Reducing your packaging costs is one of the best ways to increase your bottom line, but it may be difficult to find those hidden costs that are holding you back. From inefficient storage to the simple cost of distribution, there are plenty of areas to evaluate if you’re looking to cut back on your spending. Here are some of the top hidden packaging costs that might be causing you trouble, plus a few tips to help you avoid them in the future.
Inefficient Storage Space
Creating warehouse space for your operations requires money. Whether you’re a small business or a multi-billion-dollar company, you have to pay for floor space to hold packaging equipment and supplies. The more efficient you are with your warehouse space, the less you’ll need to secure in order to run your business. Keeping your warehouse storage optimized can also help you keep up with increasing demands.
To avoid spending too much on storage space, make sure you are optimizing your warehouse with racking systems and other organization methods. You can also switch bulky materials like bubble wrap or foam for more compact items, such as air pillows or paper. Another way to increase your space is to design work stations or automated systems that help keep things in designated areas for more efficient packing jobs.
Product damage is the major culprit for increases packaging costs. Not only do you get hit by the costs of refunds, but also the cost of packaging and mailing out new products to replace broken ones. These hidden costs will add up very quickly when you’re dealing with thousands of products, so they can drastically affect your bottom line.
Making sure your products are protected with the right materials will help you avoid damage. You can also invest in monitoring equipment, such as impact labels or tilt indicators, to help maintain accountability in the distribution line. Remember, damaged products create a bad reputation for your business and increase your packaging costs. That’s why it’s essential that you manage product damage costs effectively and reduce them as much as possible.
The cost of transporting a product is usually around 50 percent of the total supply chain cost, which makes it the most expensive part of the process. As we know, the size and weight of your packaging can increase transportation costs quite easily. That’s why making smart decisions about the design of your packaging can help lower distribution costs and your overall spending.
Make sure you’re right-sizing boxes or containers to limit the finished size of your packaged product. You can also ensure the weight of the box is as low as possible by choosing void fill materials that are lightweight, yet still protective enough to prevent damage. Taking the time to think through your packaging design in regard to your distribution strategy will help you reduce shipping and handling costs.
Downtime is considered the time when a machine or person is not working in order to change out supplies, fix mechanical issues, or any other maintenance tasks. Essentially, downtime is time spent not packaging a product, which means it’s not good for overall productivity. Luckily, downtime can be minimized to help increase your output, and your ability to meet demand.
To reduce downtime in your warehouse, make sure you set the right settings on your machines and check them often to ensure they haven’t changed. This allows the machine to run smoothly without any issues, such as stretch film tearing from too much tension or strapping breaking from too little heat during sealing. Materials also come in longer length rolls to help reduce the amount of time changing out materials. All of these things will increase your productivity to help increase your profits in a given time period.
There a lot of administrative costs that can add up over time. This includes the cost of tracking and allocating resources, working with suppliers, coordinating different operations, and so on. All of these add to the total of your logistic costs, so if you’re looking for somewhere to reduce spending, this could be the right place to start searching for new ideas.
There are some ways to improve your logistics, from increasing your number of workers to help speed things up to get more out the door on time to changing management software to help track items more efficiently. Make sure your operations are optimized with the best solutions to help reduce costs associated with logistics.
Another major hidden cost comes in the form of packaging waste. This can be created when you cut or alter supplies to make them work for your application while leaving behind unused material that’s eventually tossed out. The excess material that’s thrown away is where the hidden costs come from. When you purchase supplies, you pay for the amount of material you receive. When you throw unused materials away, it becomes a wasted cost.
To avoid losing money to wasted packaging materials, try to find supplies that are exact for your application. This means changing tape sizes or looking for alternative options where you don’t have to alter something for it to work. This is where a converting partner can come in handy because they have the ability to sell custom sized products, so you won’t have to cut them yourself and pay more upfront. You simply pay the converter for the materials you actually need.
Hopefully, you understand where hidden packaging costs can come from and how you can avoid them. When you eliminate these hidden costs, you can reduce your spending and add more to your bottom line. If you haven’t evaluated your operations costs in a while, now is as good a time as ever.