Optimize Packaging Costs to Improve Your Company’s Bottom Line

How do I reduce my expenditure on sourcing?” –  This is a commonly asked question in procurement circles. Packaging is no different. All procurement managers we meet are looking at reducing packaging costs for their standard requirements which are easily available in the market.

However, packaging is an essential element for the majority of businesses and has now set its foot forward to be as significant as the product itself. Its main function lies in ensuring the integrity of the product in which an organization has put immense effort while developing. You won’t find a single customer who would be happy about receiving a package in a damaged state. 

Even then, the organizations whose main business is not packaging tend to sideline it, causing them to sometimes even end up with incorrect kind of packaging. This mostly leads to unnecessary increment of packaging cost and brand name deterioration. 

So how can one curate a smart and cost-effective packaging procurement strategy?

#1- Know Your Packaging Options

To save on packaging cost, one needs to narrow down and fix their packaging requirements after gaining proper insight and detailed assessment of their requirement. Latest technology, materials, and designs are the basics you need to be aware of if you need to make a choice that is durable and sustainable. You can easily pull out the value potential and understand the difference between critical good costs and non-essential bad costs with such kind of research and satiate unhappy customers if any problem arises at all.

However, it is not always feasible to have in-house expertise in several packaging categories due to the cost associated with it. An alternate way of staying updated is outsourcing your packaging requirements to someone who can handle all your packaging needs leaving you with bandwidth to concentrate solely on your core product.

#2- Get Multiple Quotes and Compare

Always.

This is a basic step. You need to have several options to choose from to optimize your packaging cost. The fact that the packaging industry is highly fragmented makes it even more significant to measure your alternatives.

Connecting with multiple vendors and getting their independent quotes can be very tedious. This is a common challenge we have seen across the board of clients we are catering to. We’re solving this problem for them through technology. The digital platform we have built in-house enables us to put together quotes from multiple vendors and choose the best quote keeping in mind other variables like quality and timely delivery.

#3- Aggregate Your Packaging Requirements

The end to end process includes design, development, & procurement of any kind of packaging product. A lot of times, companies falter in this process as the teams responsible for this process are working in silos. This style of working results in a mismatch between the given specs and the end products. Often, the designs are not feasible once taken off the drawing board and onto the manufacturing plant.

Having siloed teams sync in and work together for the tasks that need them all to be on the same page is a pretty frenzied task if you ask. Identifying multiple vendors in a region, communicating with them all, fixating on one design on all fronts at all locations and communication between leaders handling the entire process. Quite a task with a lot of capital requirement.

Rather than investing your money, time and effort on multiple touch points and spreading yourselves thin, you can aggregate all your packaging requirements in one place through the use of technology. This will enable you to have an overview of your spends and control packaging cost through optimization. In addition, you can also avoid miscommunication due to the gaps between the design, development and procurement stages.

#4- Save on Shipping

Transportation consumes a great portion of expenses while procuring packaging and this is where you need to play smart. Every penny saved can add up to your bottom line. There are two parts to saving on shipping –  ideal packaging specs and cost-effective delivery.

• Get the Packaging Specifications Right

  

As far as the specifications are concerned, cutting down on the size of primary and secondary packaging can be very beneficial. Even a few inches of reduction will lead to a very high percentage of savings on the entire packaging cost.

Another thing that can spare you from high packaging costs is buying in bulk. It is a no-brainer that more of the quantity, lesser the price. It will simultaneously ensure cordial relations with the people you are doing business with thereby building mutual trust thus making way for more concessions.

Besides the aforementioned factors, dimensional weight is also sometimes used to calculate shipping cost. In such scenarios, accurate computation of the size of packaging swings into action. Correct measurement of boxes helps you retain loads of your wealth. All the more efficient can be customization which eradicates the need to fill the gaps as well.

• Optimize on Transportation

  

Mode of shipment and delivery time being the chief attributes of concern, it’s important to be clear on strictly sticking to only spending enough to cater to the said requirement. You need not go overboard here if you are looking for lucrative alternatives.

