The Secret to Saving Cost in Packaging Nobody Tells You About
As a brand, you have created a high-quality product and invested heavily in production, operations, and marketing. And now, when it’s finally time to get the product market-ready, you have one last dilemma to face: packaging.
Businesses, especially those in the e-commerce industry (practically every industry now), often struggle to find cost-effective custom boxes. They want packaging that complements their product, keeps it safe, and also works well for their branding—but at the same time doesn’t break the bank.
In addition to purchasing quality material, you also have to manage the shipping expenses. Overwhelming, right? We get it!
But you are in luck today as our experts from The Mailer Box’s design and operations department share how you can reduce the cost of production and shipping by smartly navigating the customized box process.
Let’s start with the Basics…
Variable & Fixed Costs
There are two types of expenditures in packaging—one that you can move around and another that is fixed for you to bear. However, fixed cost also varies from manufacturer to manufacturer. So, if you can find a reliable vendor that offers quality with cost flexibility, there is nothing better than that.
Fixed Costs
In custom boxes, there is a fixed cost that does not change with the volume or output of production. These include:
- Cost of printing plates (depending on your printing choices)
- Cost of setting up the machinery
- Cost of finishings (depending on what type of finishings you select
- And the cost of service
“What we advise to our clients is to increase the number of units produced for custom packaging for regular orders to reduce the fixed cost ratio compared to the number of units produced. This is the best strategy in custom packaging when it comes to strategizing your way around the fixed costs, again for products you regularly need packaging for”
Says Zeeshan, Operations head at the Mailer Box.
For example, the cost of printing plates will remain the same whether you use it for 100 or 1000 boxes. So it is best to order a higher volume of regular products as it helps optimize the budget in the long term.
Variable costs
Variable cost is the cost that varies with the output of production. If you have a small order, the variable cost would be less compared to when you have a high-volume order. These elements of packaging include:
- Cost of material
- Cost of shipping
- Cost of Labor
- And the cost of production
Generally, vendors recommend optimizing the variable cost and saving as much as possible on material and shipping by choosing alternatives that may not be your personal favorite. However, there is more to it.
Balancing The Two Costs
Understanding and mastering this one is a real game changer for your production costs. Unfortunately, many vendors do not help their clients understand this relationship to save them extra production costs. At the Mailer Box, we are committed to helping our clients achieve the best value and best quality at the best possible price.
So coming back to the relationship between fixed and variable costs, the key is to increase the volume of production as already highlighted above. This is because you will reduce and spread the fixed cost per unit over more units. Variable cost on the other hand will be more or the same depending on your choices and total number of units.
Simply put, as you make more of a product, the cost per unit tends to decrease.
Let’s break it down with an example. Imagine you have a fixed cost of $100 for making a product, and the variable cost (the cost that changes with each unit made) is $1 per unit. If you order 100 units, the fixed cost would be $1 ($100 divided by 100 units) plus the variable cost of $1, making the total cost per unit $2.
Now, let’s say you increase your order to 1,000 units. The fixed cost per unit drops to just $0.10 ($100 divided by 1,000 units), while the variable cost stays the same at $1. This means that when you order 1,000 units, your total cost per unit becomes $1.10. So, by ordering more, you end up with a lower cost per unit than when you ordered just 100.
It’s important to remember that while economies of scale help reduce fixed costs, variable costs might increase if you produce at a very high volume. However, the overall savings from lower fixed costs usually outweigh any increases in variable costs.
In short, understanding economies of scale can help businesses manage their packaging costs better. By producing more units, they can benefit from cheaper per-unit costs, leading to higher profits.
Additional Considerations:
- Understanding What You Need Packaging for!
An average customized box is likely to be mishandled several times during transit. Therefore, your packaging material must be resilient enough to protect its contents and maintain its aesthetic integrity.
Different products require a varying degree of protection, for more fragile items such as electronics, glassware or liquid products, custom rigid boxes or corrugated boxes are equipped to offer premium protection.
