Many Companies Miss This Key Method For Saving Money On Packaging
Product packaging is the often underappreciated hero of the product life cycle. Without proper packaging, most products would never make it safely through transit to the end user. But when it comes to sourcing packaging, some companies look for the lowest unit price. We support not wanting to overpay for packaging, but many fail to realize that the lowest unit price may carry the highest total costs.
Analyzing your packaging options before making a decision is prudent. When you evaluate total cost, don’t forget to include the avoidable cost in the analysis. An avoidable cost is an expense that will not be incurred when a product or activity is continued. Deciding to discontinue a product or activity, such as changing your packaging vendor, will eliminate or reduce these costs.
When comparing packaging, you should look at all activities that are increasing your total costs or that may potentially decrease your total costs. Here are some things to consider that may be increasing your total costs.
If your packaging vendor offers design services, there are several opportunities to reduce your total costs. Optimized packaging design can reduce product damage and returns, excess inventory, material waste, packaging line inefficiencies, and shipping and handling costs.
Optimizing your packaging design isn’t just ensuring your product arrives without damage. It takes it a step further by reducing material, footprint, and weight while maintaining protective properties. Internal packaging (dunnage, partitions, etc.) may be changed or reconfigured. It may be done for one product in one box, or you may decide that it makes more sense to package multiple products together for better efficiency and cost savings.
The design also impacts how your boxes flow through your packaging line. If your packaging is creating bottlenecks or inefficiencies on your line or ergonomic issues for your employees, you may have opportunities for cost savings through packaging optimization.
Your packaging designer may also help you to combine SKUs for similar products. This can help with inventory management costs and prevent waste (costs) in the case of product obsolescence. Optimizing your packaging can also maximize pallet configuration and DIM factors, which all lead to lower shipping costs.
Consider the minimum quantities you are required to purchase to get the lower unit price. The most obvious reason to buy only the quantities of packaging you need is to optimize cash flow. But there are even more compelling reasons.
If you are required to purchase more than you can use, you increase your risk for product damage and returns. After only 90 days, 40 percent of a box’s stacking strength is lost. If your warehouse doesn’t have environmental controls (i.e., temperature and humidity), that percentage is much higher. The higher your product costs, the higher these costs associated with damage and returns will be.
The third way minimum quantities cost you is through managing excess inventory. You have to store it, which means space can’t be used for something else – like a saleable product. If your product becomes obsolete, you are stuck with the packaging you have paid for that becomes waste.
It goes without saying that delays cost you in many ways. You may have to pass those delays off to your customers, who may go elsewhere. You may have to pay expedited shipping costs to make up for the delay to keep your customers happy. Unexpected things happen, and if a project shifts or unexpected orders happen, can the packaging vendor meet your needs on time?
If you plan well and all your orders are reoccurring, but your packaging vendor’s lead time is inconsistent, you may find you need to have excess inventory on hand to ensure you don’t run out before the next delivery. You are faced with the same challenges, such as the risk of obsolescence, reduced stacking strength, and the cost of warehouse space.
Calculating Total Costs Paints the Full Picture
In addition to the unit price, by taking into account costs associated with packaging design, minimum quantities, and late deliveries or long lead times, you will have a better idea of what your packaging is costing you. You may even want to go a step further and see if poor communication and customer service add to your total costs.
Axis Corrugated Container Can Reduce Your Packaging Total Cost
As a valued supplier of custom and standard die-cut, flexo, and specialty corrugated box and display products, we understand the factors that increase total costs and reduce those costs for our customers. Some of the ways we do this are through:
- Reduced lead times
- Optimized design and DIM factors
- Our streamlined job workflow, which minimizes production costs and speeds job processing
- Quick response to urgent orders and unusual packaging challenges
- Our enormous inventory of corrugated boards and materials, which enable us to fulfill short turnaround and specialty orders quickly
- Just-in-time delivery and next day turnarounds in many cases
- Inventory management, ensuring you always have the boxes that you need
- Improved logistics with our extensive fleet of trucks and dependable logistics partners
We would love to help you reduce your total packaging costs. Contact us to get started.