Worldwide freight is quite common, when it comes to comparison of Volume Weight against the actual weight. It is therefore easy to predict the ROI by changing your invoicing to use Volume Weight.
That is Volume Weight?
The rules for calculating freight charges have been around for decades: Clients pay for the volume weight or the actual weight of the goods, whichever is greater. The sender declares the dimensions of the shipment (Length, Width, Height) and Weight. For domestic shipments, the freight charge is based on:
|Volume Weight:||Length x Width x Height x 250 kg / m3|
|Example:||A parcel is 60 x 40 x 30 cm and weighs 7.5 kg|
|Volume Weight:||0.6 x 0.4 x 0.3 x 250 = 18 kg|
In this example, the client should be charged for 18 kg and not 7.5 kg !!! – this is clearly a major increase compared to the actual weight.
How much is Volume Freight?
Products have become lighter. Products made years ago generally had a solid steel frame and some kind of mechanical parts. Today’s products contain few mechanical parts, are often made of plastic, and are controlled by a small chip.
We have investigated the relationship between volume weight and weight for over 10,000 shipments and 40.000 parcels:
75 % of all freight is Volume Freight
Does this affect my revenue?
Not all freight is charged based on the parcel rules. For example, palletised goods are often charged at a fixed price for each European pallet.
But clients have also been very creative in this area, for example, by overlapping the pallet edge by 5 cm all the way around. This leads to major problems when packing vehicles, leading to reduced capacity. You are then, only able to have 2 pallets side by side – who has to pay for this? – the freight companies.
Parcels are often also charged based on weight ranges, such as 0 – 5 kg, 5 – 10 kg, etc. But again, the volume weight might lead to a one or two class increase.
Effect on invoicing
We have calculated the averaged weight and volume weight for 10.000 pallets and 40.000 parcels, where we found:
For shipments where the volume weight is the greatest, it is an average of 2.06 times greater than the physical weight. Let’s consider an average shipment from Copenhagen to Århus:
The average weight is 116 kg Price: € 45
The average vol. weight is 240 kg Price: € 77
Revenue € 32,- each pallet
For parcels where the volume weight is the greatest, it is an average of 2.31 times greater than the physical weight. The following weight ranges are used for calculating parcel charges:
0 – 5 kg: € 5 5 – 10 kg: € 7 10 – 15 kg: € 9 15 – 20 kg: € 11
The average weight is 6,8 kg Price: € 7
The average vol. weight is 15,7kg Price: € 11
Revenue € 4,- each parcel
Return of investment
As parcels and pallets are very similar worldwide, we can calculate the return on investment for the implementation of Dimension Scanners:
Freight Volume System, M101 for parcels:
Typical price of implementation: € 90.000,-
Typical revenue each parcel: € 4,-
Return on investment: 22,500 parcels.
Freight Volume System, M202 for pallets:
Typical price of implementation: € 100.000,-
Typical revenue each pallet: € 32,-
Return on investment: 3,125 pallets.
How about the ROI for you!
It is very simple to calculate: Take a tape measure and a scale, and record the weight and volume of shipments for a day, or a week. Compare the actual charges with the potential charges.
These claims are yet to be refuted:
Increase your earnings by 5-8 % of your turnover.
A dimension scanner can generate € 800.000 extra in annual revenue.