The Real Price of Packaging

    The Real Price of Packaging: Direct Costs

    1024 478 ITB Packaging

      Part 1: Direct Costs of Packaging


      “What you don’t know will cost you.”

      —Dee Dee Artner, Author


      In the dynamic world of product packaging and distribution, understanding the total price of packaging is essential for any business, particularly in the e-commerce space.

      Many factors collectively dictate the efficiency, sustainability, and overall cost-effectiveness of a business’s packaging strategy. To help you navigate this extensive topic, we’ve created a detailed, multi-part series designed to provide businesses with an in-depth understanding of packaging costs.

      This series breaks down the complex landscape of packaging expenses into manageable segments, offering insights into 15 key aspects of packaging costs, along with actionable approaches to analyze your business needs and a list of cost-reduction strategies you can explore. Lastly, we have identified some of the most suitable experts to consult in the process.

      Join us in this exploration to optimize your packaging expenses effectively and strategically.

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      About this series:

      • Each part is structured to stand alone while also contributing to a broader understanding when read as a whole.
      • Provides a comprehensive analysis and actionable strategies in each category.
      • A holistic view of packaging costs that balances immediate needs with long-term strategic planning.


      The price of packaging for immediate, tangible packaging creation and implementation expenses

      Understanding the price of packaging begins with assessing material costs.

      Your choice of materials directly influences the cost and the product’s durability, protection, and presentation. The material choice becomes even more significant in industries such as beauty and personal care, where packaging is critical in consumer appeal or product safety. For a deeper look at material choices, see Types of Packaging Materials.

      These costs are directly associated with the creation and implementation of packaging. They are typically straightforward and quantifiable. Direct Costs focus on the immediate, tangible expenses directly linked to packaging creation and implementation, offering clear insight into the areas where immediate cost-saving measures can be most effective.

      Case in point:

      Corrugated and paper prices saw unprecedented increases starting in 2020 continuing through 2022. Although prices have seen some softening in 2023, prices are still at or near all time highs. This dynamic market underscores the importance of staying informed and adaptable in your material selection strategy and why it’s essential to balance the long-term impact on product safety and customer perception against immediate cost savings when choosing materials.

      Analysis Approach:
      • Market Research: Conduct thorough research to understand the types of materials available and their respective market prices. Include both traditional and newer options.
      • Supplier Evaluation: Compare suppliers to find the best combination of quality and cost. Consider factors such as bulk pricing, reliability, and supply chain resilience.
      • Cost vs. Quality Trade-off: Evaluate the trade-off between material quality and price. Higher-quality materials may be more expensive but can enhance product protection and customer perception.
      Cost Reduction Strategies:
      • Bulk Purchasing: Negotiate with suppliers for discounted rates on bulk purchases, reducing the per-unit cost of materials.
      • Local Sourcing: Source materials from local suppliers to cut down on transportation costs and potential import duties.
      • Material Alternatives: Explore alternative materials that offer similar quality at a lower cost. For instance, recycled materials can be both cost-effective and environmentally friendly.
      • Supplier Partnerships: Develop long-term partnerships with suppliers to secure better pricing and terms.
      • Design Efficiency: Optimize packaging design to use less material without compromising protection or aesthetics. This could mean redesigning packaging to be more compact or using materials more efficiently to reduce the amount of dunnage needed.
      Who to Consult:

      🔄 Supply Chain Analyst

      📦 Secondary Packaging Supplier

      The labor involved can significantly contribute to the overall costs of packaging, especially in businesses where packaging processes are largely manual.

      From packing to handling, efficient labor management can dramatically influence the cost-effectiveness of packaging operations.

      It is also important to note that the COVID crisis generated a paradigmatic shift. According to a recent McKinsey report, wages are increasing at more than twice the long-term rate before the pandemic. Moreover, wages in warehousing and transportation are rising four times quicker compared to the pre-pandemic period.