This is the first thing that we discuss with our clients. In packaging, it is not so much about the custom box but what goes inside the box. As a general rule, you need to understand the dynamics of your product to understand the type of packaging you need for it.
Every product is different and has unique needs when it comes to packaging. Simple items can be packaged in relatively no-fuss custom packaging without extra inserts such as bubble wrap or foam pellets. The boxes can be flattened and easily shipped, saving you a good amount on shipping. For such cases, folding cartons and mailer boxes can be a good choice. These boxes also offer a great deal of flexibility in printing, allowing you to be as creative as possible with your branding and design.
Now, coming back to delicate products, you need sturdy materials like corrugated or rigid custom boxes. These boxes would ensure product safety, provide optimal cushioning, and maintain the integrity of the contents by acting as a barrier to moisture, tear, and contamination.
The risk of damage to your fragile or delicate product is more profound than you may anticipate. Imagine your customer receiving a broken or damaged product- a long-term cost your business will incur by creating a negative perception about your product quality.
Other ways to prevent impact:
- Bubble wrap
- Air cushions
- Packaging foam
- Padded dividers
- Corrugated rolls.
- Optimizing Dimensional Weight
Dimensional weight is another important factor that we thoroughly discuss with our budget clients. Clients often fail to realize how much cost they have to bear in shipping only because of ill-planned dimensional weight. So, what do we mean when we say dimensional weight? It is the space our packaging takes in transportation and storage.
Now, it is interesting to know that in shipping, it is not weight but space that genuinely impacts the cost. This means that even if your packaging is light, but the dimensional weight is higher, the shipping cost will increase.
For example, if your custom packaging contains balls of cotton in an unoptimized wide box, consuming extra space, the cost will increase regardless of the weightless product inside.
So, what are the correct alternatives?
1.Use standard sizes
Depending on the type of product, many companies can benefit from shipping-friendly standard dimensions. You can choose from a wide range of standing sizes with minimal dimensional pricing.
2.Padded envelopes
If you are looking for customized packaging options for smaller products, you can try padded envelopes, which save a lot of cost on shipping compared to boxes.
3.Streamlining Your Print & Design
“When it comes to product packaging, it often includes many different parts and components, but not all are necessary. Some businesses might be spending too much on their packaging without needing to. Now, if you have a large budget, that’s great, but if you are on a tight one, it might be a good idea to opt for a simpler approach.”
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Says Ayesha, Performance Analyst at the Mailer Box
To help you cut costs on packaging, consider these helpful questions:
What parts are critical for protection? Any component that helps keep your product safe from damage is essential. It’s important not to remove anything that serves this purpose. However, if items in your packaging don’t contribute to protecting your goods, it might be time to let them go.
What packaging elements do customers love? Some packaging features can resonate with customers, especially on social media. Unique or eye-catching elements often make for a memorable unboxing experience, particularly for influencers who share these moments online. Keep these parts in your design, as they can help attract more customers.
Are there any unnecessary components? If you have materials in your packaging that don’t serve a clear purpose, it’s worth considering their removal. For example, if you have an internal box or carton that isn’t doing anything beneficial, getting rid of it could save you money.
4.Choosing Ocean Shipping
Ocean freight can be a more affordable option than air freight when you receive your packaging inventory from abroad.
The charges for ocean shipping are generally based on the space your packaging takes up (measured in cubic meters) rather than the weight of each item. This often saves you money, but remember that your total shipment must be at least 100 kg (about 220 lbs) to qualify for ocean shipping.
Even if your shipment is lighter, shipping a 100 kg load by sea can still be cheaper than air freight, with the disadvantage of being much slower than air freight.
Brands can save significantly on packaging costs by planning, ordering in bulk and getting their shipment via the sea route.
In short, simplifying your packaging and choosing the proper shipping methods can lead to significant cost savings! If you need any further assistance on how you can reduce your packaging costs, get in touch with one of our team members today at 801-783-4566
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Ayesha Khubaib
Ayesha has a diverse experience in areas of marketing and management. Over the years, Ayesha has been involved in the packaging sector in various capacities and now aims to share packaging market insights with her readers
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