United Parcel Service (NYSE:UPS), the world’s largest package delivery company, followed the move of its competitor, FedEx Corporation (NYSE:FDX), in setting its U.S. ground shipping rate based on package size. The largest package delivery company announced today that it will determine the rates for all U.S. UPS Ground services and U.S. Standard to Canada packages using dimensional-weight pricing, starting December 29, 2014.

UPS

UPS’s new pricing strategy promotes packaging efficiency

According to United Parcel Service (NYSE:UPS), its new pricing strategy addresses trends in the industry and promotes packaging efficiency and environmental responsibility. The largest package delivery company emphasized that it is already using dimensional-weight pricing for UPS air services, both domestic and international, UPS Standard to Mexico ground services, and UPS Ground packages and UPS standard to Canada packages measuring 3 cubic feet in size or larger.

In a statement, Alan Gershenhorn, executive vice president and chief commercial officer at United Parcel Service (NYSE:UPS), explained, “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.”

E-commerce shipping trends

United Parcel Service (NYSE:UPS) noted that recent shipping trends in e-commerce decreased package density. According to the company, the package weight compared to the physical exterior dimension is declining, which caused less efficiency in utilizing cargo space and increased the cost per package. Online retailers such as Amazon.com, Inc. (NYSE:AMZN) usually ship small items using large boxes, which are lighter. So the rate is lower, but the packages take up more space on delivery trucks.

The largest package delivery company believes that more shippers will improve their packaging practices following its implementation of dimensional-weight pricing method. United Parcel Service (NYSE:UPS) anticipated that its efforts will reduce excess packaging materials and overall package sizes, which could lead to reduction of fuel use, vehicle emissions and transportation costs.

United Parcel Service (NYSE:UPS) said UPS Freight recently started offering an optional, simplified density-based pricing program to a segment of its customer base.  According to the company, its UPS Freight Density-Based Rating LTL pricing solution is based only on the weight and cubic volume of a shipment instead of the National Motor Freight Classification (NMFC) system, as it is complex for both customers and carriers.

Last month, FedEx Corporation (NYSE:FDX) also announced that it will use dimensional-weight pricing on all shipments starting January 1, 2015.