How Smart Packaging Choices Can Reduce Your Operating Costs by 25%

While many business operating expenses are easily recognizable in terms of their impact on the bottom line, packaging costs often lurk in the shadows, quietly eroding profit margins. Most business owners assume that packaging costs are a fixed quantity and view the prices of boxes and other materials to be shipped and sold with a rather-blind-eye to the many options available that can save a tremendous amount of money with no sacrifice in product protection, or even enhanced protection, presentation, or customer satisfaction. Businesses can save up to 30% of packaging costs by making a few simple changes to their packaging strategies and custom printed boxes, with savings compounding over time as the costs of shipping, storage, and packaging-related labor and product-damage are lowered. These savings can add up quickly, all without having to change the way products are made or marketed.

Understanding Total Packaging Cost Components

The cost of packaging is not just the cost of the boxes and packaging materials. There are other hidden costs that can be quite substantial. The initial material cost is where everyone starts, and it often represents about 40-50% of the total costs associated with packaging. However, there are several other costs that add up quickly to reach the true total cost of the packaging.

Carriers are starting to implement Dimensional Weight (Dw) shipping rates which severely penalize oversized packaging. As the industry moves to this new pricing model, shippers will start to feel a hit in their bottom line for thousands of shipments. The cost of storage will increase because oversized packaging is taking up space in warehouses that could be filled with more product, saving on rental costs of additional warehouse space. Additionally, the time it takes to select the correct box, cut the right amount of custom void fill and close the box up is an hourly wage cost that is multiplied by the volume of orders a company ships on a daily basis.

The cost of damages and return shipping can be exponentially greater than the initial cost of packaging when not properly protected. Ongoing service time to process returns and possibly re-order a lost sale, also have value. High Quality Packaging will cost a bit more up-front, but in the long run can save you a lot of money compared to super cheap packaging materials and methods that offer little value in terms of comfort, sales and revenue protection.

Dimensional Weight Optimization Strategies

Carriers have begun to calculate shipping costs based on the dimensional weight of a package, or carrier dimensional weight pricing (CDWP), which gauges the size of a package, compared to its weight. If the two measurements don't equal, the package is classified as oversized, resulting in significantly higher shipping rates for items that require only a minimal amount of packaging. In order to avoid these additional, often prohibitive costs, businesses are turning to custom boxes that precisely fit their products, eliminating the generic stock box "empty space."

Shrinking the package size to better reflect the size of the products it contains can help remove unnecessary empty space and greatly reduce the need for those cumbersome dimensional weight calculations which are one of the primary drivers of shipping expense. Using the example above, a 2 pound product packaged in a 16x12x8 box could be calculated to weigh the same as an 8 pound product, but packaged in a 12x9x4 box the product would actually weigh 2 pounds. And with typical savings of 30-50% for large disparities in size between products and packages, that's a quick win for shippers.

Dimensional Weight Reduction Tactics:

• Conduct detailed audits of product dimensions and determine optimal SKU box sizes
• Get rid of "one size fits all" packaging that causes packages to be oversized for their actual shipment weight
• Develop a set of packaging decision trees that can be followed by warehouse staff to pick the correct box
• Can make custom box sizes based on exact dimensions of high-volume products
• Packaging that is collapsible or adjustable which changes to the minimal required space to prevent unnecessary empty space

Inventory and Storage Cost Reduction

By nature, packaging materials require space to be stored in a warehouse, which can cost to rent and also consume up capacity that could otherwise be used to store valuable inventory. Packaging storage space costs are often hidden because facility rental costs are typically spread across the total inventory base without accounting for the specific space required to store packaging materials.

Warehouse space can become very expensive when filled with large empty boxes. For instance, a warehouse storing 10,000 boxes that require 400 square feet of space, costing $15 per square foot per year to rent, totals $6,000 annually for empty boxes before there is any handling cost to move the boxes to storage and then to packing locations. By optimizing the box size to enable best nesting it is possible to reduce storage needs by 60-70%. The warehouse can then be used to hold more saleable goods. Flat-packed packaging products that assemble at the point of packing can help to minimize storage requirements.

Fewer box sizes in inventory mean easier management of packaging inventory and less money tied up in packaging materials. Many strategic companies have reduced the 15 different box sizes they used to package their products to 5-6 core sizes that handle 90% of their shipments. In addition to reduced carrying costs, companies with fewer box sizes are able to negotiate better bulk purchase prices, and experience fewer stockouts that require expensive or incorrect last minute substitutions.

Material Cost Optimization Through Strategic Sourcing

While it is clear that the cost of packaging materials goes toward the direct packaging material cost (i.e. the "hard dollar cost" of the materials purchased by the company), few realize that sourcing strategy can have a dramatic impact on this cost. In fact, many companies pay 40-60% higher prices for packaging supplies and materials when purchasing through carrier branded materials and shipping services as opposed to purchasing through a quality packaging materials supplier. Unfortunately, many companies settle for higher costs simply because buying from local suppliers or primary shipping providers is easier and more convenient.

