How to Effectively Optimize Packaging Costs

Packaging is essential to any business, but the cost of packaging materials can deeply impact a budget. Not only do you have to design and order the packaging you need, but you also need to figure out how to store your packaged items and ship them to your customers when orders come in. This creates costs for both labor and materials that can quickly add up.

While businesses have fixed costs like rent and employee wages, some costs are variable. Though it may seem like a fixed cost initially, packaging is one example of a variable cost when running a business. Companies can take a proactive approach to optimize these costs without hurting their brand image or marketing goals. Here are some effective strategies to manage and optimize packaging costs.

Understanding Packaging Costs

While the costs of boxes and packing material are obvious, there are other packaging costs to consider. The five main categories to look at when optimizing these costs include:

• Direct material: Direct materials are the raw materials used to make packaging. For example, the cardboard that makes up a box is a direct material. Anything necessary to make the final packaging product is a direct material.

• Indirect material: Indirect materials include glue, labels, and digital printing that are not necessarily integral to the final product but are still needed in creating packaging that aligns with your branding goals.

• Production and processing: From printing branding messages on packaging material to processing the final packages, there are many costs associated with creating the complete package to get your products to your customers.

• Storage and handling: Most companies have a period of time between receiving packaging material and sending the packaged product to customers. This time requires storage and handling, which add to the costs of packaging through labor costs, rent, and storage.

• Shipping and logistics: Shipping and logistics costs are necessary when running a business, you’ll have to account for the costs of not only sending products to customers but also receiving materials and products to your facility to maintain your production supply.

What Are the Most Common Packaging Cost Challenges?

As you look for ways to maximize your storage costs and shipping costs, you must consider some common challenges that can add to the total cost of creating your packaging. These include:

Limited Storage Space

Many businesses have limited storage space. While they can rent storage units to add more space, no matter what they do, the total amount of room is not unlimited. Yet buying packaging in bulk is more cost-effective than buying smaller quantities. Brands must maximize the size of their storage area to accommodate product storage and the additional packaging needed for shipping. Oftentimes shipping operations share a portion of storage space for efficiency and accessibility which further limits brands on how much product can be stored.

Unreliable Deliveries

Poor packaging can cause unreliable deliveries. A package damaged during transit may not be deliverable. These unreliable deliveries not only increase packaging costs due to the need to replace missing items for customers but also overall business costs due to a poor product experience which can damage a brand’s reputation and customer loyalty. Additionally, global shipping can result in shipping delays and should be considered when evaluating the potential impact on delivery times.

Inconsistent Quality

Product packaging is a major factor in establishing a brand's reputation. You must present the right image to your customers, starting with the package it comes in. Inconsistent quality leads to wasted money because you rely on a packaging supplier who doesn’t consistently deliver good quality products. Also, inconsistent quality can also lead to lost customers and sales.

New Product Launch and Rebrand Challenges

Whether you’re introducing a new product to the market or rebranding, you’ll likely run into challenges when it comes to deciding on packaging. You’ll want to choose packaging that aligns with your brand identity. Business owners will need to collaborate with a team of people to launch a new product or rebrand their image, so you’ll need to consider costs for new graphic design and packaging solutions.

Inventory Availability

Once you decide on the type of packaging to use, fluctuating business and market demands make you susceptible to inconsistent inventory availability. If you’re working with a packaging solution that has a long lead time, you risk not being able to fill the product or ship orders until you have that packaging on hand. In addition, you also want to account for the number of units needed compared to the minimum order quantity (MOQ) needed to place an order. If the MOQ is significantly more than the number of units needed, you’ll need to account for the additional cost to your budget and the space to store the excess packaging.

Benefits of Effective Packaging Cost Management

To minimize packaging costs, there are several effective tips and strategies you can implement. By incorporating these measures, you will reap the following benefits:

• Cost savings: Managing packaging costs allows you to put more money back into your budget to invest in other aspects of your business.

• Improved efficiency: Managing packaging costs involves monitoring your packaging inventory and availability. This ensures that you always have the necessary materials to ship your items, enhancing operational efficiency and minimizing delays.

• Enhanced quality control: When you have tight control over every aspect of your packaging strategy and supply chain solutions, you will have more visibility on your products, allowing you to catch quality control issues early and resolve problems before they get out of hand.

