TCO optimisation is a powerful approach to reducing packaging costs by looking beyond the purchase price alone. By 2025, companies that understand and optimise their Total Cost of Ownership will be able to save 15-30% on their total packaging expenditure. By analysing all costs throughout the life cycle – from purchase to disposal – you can make smarter decisions that create long-term value and eliminate unnecessary expenditure.
TCO optimisation in industrial packaging means identifying all costs associated with your packaging throughout its entire life cycle. It goes far beyond just the purchase price. You look at the complete cost picture: purchase, use, maintenance, storage, transport, product protection, return logistics and final disposal or recycling.
A good TCO analysis for packaging takes the following into account:
Take, for example, an industrial flight case for fragile equipment. The purchase price may seem high compared to a standard cardboard box. But when you consider the protection it offers during transport, the possibility of reuse, and its longer lifespan, the TCO per transport cycle can actually be much lower.
TCO optimisation helps you make smarter decisions that save costs in the long term, rather than focusing on short-term savings that ultimately turn out to be more expensive.
Packaging costs are often unnecessarily high due to a combination of factors that are easy to overlook. The main reason is that many companies only look at the direct purchase costs and not at the total picture.
Common inefficiencies that lead to higher packaging costs include:
An example: you use standard-sized boxes that are not optimal for your product. This means you have to use extra filling material, the boxes take up more space during transport, and there is a greater risk of damage. By investing in customised packaging, you can reduce all these costs.
The impact of packaging on labour costs is also often underestimated. Inefficient packaging processes can account for up to 40% of total packaging costs. Consider the time employees need to pack and unpack, assemble packaging, or handle damaged products.
To calculate the actual TCO of your packaging process, you need to identify and quantify all cost components. Follow this step-by-step approach:
A practical formula you can use is:
TCO = Purchase costs + Operational costs + (Damage percentage × Product value) + Disposal costs – Residual value
For reusable packaging, divide the total costs by the expected number of usage cycles to calculate the TCO per cycle.
Use data from your ERP system, logistics reports and quality controls to make this calculation as accurate as possible. By quantifying all costs, you will get a clear picture of where the greatest savings opportunities lie.
The most effective strategies for reducing packaging costs are based on an integrated approach that looks beyond the purchase price alone. These approaches deliver the highest ROI:
Start with the design of your packaging. Customised packaging that fits your product perfectly eliminates unnecessary space and material usage. This leads to savings on materials, transport and handling. Consider incorporating packaging early in the product development process rather than afterwards.
Reusable packaging such as robust flight cases or returnable crates require a higher initial investment, but the costs per transport cycle decrease dramatically with frequent use. For regular transport or storage movements, the TCO can be up to 70% lower than with disposable packaging.
By limiting the number of different packaging formats and types, you create economies of scale in purchasing, simplify inventory management and optimise logistics processes. Find a balance between standardisation and product protection.
Automating packaging processes can significantly reduce labour costs. This can range from semi-automatic packaging stations to fully automated packaging lines. The ROI is particularly high for larger volumes.
Sustainable packaging materials are not only better for the environment, but can also save costs. Lighter materials reduce transport costs, while recyclable or biodegradable materials can reduce waste disposal costs.
The most effective approach is to start with a thorough TCO analysis of your current situation. Identify the biggest cost items and focus on these areas first. Often, the biggest savings can be achieved by looking at the entire supply chain rather than just the packaging itself.
TCO optimisation of industrial packaging is not a one-off cost-saving measure but a strategic approach that creates lasting value. By looking beyond the purchase price and analysing all costs throughout the life cycle, you can make smarter decisions that benefit both your operating results and your sustainability goals.
By 2025, companies that optimise their packaging processes from a TCO perspective will have a significant competitive advantage. They will benefit from lower operating costs, less product damage, more efficient logistics and a smaller ecological footprint.
At Faes, we understand better than anyone that industrial packaging is more than just a cost item. As specialists in customised packaging solutions, we are happy to help you optimise the total cost of your packaging process so that you can focus on your core activities.
Start by mapping out all cost components: direct purchase costs, labour costs for handling, transport costs, storage costs, product damage costs and waste disposal costs. Collect data from your ERP system, logistics reports and quality controls. Then, take a baseline measurement of your current situation and identify the areas with the highest costs. These will be your starting point for targeted optimisation.
Many companies make the mistake of looking only at direct cost savings without considering the impact on the entire supply chain. Other common mistakes include underestimating labour costs, ignoring reverse logistics, paying too little attention to product protection, and not involving all relevant departments (logistics, purchasing, production, sales) in the decision-making process. Ensure a holistic approach that takes all cost components into account.
Present a clear business case that not only shows the higher initial investment, but also the total savings over a relevant period (e.g. 1-3 years). Quantify all cost components as much as possible and calculate the ROI and payback period. Support your case with practical examples from similar companies that have successfully invested in TCO-efficient packaging. If possible, propose a pilot to prove the benefits on a small scale.
Look out for warning signs such as a high percentage of product damage during transport, frequent overtime during packing and unpacking processes, high costs for filling materials, inefficient use of transport and storage space, and many complaints about packaging from customers or internal departments. High waste disposal costs or rising costs per shipment while products remain the same also indicate inefficiencies in your packaging process.
