Key takeaways from the HiLe webinar on optimizing packaging costs
Picture this – you receive a beautifully wrapped up gift box. You’re so excited to open it, but it’s secured with an excessive amount of tape. So much so, that it may as well require a separate toolkit!
In a festive setting, this is at most a minor inconvenience. But imagine applying this overzealous packaging to everyday items, or even large industrial goods.
It’s safe to assume that it would be a real test of your patience!
These were the opening thoughts of our recent webinar titled ‘How can you optimize packaging costs effectively’, led by KS Jay, our co-founder. The webinar covered several topics, such as:
- Understanding packaging costs
- Avoiding costly pitfalls
- Actionable insights and sustainability
ACCESS THE FULL WEBINAR HERE
In this blog, we’ll take a deeper look at its key takeaways and major learnings. Let’s get into it!
The major question the webinar sought to answer is – are we securing our products or barricading them as we explore cost effective and efficient packaging solutions? How can we strike the perfect balance between protection and accessibility, ensuring that packaging isn’t just economical but also user-friendly?
Well, for starters, in Jay’s words –any packaging material can be utilized to ensure functionality. And when it comes to optimizing costs, the ideal way to go about it is to integrate different packaging materials to adequately protect the product while saving on costs.
The primary objective of packaging – protection
The first thing to keep in mind when considering how to optimize packaging is that no matter what the package goes through during transit, the primary objective of packaging is to project the product. It must be in perfect condition when it reaches the end customer.
Be it a phone, a printer, or washing machine (all products with varying complexities), each one of them goes through extensive handling through the transit process. The possibility for damage is thus extremely high. Take manual handling, for example. The product can be dropped on the ground. When it comes to machine handling, any potential failure in lifting can destroy the product. When it comes to land transportation, poor road conditions could be detrimental to the goods in transit. Sea and air transport also come with their unique challenges around temperature and altitude that can impact products.
Let’s take the example of COVID vaccines – most were shipped by air and had to be kept in temperatures below -40 C. These were very unique requirements that were met with the help of packaging.
Cost cannot be an afterthought
Yes, protection is primary – but cost can’t be left by the wayside. Whether it’s Original Equipment Manufacturers or any other manufacturers, each one needs to take the cost of packaging into account. The cost incurred right before the product leaves the factory, is called direct material cost.
Let’s take a simple example of a glass jar that needs to be shipped. It’s given to two packaging professionals – Anna and Ben.
Anna is conscious about packaging size, so she takes the smallest box and adds bubble wrap around the jar, securing it with some tape
Ben, on the other hand, is aware of how fragile the jar is. He adds three layers of bubble wrap and packs it in a bigger box.
Clearly, Ben’s packaging incurs a higher direct material cost.
Now, when it comes to shipment. Anna’s box is of a lower footprint as compared to Ben’s. However, when the product reaches the customer, Anna’s glass jar has a defect, and is rejected by the customer. Ben’s shipment is in perfect condition, and the customer orders more jars for his end-consumer.
Here, we see the differences in indirect cost. One was a case of underpacking, and other of overpacking. Money is lost either way – the trick is to fine-tune the process and achieve the optimal level of protection and the best possible cost.
Packaging effectiveness analysis is crucial
Packaging effectiveness analysis allows us to understand whether a product has been underpacked or overpacked, among other things.
Let’s take an example to understand how packaging effectiveness analysis works. We conducted an analysis for the packaging of a plotter – a complex piece of machinery that comprises around 5000 components and weighs approximately 200kgs.
This product was packed using 50 different packaging components and 4 different materials. We at HiLe studied the packaging and proposed a new packaging with half the material, fewer unique components, and 50% shipment reduction. This allowed the client to maximize container space and reduce indirect costs.
This process applies to simpler products as well – consider a corrugated box. If the length, width, and height is reduced by just 2%, it can result in a 5% cost reduction!
Sustainability saves costs in the long run
Sustainability is currently seen as a ‘nice-to-have’ by OEMs – and they are still reluctant to embrace it wholeheartedly, given its up-front expenses. However, key trends such as consumer awareness of CO2 emissions and global warming, as well as the introduction of carbon taxes and net zero initiatives by governments, are driving a shift in customer mindsets.
Today, a consumer is willing to pay as much as 15% more for a product that prioritizes sustainability, over a similar one that doesn’t.
So when a company adopts sustainable packaging, they’re making an investment in customer loyalty while also avoiding future cost increases in terms of carbon taxes. Every country has different numbers when it comes to the latter. In Singapore, the government implemented its carbon tax in January 2019 – it was set at S$5/tCO2e till 2023, and was raised to S$25/tCO2e this year with a view to reaching $50-80 tCO2e by 2030.
Clearly, companies that don’t implement sustainable packaging in the near future will end up having to spend more in the long run.
Conclusion
Our comprehensive webinar covered every possible aspect of what it takes to optimize packaging — from product protection and costs to packaging analysis and sustainability. If you’d like to learn more about how to improve your packaging processes, get in touch with us here and let’s work together!