      Analysis Approach:
      • Labor Efficiency Analysis: Assess the efficiency of your current labor force in packaging processes, identifying bottlenecks and areas for improvement.
      • Cost of Labor Assessment: Evaluate the cost implications of different labor strategies, including in-house versus outsourced labor.
      • Process Optimization Study: Investigate how changes in packaging design or processes can reduce labor-intensive tasks.
      Cost Reduction Strategies:
      • Automation: Implement automated packaging systems where feasible to reduce manual labor requirements and enhance efficiency.
      • Workforce Training: Invest in employee training to improve packaging speed and reduce errors, leading to cost savings.
      • Process Simplification: Simplify packaging processes to minimize the time and labor required, possibly through redesigning the packaging for easier assembly.
      • Shift Scheduling Optimization: Optimize shift schedules to align labor supply with demand peaks, ensuring efficient workforce use.
      • Outsourcing Non-Core Activities: Consider outsourcing non-core packaging activities to specialized firms that may offer cost efficiencies through scale and expertise.
      Who to Consult:

      🏭 Operations Manager

      📦 Secondary Packaging Supplier

      Packaging choices directly influence shipping rates, particularly in size, weight, and durability.

      Efficient packaging can lead to significant savings in shipping, as carriers typically charge based on dimensional weight or actual weight, whichever is greater. Additionally, well-designed packaging reduces the risk of damage during transit, potentially lowering the cost of returns and replacements.

      Analysis Approach:
      • Shipping Cost Analysis: Evaluate how different packaging options affect shipping costs, considering both size and weight.
      • Carrier Rate Comparison: Compare rates from different shipping carriers and services to find the most cost-effective options for your package dimensions and weights.
      • Damage Rate Assessment: Analyze the rate of product damage in transit and how packaging improvements could reduce these incidents.
      Cost Reduction Strategies:
      • Dimensional Weight Optimization: Design packaging to minimize dimensional weight, potentially using lighter materials and reducing excess space. Use this DIM weight calculator to evaluate your costs.
      • Multi-Carrier Shipping Strategy: Use a multi-carrier shipping strategy to select the most cost-effective carrier for each shipment based on size, weight, and destination.
      • Packaging Material Reduction: Reduce the amount of packaging material used without compromising the protection of the contents, thereby lowering the package’s weight and shipping cost.
      • Consolidated Shipping: Consolidate shipments wherever possible to take advantage of bulk shipping rates.
      • Packaging Durability Improvement: Enhance the durability of packaging to reduce the likelihood of damage and the associated costs of returns and insurance claims.
      Who to Consult:

      🔄 Supply Chain Analyst

      Incorporating technology and automation into packaging processes is increasingly vital in the e-commerce industry.

      This investment can substantially improve efficiency, consistency, and speed, significantly reducing long-term labor costs. Automation also opens up opportunities for more precise and innovative packaging, enhancing product protection and customer experience. Investing in technology and automation is also a strategic move to optimize packaging costs.

      Analysis Approach:
      • Current Process Evaluation: Assess existing packaging processes to identify areas where automation and technology could provide the most benefit.
      • Technology Options Research: Explore various available technologies and automation systems suitable for your packaging needs, considering scalability, flexibility, and integration with existing systems.
      • Cost-Benefit Analysis: Conduct a thorough analysis comparing the upfront costs of technology and automation investments with the long-term savings and efficiencies they offer.
      Cost Reduction Strategies:
      • Phased Implementation: Adopt a phased approach to introduce technology and automation, starting with areas where it can provide immediate benefits and gradually expand.
      • Vendor Selection and Negotiation: Choose technology vendors carefully, focusing on value, reliability, and after-sales support. Negotiate favorable terms that align with your business objectives.
      • Employee Training and Transition: Invest in training employees to smoothly transition to automated systems, ensuring they can effectively manage and maintain the new technology.
      • Process Optimization: Use technology to streamline and optimize the entire packaging process, from design and material selection to final packaging and shipping.
      • Data-Driven Decisions: Implement systems that provide actionable data insights, allowing continuous improvement and adaptation of packaging processes to changing business needs.
      Who to Consult:

      🏭 The Operations Manager

      📦 Secondary Packaging Supplier

      Find out how ITB Packaging solutions can reduce your secondary packaging costs while enhancing supply chain resilience, product protection, and customer perception.


      As we conclude Part 1 of “The Real Price of Packaging,” we’ve illuminated the significance of Direct Costs in shaping the overall price of packaging. This exploration into material, labor, shipping rates, and technology costs provides a foundation for effective cost management.

      But there’s more to consider to get the full picture of cost factors. You can continue this journey in Part 2: Indirect Cost of Packaging, where we’ll help you learn and understand how to further optimize your packaging expenses.

      The Real Price of Packaging Series: