The encyclopedia · Finance & Accounting · Financial decision · 2014–2015
UPS and FedEx priced packages by size, not just weight, and boxes shrank
When e-commerce filled trucks with light boxes, FedEx and UPS charged the greater of weight or volume — shippers cut packaging and carriers got paid for cube.
UPS · FedEx
The solution
E-commerce shipped small items in big, light boxes, so trucks and planes filled with cube that weighed little. Weight-based rates under-charged those parcels, even though both carriers already priced air service by dimensional weight.
In May 2014 FedEx said it would apply dimensional weight pricing to all FedEx Ground shipments from January 1, 2015, removing the three-cubic-foot threshold; UPS matched with all US Ground and UPS Standard-to-Canada shipments from December 29, 2014. Both said rates should reflect the space a package occupies.
UPS framed the change as a packaging-efficiency push: shippers would use less packaging and smaller boxes, cutting fuel, emissions and transport cost. In Q1 2015 UPS credited the new pricing among the factors that lifted its US sales 3.8% year over year.
Why it worked
- Volume, not mass, had become the scarce resource in delivery networks.
- Removing the 3-cubic-foot exception closed the loophole that let big light boxes ride cheap.
- Pricing space directly rewarded shippers who used the right-size box.
- Ground simply aligned with an established practice in air pricing.
What can be applied
When the scarce cost driver changes (volume, not mass), price the new driver: the price signal propagates upstream and changes packaging behavior without any mandate.
Aftermath
Dimensional pricing became the industry norm: shippers redesigned packaging, carriers added peak-season dimensional surcharges, and package density improved across US parcel networks.
Sources
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