What is Your Packaging Really Costing You?
If I asked you what your packaging costs are annually, you might total up your invoices for the year to come up with your annual costs. You may even think you are doing pretty good, having negotiated a great unit price. However, the total costs, not the unit costs, could be throwing your budget off and costing much more than is necessary. Those boxes that saved you a few pennies could actually be costing you thousands of dollars.
When you buy based on unit price while not considering the optimization of your corrugated packaging and supply chain, you end up spending more in other areas, which raises your total costs. Here is a breakdown for general corrugated packaging costs:
Unit costs – what you pay to your vendors per unit
Total costs – which includes unit costs and may include excess costs related to:
- Product damage and loss
- Material Waste
- Handling
- Warehousing
- Transportation
Product Damage and Loss
If you see a lot of product returns or customer complaints, your packaging may not be optimized for the type of conditions it experiences. Obviously, you will want to ensure the product is adequately packaged, but have you considered environmental factors? Fluctuations in temperature and humidity during transportation and storage can be an issue. Corrugated board will naturally try to reach equilibrium with its environment.
- High humidity. If high humidity increases moisture content in your corrugated packaging, the bonds within the cellulose fiber can weaken, leading to failure. Also, any glue used in the packaging can fail.
- Low humidity. If humidity is low, corrugated can become dry and brittle over time. Preferred
moisture content is 5 percent to 7 percent at 72° F, 50% RH.
Material Waste
Material waste can occur in several ways that can be avoided.
- Purchasing large quantities. If you are buying in large numbers to get a discount, ensure you will use them quickly. Obsolete packaging is an unnecessary waste. Also, about 40 percent of stacking strength is lost after 90 days.
- Over packaging. Never seeing product damage from shipping and handling may sound like a good thing, but using excessive dunnage and over packaging a product is nothing more than waste. Ensure your packaging is optimized for the product. It’s also better for the environment.
- Excessive SKUs. If you have several similar product types, it may be possible to reduce and consolidate the number of box SKUs, which can save you money.
- Excessive materials. Ensure that you are only using the amount of stretch wrap and strapping needed to keep a pallet intact during storage and transportation. Is it possible to adjust the load on the pallet so that fewer materials are required?
Handling
The amount of time that employees spend handling your packing and the ergonomic risks associated with it can drive up costs.
- Complex box configurations. Fitting your product to standard packaging could be creating inefficiencies. Look
at your packing lines and ask if a redesign can make packing and handling of your boxes easier, faster and safer
for your employees? - Line inefficiencies. Are inefficiencies in your packaging line causing excessive handling or reducing throughput? From material replenishment to finished goods evacuation, your line should flow to reduce extraneous steps and reduce ergonomic hazards.
Warehousing
From storing your packaging materials to storing finished goods, your warehouse space can take up a large portion of your facility. There are a couple ways that you can uncover savings in your warehouse.
Keeping a large inventory of packaging materials. In addition to the potential for waste from keeping the large inventory of packaging supplies that was mentioned above, the excess inventory takes up valuable real estate in your warehouse that could be used for revenue generating activities. Working with a just-in-time vendor can help you reduce the footprint required for packaging storage.
Product stacking. If your pallets are optimized for strength and stability, you will need less space for the same number of boxes.
Transportation and Freight
Part of your packaging costs are associated with transportation and freight, but if your packaging and pallets aren’t optimize those costs may be much higher than they should be.
- Package weight. Optimizing packaging can reduce the overall weight. Those small amounts can add up and can reduce your freight costs.
- Number of products on a pallet. Optimizing pallet stacking can save you money by reducing the number of pallets required and may also offer greater protection to the product. Redesign of your corrugated packaging may be one option to increase pallet utilization. The configuration on the pallet is another. Interlocking stacking, for example, isn’t more stable if the box contents aren’t rigid enough to support it. Slip sheets between layers on column stacked boxes can provide increased stability, and with column stacked boxes, the corners, which are the strongest point, bear the weight evenly, which allows it to maintain 100 percent of the engineered compression strength.
- Number of pallets in the truck. Optimizing the pallet utilization allows you to get more pallets on the truck, which will reduce your shipping costs.
Learn More
Do you want to learn how you can reduce your total costs for packaging? Contact Progress Container Today to schedule a Packaging Assessment!