by Labor
Packaging has a significant impact on labor costs with the most obvious impact being how long it takes to package your product. The easier and quicker it is to pack the product, the less you’ll spend on labor. However, packaging actually plays a much wider role when it comes to labor. Take for example the industrial manufacturing company we worked with that made large, high-value machines. Due to their packaging design and the constraints of their operations, incoming parts were unpacked and the incoming packaging was discarded. Machines were then assembled with these parts before being partially disassembled for shipping. The parts were set on carts and sent to shipping to be packed. Altogether this meant a minimum of four touches for every item. To save time, we recommended they rearrange their process so that the person disassembling the machine places the parts directly into the shipping containers rather than onto a transfer cart. This change saves time and also ensures parts aren’t lost in transit.
A packaging system overhaul can be key to reducing the cost of labor, shipping, logistics, warehousing, and returns in addition to the direct material cost reduction.
Shipping & Logistics
When it comes to shipping, it is critical to balance the amount of packaging protection with the size of the package. Finding the right balance here means finding a solution which simultaneously minimizes the shipping cost and risk of damage. Creating packaging designs in this sweet spot can save your company hundreds of thousands of dollars per year. To do it right, you will need to consider the supply chain hazards your product will face in your supply chain as well as the shipping method used. Your solution should also take into account the pallet configuration and the number of products per shipping case. The end goal is to ensure all packaging included in your packaging system is value-added that is, it is there to serve a purpose that is worthwhile.
Warehousing
Warehouse space is expensive, which is why it is imperative to focus on density when designing your packaging. Some warehouses use racking, while others use floor stacking. In the facilities that use racking, it is vital to take measurements of the available racking. You want to use these measurements when you design your packaging so that when a pallet is filled, it can utilize as much of the racking space as possible. Likewise, when in a floor stacking situation, it is important to design packaging and pallets to be stacked high enough to utilize the full warehouse space.
Returns & Damage
Damaged products are not only costly, but they also impact customer service and goodwill. At a minimum, your material and shipping costs are doubled because you are delivering the product twice. Your costs continue to stack up though because you also have to factor in the cost of your customer service team and reverse logistics. Avoidance is the key here ensure your packaging solution is optimized for protection the first time.
An end-to-end supply chain hazard gap analysis is helpful to start assessing your packaging designs. Once you have an idea of the hazards, you can design solutions to prevent those hazards from damaging your product and ensure all the packaging components used add value to the system. Direct material costs are just the tip of the packaging cost iceberg. Packaging optimization can be an easy win when trying to boost product profitability.
Many components influence and impact the cost of packaging. From the obvious expenses (such as raw material and labor) to the hidden (think warehousing and obsolete inventory). It’s important to consider all of the factors when calculating the cost of packaging for your business.
Hard Costs
Hard costs are those that have a direct price associated with them. These are the things that you pay for out-of-pocket during a packaging project and are relatively easy to itemize and tabulate at the end of the day. Hard costs include:
- Structural Design
- Graphic Design
- Custom Packaging Manufacturing
- Packaging Supplies and Void Fill
- Shipping
Structural Design
Depending on your specific product and application, your packaging manufacturer or an outside agency that specializes in packaging design may develop the structural design for your packaging. The cost of creating your design and converting it into a manufacturing-ready file will vary – it may or may not be included in the services provided by your chosen design partner.
You should ask for a quote upfront that details what is included and the anticipated timeline to develop your design before embarking on any packaging project. If you bring an existing file to your packaging manufacturer, they may still need to make adjustments to ensure it will work with their machinery and operations.
Graphic Design
The application of graphics to packaging varies greatly depending on the project. You may be applying a simple 1-color version of your logo to the outside of a shipping box, or you might be developing an eye-catching highly customized retail experience. For simple designs, it may be enough to provide your packaging manufacturer with a logo file in the appropriate color profile and resolution.
More intricate packaging projects may require the support of a professional graphic designer or design agency. Whichever route you take, the graphic design process is similar to that of structural design, and you should ask for a quote, timeline, and terms upfront.
Custom Packaging Manufacturing
Once your structural design and graphics are finalized and combined into a manufacturing-ready format, you are ready to begin custom manufacturing. The cost of this process depends on the material, size, run volume, print method, tooling/setup charges, and labor. Another consideration is whether or not you choose to offshore your project.
A key component to the success of any packaging project is to bring your manufacturer into the picture early on. Partnering with your Packaging Advisor as early as the product design stage will deliver insight during the formative development phases (structural and graphic design). This insight may ultimately optimize your packaging outcome, including your total cost. You don’t want to spend time and money with an expensive branding firm to develop your new packaging concept only to discover that your box has not been optimized for structural integrity or shipping costs.
Similarly, you don’t want to send your graphic designer down a creative path that ultimately won’t work for the print method that your packaging will use or your manufacturing budget. It is far better to have these discovery sessions and discussions as early on as possible and with the manufacturer in the room.
Packaging Supplies and Void Fill
Some or all of the components of your packaging project may be stock items or supplies that must factor into your cost. These can include primary packaging (such as bottles, tubes, and bags), void fill (such as air pillows or paper packaging), packing tape, labels, stretch wrap, and more. Take a look at your packaging supply chain from beginning to end and include your stock product purchases into your packaging cost calculation.
Shipping
In today’s logistics-driven environment, the cost of shipping will continue to play a significant role in your total cost of goods. Shipping has potential implications for the cost of packaging on both the front and back ends of your project. You may pay for shipping to your warehouse or fulfillment center, and you will pay again when shipping your packaged product to the end-user.
The size, shape, and material choice of your packaging affect its weight and assembled dimensions. Weight and size impact the cost of shipping adding even more incentive to involve an experienced Packaging Advisor early on in the packaging development process.
