THE INCONVENIENT TRUTH ABOUT PACKAGING WASTE AND LAST-MILE DELIVERY Shipping air is a lose-lose-lose-lose proposition, but how do you rectify this?
nyone who shops online has had this experience: A big parcel carrier truck pulls up to your house, spewing CO2. The delivery person drops a large package on your porch. You open it up only to find the tiny product you ordered swimming in a sea of Styrofoam peanuts, air bags, and other filler. Everyone loses in this scenario: The carrier that could not cube out its load, the e-commerce merchant that the carrier taxed with dimensional weight (DIM) fees for wasting space on the delivery vehicle, the consumer who paid for the waste in the form of higher shipping charges or product costs, and, of course, the environment. CARRIERS HATE SHIPPING AIR, AND THEY WILL MAKE YOU PAY FOR IT During an investor conference at the end of the 2015 holiday rush, Fred Smith, FedEx’s CEO, famously went on a rant against e-commerce companies whose sloppy packing practices wasted valuable space on his trucks and planes during the holiday rush when demand for capacity was at an all-time high. He complained
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that “we were getting lots of packages that were one or two cubic feet, and inside was a six-ounce stuffed toy.” Can you blame him? It would be like expecting airlines to provide free seats on a plane just because you want to put your feet up on the seat in front of you. For some businesses, time is money. For carriers, space is money. In response, both FedEx and UPS have ratcheted up the costs for shipping packages that are light relative to their size. FedEx and UPS reduced the standard DIM factor for 2017 from 166 to 139, making it more likely than ever that shipments with too much air will be subject to DIM weight rating — an “air tax.” LTL carriers have followed suit for the same reasons, introducing “spacebased” rating. The pressure is on to be more aware of cost-effective packing and palletization or else pay the price in the form of unexpected dimensional weight fees. THE AMAZON EFFECT: LOSE MONEY SHIPPING AIR, BUT MAKE IT UP IN VOLUME Amazon has established a new normal in e-commerce parcel delivery — free
last-mile shipping, including two-day delivery and other premium services that are eating into margins, including Amazon’s. In 2016, Amazon’s shipping revenue amounted to $8.98 billion, whereas the company’s outbound shipping costs came to $16.17 billion — which means it lost $7.19 billion on free shipping. Amazon has done a good job convincing Wall Street that losses like this are A-OK. But businesses that don’t have Jeff Bezos as a CEO are expected to make a profit, and that is hard and getting harder if they can’t absorb shipping costs into higher product prices. So why does it seem that Amazon habitually sends out packages filled with air, despite its public Amazon Packaging Certification Program? Maybe it thinks more about speed and the cost of fulfillment (reducing steps in its picking and packing process) than it does about the extra fees it would incur with dimensional weight surcharges. Or maybe it can afford to not be vigilant about transportation cost-effective packing because it has negotiated dimensional weight surcharges out of its carrier contracts. Have you? Probably not.
PARCEL Jan/Feb 2018