Rethink Product Packaging Strategy to Lower Production Cost
Entrepreneurs find that their creative vision does not always translate to efficient product packaging. Instead, product packaging becomes an overpriced and time consuming chore. This mindset is where many problems with packaging and design start. We will break down how you can cut your packaging costs while using a sleek design and showcasing your brand.
Restart from the Beginning – Defining the Packaging Cost Structure
Most issues with packaging stem from the fear that they are overspending. This fear is not a new aspect of production or business ownership. We understand that there is always the concern that a lower cost was “out there” waiting for you to swoop in on the deal.
Instead of waiting for a better price, and ultimately paying more, scope out the highest quality materials in your budget. Set and reinforced a strict budget for each part of the packaging process. This in-depth budget will establish the packaging cost structure.
The most common structure that companies rely on is a 40/30/30 split. Where 40% of the budget goes towards materials, 30% goes towards process costs and 30% is dedicated to shipping costs. You can begin reducing the amount you pay for packaging overall by attacking the areas of the packaging cost structure separately.
You need more than a simple box with four sides, a top and a bottom. You need a box that will sell your brand while protecting your product and printed materials.
Overall materials costs include:
- The box for your unit
- The inserts for product placement
- User guides or printed materials
- The shippers to hold your boxes
From printing to specialty varnishes, package assembly to kitting, process costs can quickly add up and take new entrepreneurs by surprise.
- How many print colors?
- Any specialty varnishes? Spot UV, Emboss/Deboss, Foil Stamping…etc.
- Packaging Assembly Process
- Kitting Process
When accounting for shipping costs, you should consider how you are shipping:
- Raw materials to where you will assemble the product kits
- Fully kitted product to distributo
- Distributor to the customer or potentially another retailer
How to Reduce Material Cost
The simple answer is to keep packaging sleek and straightforward. Use alternative materials that are of equal quality, but lower cost. Packaging as its most efficient will rely on structural design to reduce the amount of material used. To reduce material costs on a long term basis is to purchase in bulk. Any many cases, it has proven to be even better to buy raw materials in bulk.
Case Study: Client X retail box art paper raw material saving
In 2016 our client reported $500,000 in actual spend on retail boxes. The company was still growing and knew that they needed to save money in the packaging process. Zenpack provided full-scope analysis of the paper market in China and acquired art paper materials in bulk. By January of 2017, the materials were fully delivered in-house with an inventory to last throughout the year. Ultimately, ordering raw materials in bulk benefited Client X with $15,000 in projected cost savings for 2017.
Retail box art paper weight = 0.0003 metric ton / per piece
2017 January Art Paper Price = 5820 RMB / per metric ton
2017 February ~ December average Art Paper Price = 6894 RMB / per metric ton
This is what our client would have paid if they purchased raw materials monthly:
Zenpack acquired materials at a fixed price 2017 in January:
620,400 RMB – 523,800 RMB = 96,600 RMB(14,587 USD) (Cost Saving for year 2017)
How to Reduce Process Costs?
Consider the volume of your order first and then decide on the printing method and varnish that is right for you. Package assembly and kitting is a large part of the process costs. Packaging assembly includes how you assemble the box itself. Companies might explore options that use similar box designs to save time and money. Kitting, or putting the product inside the box, can become time-consuming and expensive. The box structure can reduce the costs of kitting and the process costs overall. Simplicity is king when it comes to reducing process costs.
Ineffective Box Structure for Kitting
(Book Style Folding Carton)
Kitting Time ≈ 25 Seconds
Efficiency Box Structure for Kitting
(Book Style Rigid Box)
Kitting Time ≈ 7 Seconds
How to Reduce Shipping costs?
To reduce shipping costs, you must start with the ISTA packaging test (https://ista.org/test_procedures.php) . This test will help you identify if you are overpacking your boxes. Reduce shipping costs begins with lowering the weight of the materials and optimizing the shipping containers (your shippers, your pallet loading, your container loading…etc). You may be using too much packaging and weighing down your box. Also, planning logistics ahead can reduce the time and lower freight costs. Always be open to switching to a more cost-efficient option.
Case Study: Client Y Pallet Loading Optimization
One of our clients shipped about 3 containers of their products per month from China to the United States. The overwhelming shipping costs were frustrating and they felt like there were no other options. We helped them save over $5,000 per month. To achieve these savings we started with an analysis of their shipping container. Our analysis led us to reduce the size of their box, which led to the reduction of the shipper size and the ability to load more products onto each pallet. Ultimately, they are now able to ship more products per container from China to their U.S. distribution center.
Enjoy Your Savings in the Bottom Line
Product packaging is where art meets engineering. You must protect your product while also showcasing your brand.
Follow with these tips to save money on product packaging now:
- Plan your packaging when you’re designing your product.
- Pay more raw materials in bulk for a lower cost per package.
- You can find high-quality materials at affordable prices.
ZENPACK TEAM / 10.02.2018
We make it our job to help anyone who is ready to start their packaging production. If you are designing your product packaging or want to reduce your packaging costs, call or email us for a free consultation.