• Sustainability: Managing production costs often means cutting down on waste. Utilizing eco-friendly packaging helps lower your carbon footprint by incorporating sustainable practices into your business and packaging solutions resulting in reduced waste and effective ways to address our plastics problem.

• Better supplier relationships: As you work to manage these variable costs, you build strong relationships with your packaging suppliers, which can play a significant role in helping you maximize the actual cost of your packaging.

How to Optimize Packaging Costs

With a clear understanding of the challenges surrounding packaging costs and the importance of managing them, it's time to delve into some practical tips that business owners can use immediately to start optimizing these costs today.

Free up Valuable Space

Storage costs, whether incurred while renting a storage unit or warehouse space or maintaining your own storage area, add to the price of packaging. To reduce these indirect costs, consider seeking more efficient storage solutions or finding a supplier that offers small-volume purchases, thereby freeing up valuable storage space.

Ensure Reliable Deliveries and Consistent Quality

The first step to guarantee consistent delivery quality to your customers is to conduct thorough quality checks to maintain the uniformity of your packaging. In addition, work with your supplier to establish dependable deliveries of packaging supplies on a schedule that accommodates your needs. If you're waiting for a glass bottle delivery for your lotion, you'll have to store the lotion until the bottles arrive, which can result in lost sales. This type of waste can be minimized with timely and dependable deliveries.

Minimize Recall Risks

Packaging can directly impact the chances of a product recall. Many finished products, particularly in the food or health and beauty industries, have stringent packaging and sealing protocols you must follow. Working with a quality packaging supplier will help minimize the risk of a recall due to incompatible packaging or inadequate sealing.

Streamline New Product Launches

Streamline new product launches by integrating packaging solutions that fit seamlessly into your current product line. If this isn’t your first product launch, continue working with suppliers who can be trusted to deliver on time. Custom packaging is also a consideration when it comes to new product launches or rebranding. If you go this route, streamline the process so that you have a uniform product line in the same custom mold to stretch the cost of the custom design further and differentiate your products through custom labels.

Prevent Stockouts

Having an item out of stock hurts your customer service, and where you get your packaging from can play a role in whether or not you can keep products on the shelves. Work with trusted suppliers and local domestic distributors to minimize the risk of supply chain disruptions and shipping delays.

Utilize Collaborative Design and Sourcing

Custom packaging costs include design costs, labor costs, and printing costs. Businesses can save on this by collaborating with other professionals to help with this step. They can also source work from designers and packaging professionals who can efficiently develop a design that will meet the brand's needs.

Implement Design for Efficiency

The design of your packaging can impact its overall cost. Unique, complex designs can be more costly to produce, though they may have a good visual impact. Efficiency can also apply to shipping and storage. If items are more easily stored and stacked because of the shape and design of the packaging, then you can save money on storage while also reducing the labor cost necessary to retrieve and ship an item.

Invest in Sustainable Packaging

Using sustainable packaging is a good idea for a number of reasons. First, it gives your brand a positive image with your customers. When you use sustainable materials like biodegradable plastics, eco-conscious customers will appreciate the effort. Second, sustainable packaging can often be smaller in size and bulk, which can reduce your costs. Finally, it gives you the peace of mind that you're doing all you can to support a healthy environment for the future.

Partnering with a Packaging Distributor

Managing packaging costs involves numerous considerations, such as design work, fuel costs, and storage requirements. A full-service packaging distributor can assist you in navigating these factors and reducing costs without compromising quality.

Working with a packaging distributor will help you select the appropriate containers for safely packaging and shipping your products. Their expertise in structural design enables them to determine what is needed based on the type of product you sell. They are knowledgeable about requirements and regulations for specialized items like food or chemicals, guiding you toward suitable containers to ensure the integrity and safety of your products.

Packaging distributors are also well-versed in packaging logistics. They understand the supply chain, potential challenges, and cost of materials to help optimize your budget. They can address your questions regarding packaging optimization and offer solutions that can result in substantial cost savings.

Streamline Your Packaging Operations Today

Streamline your packaging operations and explore ways to optimize your packaging costs when you partner with Paramount Global. As you look to understand your packaging costs better and find ways to save on them, our team of packaging experts can help you navigate the process. Contact us today to learn how we can optimize your business solutions and budget while helping you focus on growth.