The delivery can be furthermore optimized by picking reusable packaging choices. Foldable crates are an example of this type of packaging. Firstly, they can be returned back and post the delivery, we can buy them back to use again for the next shipment. Plus, they are space efficient and take less area in the warehouse and also in the vehicle taking it back. As compared to one-way, one-time use boxes, the cost savings are significant.

Localization is another cost-efficient method for packaging cost saving. This is a great fix for those with several locations to serve. We came across such a situation with TATA CLiQ which supplies to over 1700 locations. Here we identified local vendors which led to optimization of procurement and packaging cost and brought down lead time to a good extent.

Nonetheless, the biggest factor to be vigilant about is the damage caused in transit. Any kind of damage will put all your efforts in vain.

#5- Control Warehousing and Labor Cost

A warehouse is the power bank of packaging. It is vital to the business and the product spends a lot of time there. Hence, you can make a huge difference if your pockets are kept intact in this stage. You can easily save on packaging cost by using just-in-time supply strategy. Just in time delivery means less storage time which will result in trimming of inventory cost. Nonetheless, you need to ensure that you are highly efficient with the just-in-time strategy without which you can fail to deliver.

For example, Amazon had a similar challenge. They were looking to automate the process of order consolidation and delivery across 200+ locations for the northern regions in India. Understanding that, we provided them with a customized solution that not only helped them in making procurement a lot less taxing but also eliminated their need to manage a huge inventory at their own warehouses.

While such solutions removed the hassle from the procedure, they also saved cost to a great level as the demands were simply fulfilled as and when needed.

#6- Avoid Excessive Cushioning

By adding anything extra, you are bound to add up to the price. Be it bubble wraps, papers or anything else, reducing the layers will aid in lessening the production cost. Many think that layering is of utmost importance for the safe delivery of products. It is. But you need not add hundreds of coatings when even one can help you achieve the same goal.

Frustration-free packaging techniques are quite effective to attain this objective and will surely provide your customer with enhanced user experience.

#7- Simplify Your Design

You know how anything fancy can be a bite to your pocket? Of course, you do. Any effort taken in customized design comes with a price. So we suggest that when packaging is not your primary concern, don’t stress too much on the stylish ways of doing it. Keep your packaging designs simple.

But if you fear to get a bit boring for the outer cover for your product, there are ways in which you can be creative in reasonable pricing if you properly explore the packaging options to cater your requirements.

Take for instance of the boxes used by MI to pack their phones. These boxes are extremely simplistic. Even with simple and elegant form and minimal usage of colors, their work is done. So if you wish to hit two birds of getting a decent cost reduction and matching the brand voice with one stone, you can refer to such illustrations.

Now the design also has to be damage resistant with all the stacking, storage, and transportation happening. When an FMCG company from cooking oil sphere approached us with the matter of deformation of the PET bottles used for packaging oil, we provided with solutions to keep away from damage at different levels.

And as mentioned earlier, our main intent here is to put an end to any disruption that can possibly hamper the product which makes damage control absolutely paramount. Failing to do that, your chief purpose will get defeated.

#8- Reuse

After you are done and dusted with everything and recognized what you need to do and how to save money, you can still have your cherry on the cake by saving furthermore. How you ask? Well, the answer is just one word.

Reuse.

One of the best ways to recycle is to reuse. With the plastic ban in the picture, the alternatives are already expensive. What can you do then?

You can vouch on reusable secondary/tertiary packaging like foldable plastic crates. They can be returned and used again for another shipping trip.

Another such example can be the PP boxes that we had developed for a telecom giant in India for their pre-assembly components. These boxes safely transit the parts to the industry and come back to the previous unit for reuse.

Use of such options with a bidirectional flow in the production line can be one of the best strategies to consider for packaging cost reduction.

So when are you planning to employ this research-reduce-reuse mantra to have the packaging cost reduction you wish for?

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