By forming close relationships with our dedicated packaging suppliers, we are able to offer our customers the lowest prices on the market, along with custom manufacture options and the best wholesale prices for the highest volumes, all with greatly reduced unit prices. When you order custom boxes UK from our website, they will be manufactured to exactly fit your requirements, beating the higher prices of supply from brand named carriers, while delivering superior branding and packaging qualities. All of these benefits will be greatly enhanced by reduced shipping and storage costs. So, whether you require custom boxes UK, US or in fact anywhere in the world, we would encourage you to browse our online website, view the low packaging prices and contact us today.

We offer Bulk Purchasing Agreements on large volume commitments with price reductions ranging from 15% to 25% off of our standard wholesale pricing. These commitments can be to specific volume levels over time, and while requiring an initial investment in packaging inventory, the payback on these agreements are measured in weeks, not months.

Strategic Sourcing Best Practices:

• Obtain multiple quotes from 3-5 packaging specialists rather than just soliciting pricing from your carrier(s). This approach will save money and ensure proper packaging
• Commit large volumes of gas and negotiate an annual supply contract with competitive pricing discounts
• Consolidate with fewer suppliers to maximise quantity ordered and optimise relationships
• Timing Major Purchases – Taking Advantage of Seasonal Suppliers' Promotions
• Direct contract packaging with the manufacturer for the largest packaging volume and other special packaging requirements

Labor Efficiency Through Packaging Standardization

Address the pure labor associated with box selection and assembly time to release productivity potential to improve profitability without increasing headcount. This is especially important as volume increases. Currently, our workers invest 2-3 minutes of every minute of packing time selecting the right box, retrieving the proper void fill or overwrap, or securing the package for distribution. This results in the utilization of approximately 30-40% of total packing time.

Standardized packaging that has clear criteria for choosing the appropriate box and either sealed or void formate reduces the time it takes to make a decision as well as the chances of making an error. In addition, having boxes color-coded or numbered and organized in a simple decision tree allows the jewelry maker to select the correct packaging in seconds rather than minutes and aids in reducing the training time for new employees.

No need to cut and configure void fill for common product configurations. For businesses packaging the same product configurations on a regular basis, we provide pre-packaged "box kits" with the correct amount of void fill already configured for improved efficiency. This saves 40-50% of time to pack compared to custom packaging.

Damage Prevention and Return Cost Avoidance

Those unfortunate instances of damage to a product in transit, result in cost to replace the product, cost of return shipping, customer service time, and potential refund processing fees. There is also a perceived loss in brand image that can affect a customer's future purchasing decisions. Shipping damage is a widespread problem, affecting 2% to 5% of packages shipped, but can occur at a much higher frequency when shipping fragile or improperly packaged goods.

Protecting your products from damage with effective packaging solutions can return up to 100 times your investment in the packaging materials over the long term. While investing in a premium corrugated material and void fill solution may cost $0.50 per box more than standard packaging, the return on investment for this small incremental cost comes in the form of savings to your company of $20-$50 per damaged item. This does not even take into account the loss of customer satisfaction.

There are many different types of specialty packaging and products which require custom tube packaging, such as posters, prints and even other cylindrical products. These types of packaging solutions are ideal for companies who want to ensure that the product will not be damaged in shipping regardless of the size of the package and the amount of void fill which has been used. A product specific corrugated packaging solution can be developed to meet the particular needs of a product. This solution will most likely be less expensive to produce than attempting to use a less than ideal packaging solution and over stuff with excessive amounts of void fill.

Brand Value and Customer Acquisition Cost Reduction

Premium packaging provides an unboxing experience that delivers high customer satisfaction, encourages social media and word-of-mouth, and drives repeat purchases to lower the effective customer acquisition cost. These intangible packaging benefits deliver real returns by reducing the cost of marketing required to achieve same levels of sales growth.

Products shipped in branded packaging have a 35-50% higher chance of being repurchased by existing customers. This increased repeat transaction reduces the blended customer acquisition cost (CAC) by 20-30% as the same customer accounts for more revenue dollars before e-commerce businesses need to spend money to acquire new customers to replace them.

Sharing a high-end unboxing experience on social media can yield free marketing worth thousands of dollars per post that goes viral. For only an extra $1-2 per package, a brand can incorporate custom packaging and design elements, leveraging out existing packaging infrastructure to create organic social content that would otherwise cost $50-100 per piece to create through paid ads.

Implementation Framework for Packaging Cost Reduction

Instead of relying on generic best practices for packaging optimization, opportunities should first be identified to pursue based on the specific needs of the business. A systematic packaging optimization process starts with a detailed current-state assessment to understand the total cost of packaging for each category of products. This cost should be quantified by type (materials, shipping, storage, labor, and damage).

Map packaging costs by product category, order size and delivery location to reveal pockets of savings. High volume products may warrant packaging innovation, regardless of what the upfront cost per unit appears to be, due to the small per package savings that get to multiply across thousands of units. In contrast, for low volume products, a flexible packaging solution which accommodates pack sizes can provide value not bearing immense SKU-specific inventory.

New packaging configurations will be Pilot tested with sufficient quantities before being rolled out organization wide. This will ensure that all costs (Direct and Indirect) as well as customer satisfaction data is collected. Additionally, we will ensure that any proposed changes do not negatively affect perceived quality. Once we have proven out the successful implementation and realized savings, the best practices can be scaled to further utilize these cost efficient innovations. Conversely, if a packaging configuration does not meet our testing objectives, it will prevent implementation of a suboptimal process that could add unnecessary cost to the organization.