The Lowest Packaging Cost Can Be Costing You Money

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Savings illustrated by dollar bills above an outstretched hand

If your packaging supplier only talks with you about getting the lowest landed cost, you’re not alone. It is the easiest and often most expeditious way for a sales rep to solve a problem (and for you to keep nonproductive rep’s visits short!)

Cost focused reps believe they bring value through the transaction. When this sales rep learns their price is too high, they will use that information to go back to their company and try to match or beat their competitor. They get the order, you get the lowest price (even if it means you may have to buy more than you need)… Score!  Wait… really?

While your direct product costs are abundantly important, the savings only has value for that moment in time, and it just may not be the best indicator of whether or not you are getting the best solution, or savings, for your organization.  If you want to save money and improve cash flow for the long term, it’s essential to take a much broader perspective - and expand “cost” to include the total cost of packaging.

The right packaging supplier will treat the product cost as one of a series of components in their equation to add value. They know that saving a few pennies or dollars on a given order may be costing you far more in the long run.  Your total cost of packaging includes everything that goes into the selection, procurement, receiving, payment, storage, packaging, assembly process, transportation, and delivery of your product. Each activity has a cost. When a packaging solution takes these activities into account, your overall savings and the impact you make on your organization’s efficiency, working capital and cash flow increases substantially.

Packaging can make you a better marketplace competitor. Here are some of the considerations a certified packaging specialist focused on adding value will take into account when designing your packaging solution.

Packaging Design

  • is the packaging achieving your marketing objectives?
  • Is it getting the attention it deserves on the shelf? 
  • Does it have the features necessary to make it easy for your customers to use?  If you are involved in eCommerce, can the packaging be multi-use and make customer returns simpler? 
  • Are the packaging design and environmental footprint working for, or against you?

Reduced Damage, Improved Safety

Every return, damaged box, leaker, torn package, or broken product impacts your profitability and, potentially, your brand.  Can returns or damage be minimized by a redesign or reengineering the materials it is made of?  Fit-for-purpose packaging helps you reduce your return and damage rate, lowers labor costs, reduces packaging inventory, controls transport costs, and extends customer satisfaction.

  • Are the materials used the best packaging to protect your products?
  • Can the package be downsized or right-sized? 
  • Is it achieving your goals for shelf life?

Procurement Efficiency

The more people, activities, and components involved in packaging management and supply – the higher the total cost of packaging. The value-focused packaging supplier will look for ways to streamline your activities to free up resources, money and cash flow.

  • Is there an opportunity to reduce the number of invoices to process? 
  • Can interest expenses be reduced, or the cost and time associated with processing payments?
  • Can the ordering process be made simpler?
  • Would on-demand reporting about your spend and inventory help you better analyze, plan and control your spend?
  • Would online ordering or summary billing bring down the costs associated with procurement activities?

Transportation Costs

Freight costs are often unavoidable; however, it is worth asking how freight costs can be minimized to reduce impacts on your cost and margins.

  • Can the freight cost per item be reduced?
  • Could orders be amalgamated to increase order size to decrease freight?
  • Can packaging items be reconfigured on the pallets? 
  • Is there an opportunity to downsize the packaging or make it lighter?

Storage and Inventory Management

  • How much inventory do you need? And is all of your packaging inventory working for you?
  • Is there an opportunity to free your warehouse racks of damaged, dead or obsolete inventory?
  • Are there opportunities to simplify packaging management through just-in-time inventory?
  • Would just-in-time delivery free up valuable space for more strategic activities?

A packaging specialist can manage your inventory for you, reduce your inventory costs and more. These services can reduce the time, effort, space, and costs that come with packaging storage and inventory.

Packaging Productivity

Speed to market is a crucial driver for businesses today. Small slow-downs, extra steps, and ease-of-use all impact your ability to maximize your packaging productivity and ability to serve customers quickly.

  • Is there a way to streamline the packaging process?
  • Could kitting or assembly services save you money or provide you faster speed to market?
  • Would on-site services offer you more flexibility?
  • Could packaging automation, equipment, or predictable service increase your throughput?

The simpler, better organized, and more efficient your packaging processes are, the lower your total costs of packaging. 

Lowest Cost is Not the Best Cost – Know What You’re Getting

While product cost is critical, if it is the only solution your sales rep is bringing you, you are likely losing out on savings, efficiencies and cash flow.  Challenge your packaging sales reps to help make your packaging work for you. 

 

To learn how SupplyOne’s certified Packaging Specialists you can amp your savings, productivity and working capital contact us or give us a call today 484-582-5005.

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