How much does packaging cost? The price tag is just the tip of the iceberg!

20 September 2017

Have you calculated how much your product’s packaging costs lately? Are you sure that you’ve included all your packaging expenses in your calculations?

The cost of the packaging itself is just one part of your packaging expenses. In fact, it’s really just the tip of the iceberg.

To calculate what your total, real packaging costs are, you have to take into consideration all your direct and indirect expenses. Warning: you could be in for a surprise!

Here are five hidden costs that you need to consider:

1. Administrative fees

Receiving an order costs money. You must gather information, place the order, track it, the merchandise has to be verified upon receipt, then the bill has to be processed. The total cost can be considerable. Even more so if you go through different service providers and if purchases are spread out.

The solution? It’s more efficient to develop partnerships with providers who can help you see what’s behind price. It is also very economical to consolidate your purchases with one company that has a global vision of your operations and can advise you accordingly.

2. Labour

The more complex the packaging, the more labour it requires. In other words, the labour required to package your merchandise may represent a significant expense that you must consider.

The solution? Optimizing or automating your packaging process will free up human resources and precious time. Leaving your employees free to deal with tasks that bring in more added value.

Often automated packaging is also more uniform, which increases reliability.

3. Storage and warehousing

Growing companies often deal with serious space constraints. Packaging processes that aren’t optimized or processes that use multiple components often require a lot of floor space – which can be very expensive.

Packaging that takes up more volume reduces the amount of product that can be fit in trucks. Surprisingly, another result of this is more gaps that frequently increase the risk of damage and losses during transportation.

What’s more, in e-Commerce, volume often takes precedence over weight. The result? Higher transportation costs.

The solution? Taking into account transportation conditions, optimized packaging and packaging process reduce the amount of space needed, limiting the risk of damage and losses during delivery while lowering expenses. In other words, by using the right packaging materials and the right cubic volumes, you can benefit from economies of scale while minimizing damage and losses.

4. Breakage, damage, and lost goods

Damages and losses occur not only during transportation. At every step of the delivery process, there is a significant cost associated with insufficient packaging. Having to repair or replace part of the production at any point is expensive!

Also, think about the costs of handling returns, the transportation expenses when goods are delivered all over again – and, above all, your dissatisfied clients!

Also, losses and inefficiencies have an environmental cost. Breakages that occur late in the delivery process take up more resources when the merchandise is replaced: expediting it again, you’re looking at more wasted resources.

The solution? An optimized packaging process reduces losses at every stage, because it protects goods from the stresses of transportation.

5. Customer satisfaction

If your merchandise is damaged when it is delivered to your client, or is difficult to unpack, you create a bad impression.  

We often have only one chance to make a good impression, and that’s particularly true in e-commerce. Packaging now plays the same role in branding that stores did in the past. According to one study, 18% of packaging arrives damaged. That means that across all industries, close to one client in five has a bad experience with a product that has been delivered to them!

The solution? An optimized packaging process that protects merchandise from the point of manufacture to the moment it is delivered to the end user.  Optimal packaging also takes the customer experience into account, including the moment of un-packaging. It means that you can depend on your goods being safely and reliably protected until they are in your customers’ hands.

Don’t just deal with the tip of the iceberg – melt down the whole thing!

Try this out: Calculate your total cost of packaging, including everything listed in this article.

So? Is your packaging system really the best it could be?

Need help evaluating the difference an optimized packaging process could make? Contact us. Our experts will help you to see clearly.