items are getting smaller and lighter. Many shipments are often packed in lots of dunnage so trucks, ships and planes are completely full but have lots of extra weight that can be carried. This means transportations companies have to buy more vessels and hire more people to run those vessels, which is more expensive. If shipments are packed more densely then less vessels will be needed thus reducing costs (and good for the environment). So it is a win-win for shippers and for transportation companies. My goal is to educate everybody so space is minimized and costs are reduced, and environmentally more friendly.
Next, here is how to calculate volumetric weight. As mentioned above the dim divisors can vary by company or mode of transport but in this example I will use 6,000 cc/kg since it is a common international standard.
The box actually weighs 10 kgs but the volumetric weight is 11.3 kgs, which will be rounded-up to 12 kgs. So the shipper will be charged for 12 kgs even though the box only weighs 10 kgs. That is why it is important to use the smallest box possible while ensuring it is packed with proper dunnage to prevent damage. Sometimes paying for more volumetric weight than actual weight cannot be avoided but I often see lots of unnecessary wasted space. And I am sure you have seen staff measuring your boxes when you tender those shipments so they can calculate the volumetric weight. If you do not have a box that is the right size then cut down the box to make it smaller.
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