UPS To Charge Packages By Dimensional Weight - Update

(RTTNews) - Package-delivery giant United Parcel Service Inc. (UPS), Tuesday said it will start charging ground-shipped packages based also on their size, not only on weight.

The Atlanta-based company in a statement said it plans to start charging for packages based on dimensional-weight, which calculates the cost by gauging both size and weight of the package starting from December 29.

UPS were tempted to copy the pricing method from FedEx Corp. (FDX) after the rival changed its pricing structure to dimensional-weight pricing along with an increase in fuel surcharge in May.

Chief Commercial Officer Alan Gershenhorn said, "UPS has been researching the potential expansion of dimensional-weight pricing for a number of years because it enables us to more appropriately align rates with costs which are influenced by both the size and weight of packages."

UPS will start using dimensional-weight pricing for all packages shipped in US and to Canada through UPS Standard. UPS already applies this method for domestic and international air services, as well as for UPS standard ground service to Mexico and for big packages to Canada.

UPS linked the dimensional-weight pricing due to effects of the online shopping trends, where online retailers like Amazon.com and Ebay usually pack small items in large boxes, resulting in a "decrease of package density." This trend causes cargo space to be less efficiently utilized, resulting in an increased cost per package.

The company believes the new pricing method will force shippers to reduce excessive packaging materials thus leading to reduce overall package sizes, and as a result will lower fuel and transportation costs.

UPS is currently trading at $101.41, up $0.23 or 0.23%, on the NYSE.