DIM Rating in LTL: How to deal with it
Small parcel shippers are now familiar with dimensional (DIM) pricing, which all three of the largest carriers have been using since 2015. This method of space-based rating is something LTL shippers, by contrast, haven’t had to deal with much — until now. LTL carriers have started leveraging DIM pricing to help keep their operating costs more in line with revenue.
The primary advantage to carriers of DIM pricing is improved utilization of trailers. From the shipper’s perspective it can seem like a disadvantage in terms of both time and cost, but if it’s approached the right way, this model can be a way for shippers to save money and improve the service they get, too.
To gain these benefits, shippers need to fully understand the DIM pricing methodology.
Given how complicated it can be to calculate the space a shipment will require on a trailer and the corresponding rate, a good understanding of how it DIM works will prove an advantage for freight shippers as the LTL industry more widely adopts this rating method.
A little history to provide context
The current NFMC LTL classification system was developed in 1935. Like most things (not people!) that are almost nine decades old, the system is outdated. In those 84 years, not only has the variety of products being shipped vastly increased, but a lot has also changed about how freight is shipped. These changes can put modern-day shippers at a disadvantage under the existing system. For example, shippers that use efficient packaging to reduce space pay the same as companies sending packages that have ten times the volume but the same weight.
In LTL freight both weight and space are cost factors. It’s logical that both should be taken into consideration in the rating system and thus the price that shippers pay.
But it’s complicated!
One big reason DIM pricing has not already been widely adopted in LTL is because many shippers simply do not have the means to measure and calculate their rates based on a shipment’s dimensions, having always used the existing weight and class system. For DIM pricing to become the norm, shippers will need to make changes in how they operate.
Shippers whose products and pallet sizes remain consistent have a head start because they will less likely need to make drastic changes in their operation. Those that regularly send oddly shaped LTL shipments, on the other hand, might need to make significant changes in their shipping process.
The obvious challenge with DIM calculations is that one size does not fit all — not only on the shipper’s side, but also on the carrier’s. One LTL carrier’s optimal configuration and DIM calculation is not the same as another’s. For a given shipper, a cheaper way to ship might not always mean fewer pallets.
Due to so many variables coming into play for a single shipment, there is not a single DIM calculation that would work for every shipper. However, for shippers that are able to make the system work for them, there are potential cost savings. Specialized logistics technology can help in this regard.
The best first step for shippers is to talk with carrier partners who have implemented DIM pricing to understand their needs and how the rating system is implemented. Shippers can then modify their LTL operation to take advantage of opportunities for savings in their freight spend.