Viewpoint: Don’t overlook “dim weight”

As is tradition, our annual Rate Outlook and subsequent webcast highlight Logistics Management’s (LM) January offerings. For the past 10 years, we’ve rounded up top economists and freight transportation analysts in each mode—trucking, air, ocean, rail, and intermodal—to offer this comprehensive snapshot on what shippers can expect in terms of rates and capacity in the coming year.

Executive Editor Patrick Burnson has been master of ceremonies for this event for the past five years, and has again neatly summarized our panel’s forecasts in print (page 26) and will moderate a discussion with these keen minds in our 2015 Rate Outlook Webcast on Jan. 29—always our best attended webcast of the year.

In terms of what shippers can expect in rates, Burnson suggests we keep our eyes peeled on the level of U.S. economic growth. “Our economists believe that the U.S. is the ‘locomotive of global growth’ for the first time since the Great Recession,” he says. “And while that role is a little less powerful than it was a couple decades ago, and we’re more susceptible to fluctuations in global markets, we should stay on a steady growth course—and rates, overall, will go along for the ride.”

And while that seems simple enough to digest, there are always a couple of wild cards in the mix. Oil and diesel prices, of course, as well as the broader rollout of dimensional weight (“dim weight”) pricing to ground packages in the U.S. and Canada are two factors that shippers need to better understand to keep budgets in line.

By far one of the biggest stories we’ve been following is the more than 45 percent drop in oil prices since June due to surging U.S. oil production coupled with lagging global demand. However, while gasoline consumers have benefited from a significant drop at the pump, the windfall has not been as great for users of diesel.

According to LM’s Oil & Fuel columnist Derik Andreoli, Ph.D., the fundamentals of supply and demand suggest that there will be less variability in petroleum prices in 2015 compared to 2014. “On one hand, prices almost certainly won’t continue to decline like they have over the last six months,” he says. “On the other, there would need to be a significant supply disruption to drive pricing up. In the short term, diesel should stabilize and shippers can take that variability out of their budgets—at least for now.”

But perhaps one of the most overlooked issues—and one we’re covering in force this month—is the fact that 2015 is the year dim weight pricing for both small package and less-than-truckload shipments will be making a significant impact on unsuspecting shippers’ budgets.

“The majority of small- to mid-sized retail shippers are about as ready to manage dim weight as I am to take a rocket to the moon,” says Jack Ampuja, president of the supply chain management consulting firm Supply Chain Optimizers.

Ampuja sets out to demystify dim weight for shippers by explaining why it’s happening, how it works, and how to go about managing this significant shift in pricing.

As we’ve reported, early projections are that one-third of all small package shipments will see cost increases related to this change, with overall shipping cost increases jumping up anywhere between $500 million to $1 billion. “Shippers can either sit back and pay more or take action with their carriers now,” adds Ampuja.