The 6 factors that affect your average cost of packaging

Depending on how and why you spend what you do on your packaging can be surprisingly complex.

So, whilst it’s simply enough to say that you order a specific number of lines, in specific sizes and specific volumes, utilising a particular material, if you have grown your packaging inventory over a prolonged (or even quite rapid period, the question can still be – why?)

Why is a specific material or board grade used? Why do you order two similarly sized boxes? Why does one box, which seems quite similar on the face of it to another, cost so much more? Why do you order so many additional items, such as tape and inserts?

There are normally three possible answers to that.

The first is usually long the lines of “this is what we needed to accommodate our product range”. However, if the product range has grown over time, with new packaging introduced as you go, decisions made in isolation may be affecting your average packaging cost.

Answer two usually focuses on cost. In effect, this was the cheapest option (at the time).

The final answer, which may be of some concern, is “I don’t know”.

For most business types and packaging users, it will usually be possible to identify six overarching factors that affect the why and how of your packaging.

Whilst these can then be subdivided into a number of sub-categories and considerations, the main six factors that influence your corrugated packaging spend are as follows:

• Fragility of the product
• Volumes required
• Complexity of the product
• Sundries and secondary packaging required
• Marketing and branding
• The role in the supply chain

Whilst not all of these factors may seem relevant to your business, throughout this guide, we’ll detail why you should, if possible, analyse these elements in order to begin identifying potential cost-saving opportunities.

Perhaps the most obvious is that the fragility and specifications of your product can directly and noticeably affect your overall packaging spend.

In simple terms, the more delicate the items you need to package, the more money you will need to spend to protect them effectively.

Similarly, larger items will generally cost more to package than smaller items.

This all leads back to the high, rising cost of your packaging. The type and amount of material used.

One of the main reasons you may have experienced a price rise is the increase in demand for the raw materials that are used to produce corrugated cardboard (and for the finished material itself). This rise in demand has led to shortages, price increases, and ultimately an increase in the cost of your packaging.

So, even knowing this, is there anything that you can do?

The short answer is yes.

For example, could your boxes be made smaller to use less material (if you are not using custom packaging)?

Another area to explore is whether the packaging material is over-specified. Whilst your packaging may be successfully protecting your products in transit, a lighter, cheaper board grade may offer no noticeable difference in protection, but could provide an instant cost saving.

Packaging material costs are one of the biggest factors in the price you pay.

A similar principle actually applies to the intended use of your packaging. So, whilst assessing how fragile or robust your product is, you should also consider the environments and handling it will experience in your supply chain.

As a very basic example, a product delivered to an end user via a courier network may be handled multiple times as it passes through various distribution centres. It will also potentially undergo a number of journeys in vans or lorries, during which it will be exposed to different forces (impact, vibration, etc.).

The exact same product, being delivered directly to your customer using your own transport, will be handled considerably less and, depending on location, may also travel a shorter distance.

The first scenario would require considerably more transit protection than the second.

This again returns to the material specification of your packaging – and the cost of using a material or board grade that may or may not be suitable.

It is therefore important that you look at the average distances your products travel, how they are transported, the amount of handling they are likely to be subjected to, and then combine this with an analysis of your products’ fragility to ascertain the optimum material to strike a balance between cost and protection.

Remember, an over-specified carton will only offer you one thing – additional costs!

The final point that links to the protection of your product – but can manifest itself in other ways – is the complexity of your packaging.

For example, to protect different items within your outer carton, you may use a complicated die-cut insert that requires assembly before being placed in the outer box. Whilst a good idea, in theory, the design of your pack might be overly complicated.

This can be particularly harmful to your costs, if multiple, costly or labour-intensive manufacturing processes are needed to produce your pack.

Hand finishing is usually added to your invoice as a cost. Similarly, multiple passes through a machine (e.g., for cutting, creasing, or adding print) will also be reflected in your overall costs.

As such, consider whether your packaging really needs to be as complex as it is currently. There are many occasions where you will not be able to simplify your packaging without compromising performance and the protection of your products. This is often referred to as “value engineering“.

However, eliminating just one manufacturing process could significantly reduce your costs, and whilst you may not feel confident in analysing our packaging yourself, your packaging supplier, if competent, should be more than willing to help.

As with any item you purchase, the overall volume ordered can significantly impact the price you pay. Whilst this is simply economies of scale, the effect can be even more pronounced when using custom packaging.

Firstly, you have machine setup time and tooling costs on the initial order. You then have the manufacturing processes, plus any other manual tasks (e.g., hand finishing, bundling, etc.). Then there is storage and shipping to your location.

The more each of these processes needs to be completed, particularly the initial setup and delivery, the bigger impact it will have on your costs.

But how can you affect order volumes when usage is fairly consistent?

Well, there are a number of ways you can increase the volume you order without impacting your day-to-day packaging processes.

For example, if you have additional free warehouse space, you could use it to store packaging. If you know your average usage – and, more importantly, have the space – you could order larger volumes of packaging and store them safely until they are required.

However, this assumes you have free space.

If you don’t, your packaging company should be able to offer you a managed inventory service, in which they will hold an agreed level of stock and deliver on a ‘Just-in-Time’ basis. This could allow you to order a larger volume up-front, and then take delivery as previously.

The final option is to consider rationalising your packaging.

This would see you combining boxes of similar size, allowing you to order higher volumes in fewer boxes. This has the added benefit of minimising your admin and ordering process too.

Many people, when looking to reduce packaging costs, tend to overlook all the secondary packaging and sundries they use.

These can be significant, hidden costs of your packaging.

How much of these you use is directly affected by the type and size of the packaging you use.

Boxes that offer little protection for your product may be ‘improved’ by adding void fill, such as expanding foam or polystyrene. You might be using additional bags or papers, such as those that offer protection against static or rust (VCI). The design of your boxes may mean you use a lot of tape during assembly.

Each of these adds not only to overall packaging spend, but also creates an additional process for your staff to undertake (taping, putting in a bag before packing into the outer packaging, etc.) This, in turn, affects their overall productivity, and thus, your labour costs rise as well.

All of them can be mitigated through analysis of your packaging design, however.

VCI and anti-static coatings can be applied directly to your boxes’ surfaces, eliminating the need for and cost of the bags and paper you might have been using.

Custom-sized boxes can dramatically reduce the amount of void fill you use, whilst you can even switch to “crash lock” boxes to minimise the amount of tape you require, and speed up assembly time too.

The final part of your packaging to consider is its role in your company’s marketing.

If your corrugated packaging doesn’t currently have your logo printed on the exterior, it is a missed branding and advertising opportunity, although there may be security reasons why you don’t wish to advertise the contents of the packs.

However, if you are using a three- or even a full-colour logo and incurring the associated print costs, is this really necessary?

You should be able to analyse the impact of dropping from multiple colours to a single monochromatic logo, and you may find that the cost savings easily outweigh any possible loss of visual impact.

You may also, with the help of your packaging supplier, be able to ascertain whether switching printing methods can yield cost savings with little noticeable impact. This may be moving from a lithographic print to a high-quality flexographic finish, for example.

The key point is to consider what impact your packaging needs to make and whether your current print is the most suitable option for achieving it.

Although there are myriad factors that affect the price you pay for your packaging, if you focus on the factors you can easily analyse and even control, you can identify quick wins that help you start reducing your packaging spend.

Don’t be afraid to ask your packaging supplier for help and advice. If they value your business and know their stuff, they should be happy to work with you to achieve your cost reduction targets.

And if they’re not, it may be time to look elsewhere…