How much do shipping pillows really cost?

on October 31, 2015

The image below is called an air pillow and it is used to cushion product in shipping boxes.   It will allow a small bottle of pills (for example) to be snuggled into a box big enough to ship men’s snow boots.  The air pillow not only cushions, but it takes up space.

shippingairbagsThe air pillows weigh next to nothing and cost about 6 to 12 cents depending on size.  The cost may seem negligible but in reality it could be pretty expensive.   The reason is that since January 2015, all the major shippers are charging by dimensional weight.  Dimensional weight is a calculation based on the cubic space of the package and comparing that to the actual weight.

Example:  Shipping a .75 pound product in a box that is 10” x 12” x 6”.   The dimensional weight is equal to cubic inch volume divided by 166, or in this example 10 x 12x 6=720.  Divide that number by 166 and you get 720/166 =4.34 pounds.  So those air pillows which made it feasible to ship in a larger box could easily increase the shipping cost by $3.00 to $10.00 depending on distance and mode of shipping.  In this case the 25 cents worth of air pillows may not be that great of a deal.

Previous to 2015, many retailers would stock a limited number of box sizes.  When the part was much smaller than the box, air pillows were used to fill in the space.  This shipping cost was not affected because it was solely on package weight.   This practice was causing issues with UPS, USPS and Fed Ex as they were essentially “transporting air” across the country.   Thus dimensional weight calculations were introduced.   It made sense because large boxes can fill up a van and limit the profit for that shipment.

We suspect that negotiates some pretty favorable rates with the carriers so the dimensional shipping weight factor may have less impact on them.  For smaller retailers and suppliers, the dimensional shipping weight has transformed some of their business practices.

For companies that have a smaller number of product sizes, the solution may be simply ordering more different box sizes, including having custom size boxes fabricated.   While this may result in increased inventory costs as well as cause potential delays in shipping, the cost avoidance of shipping a product in an oversized box makes it necessary.

Some retailers with a large selection of products cannot afford the inventory cost or the space to carry a box for every possible product it shipped.   In many cases the retailers are choosing to “bite the bullet” for the higher shipping cost.  Some retailers are passing the cost on to the consumer and others accepting a reduced margin.

Another option for retailers with a large variety of products is to purchase a box machine that can create a custom sized box with the push of a button.   The machines are software controlled and can instantaneously create an ideal sized box right as the product is being packaged for shipping.  By fabricating their own boxes just in time, retailers are saving on the box cost, and now more importantly they are avoiding significant shipping costs.   However, even with these savings, many retailers might not be able to justify the capital investment.

The dimensional weight issue becomes larger as the major carriers are announcing price increases for 2016.  USPS is considering an average 9.5 % increase. Source.    UPS just announced price increases that on average starts at 4.9% for various services.  source.   Fed Ex has previously announced similar pricing increases.   These shipping cost increases come at a time when fuel prices are at historical lows.

Packnet fabricates custom corrugated fiberboard and corrugated plastic packaging containers.  Not only are the boxes custom sized to meet your needs, but Packnet has a number of customers where packaging materials are shipped “just in time” so that the customer does not have to carry a large inventory of containers.  For more information on custom corrugated plastic containers and   custom corrugated fiberboard call 952-944-9124 to speak to a technical representative.