How does a TCO calculation help build a business case for custom packaging?

A TCO calculation (Total Cost of Ownership) accounts for all direct and indirect costs across the full period of use of a packaging solution. While a quoted price only reflects the purchase cost, a TCO calculation also captures operational costs, damage risks, labor costs, and waste disposal costs. These hidden items are often what determine whether a packaging solution is truly cost-effective.

The cost items that a quote does not show, but that a TCO calculation does include, are:

• Damage and product loss: Costs associated with damaged goods, returns, and remanufacturing. For high-value or sensitive components, a single damage incident can exceed the purchase price of dozens of packaging units.
• Labor costs for packing and unpacking: The more steps a packaging solution requires, the higher the labor cost per shipment.
• Storage and inventory management: Inefficient packaging takes up more space, leading to higher storage costs and a larger warehouse footprint.
• Transportation costs: Packaging that cannot be stacked optimally increases freight costs per shipment.
• Maintenance and repair: Reusable packaging requires maintenance, but this is typically less expensive than continuously replacing single-use solutions.
• Disposal and recycling costs: Single-use packaging generates waste. The costs of processing and disposal are rarely included in a quoted price.
• Compliance and documentation: Packaging that does not meet UN, NEN, or MIL-STD standards can result in fines, delays, or rejection by the recipient.

Each of these items is measurable. Once you add them up, the picture of “what does packaging cost” changes fundamentally.

The TCO of standard packaging appears lower due to a lower purchase price, but in practice it tends to be higher — driven by greater damage risk, additional filling material, more handling steps, and a shorter service life. Custom packaging requires a higher initial investment, but consistently outperforms standard solutions across all other cost categories over the full period of use.

TCO of standard packaging

Standard packaging is readily available and inexpensive per unit. However, it is designed for an average product, not your specific situation. This often means you need additional protective materials, the packaging does not stack efficiently during transport, and the risk of damage is higher. Furthermore, standard packaging is almost always single-use, keeping the cost per cycle high. For high shipping frequencies or sensitive products, these costs add up quickly.

TCO of custom packaging

Custom packaging is engineered for your product, your transport route, and your usage frequency. The purchase price is higher, but the packaging provides better protection, requires fewer handling steps, is more often reusable, and fits precisely within the logistics chain. For high-value products or those with strict protection requirements — such as in the medical, high-tech, or defense sectors — the cost per cycle of custom packaging falls below that of a cheaper standard solution after a relatively small number of uses.

To build a reliable TCO calculation, you need quantitative data on the purchase cost, usage frequency, service life, damage rates, labor costs, and logistics costs of the packaging. The more specific the input, the more accurate the outcome — and the stronger the business case.

Collect at minimum the following data:

1. Purchase price per packaging unit (including tooling costs for custom solutions)
2. Expected number of usage cycles per year and over the total service life
3. Historical damage rate with the current packaging solution
4. Average value of the packaged product to quantify damage costs
5. Labor minutes per packaging operation (packing, unpacking, inspection)
6. Transportation costs per shipment and any applicable storage costs
7. Return logistics costs if the packaging is reusable
8. Maintenance and repair costs for reusable packaging
9. Disposal costs for single-use packaging
10. Compliance costs where specific standards apply

Not all data will always be immediately available. Damage rates are sometimes only visible after an audit of return flows. Labor costs are rarely tracked at the level of individual packaging operations. Even so, working with estimates is worthwhile, as long as your assumptions are stated explicitly. A conservative estimate tends to strengthen rather than weaken the business case, since actual savings in practice often exceed projections.

You build a business case based on a TCO calculation by comparing the total costs of the current situation with the total costs of the new packaging solution over an equal period, and translating the difference into a payback period and structural savings. This gives decision-makers a concrete financial argument to invest.

A strong business case follows this structure:

1. Define the current situation: Calculate the full TCO of the existing packaging solution using the data outlined above. This is your baseline.
2. Calculate the TCO of the new solution: Do the same for the custom packaging, including the higher purchase price but with improved parameters for damage, labor, and service life.
3. Compare the scenarios over an equal timeframe: Use the same period — for example, three or five years — for both calculations. This makes the outcomes directly comparable.
4. Calculate the payback period: Divide the additional investment by the annual savings. A payback period of less than two years is a strong argument for most organizations.
5. Quantify risk reduction: In addition to cost savings, better packaging also reduces risks such as product damage, delivery delays, and compliance issues. Where possible, translate these into a financial value.
6. Present results by stakeholder: Finance wants to see the payback period. Operations wants to know how many handling steps will be reduced. Quality wants to see the damage rate decrease. Tailor the presentation to your audience.

A TCO calculation is the strongest argument for custom packaging when the value of the packaged product is high, the shipping frequency is structural, or when damage, compliance, or reusability play a significant role in total costs. In these situations, the calculation makes the difference between a gut feeling and an informed decision.

Specifically, the situations where a TCO calculation proves decisive are:

• High-value or sensitive products: For products with a high replacement value — such as medical equipment, defense components, or high-tech parts — a single damage incident carries significant weight in the calculation.
• High shipping frequency: The more often a packaging solution is used, the greater the advantage of a solution with a lower cost per cycle.
• International or complex logistics: Long transport routes, multiple transfer points, or extreme conditions increase the risk of damage. Custom packaging structurally reduces that risk.
• Strict standards and regulations: In sectors with mandatory compliance requirements (UN, MIL-STD, ADR), the costs of non-compliance are directly measurable and therefore easy to include in the TCO.
• Return logistics and circular flows: When packaging is returned, reusable custom solutions are almost always less expensive than single-use alternatives over multiple cycles.

Sustainability and circularity reduce the TCO of custom packaging in two ways: they lower the material cost per cycle through reuse, and they limit the disposal and recycling costs that recur systematically with single-use packaging. In addition, sustainability performance is increasingly becoming part of procurement criteria and supplier evaluations, giving it indirect commercial value as well.

Circular packaging is designed to be returned, repaired, and redeployed. This reusability lowers the average cost per use as the packaging is put to work more often. At the same time, it reduces the waste stream, which is directly reflected in lower disposal costs and less material consumption per year.

For organizations reporting on ESG objectives or working with suppliers that impose sustainability requirements, a circular packaging strategy also has strategic value. That value is harder to quantify, but can be included as a qualitative factor in the business case alongside the hard TCO figures.

Concretely, the following sustainability-related items can be included in a TCO calculation:

• Savings on material costs through reuse across multiple cycles
• Lower disposal costs due to less single-use packaging waste
• Reduction in CO2 emissions through more efficient transport and less material production
• Potential savings on environmental levies or packaging waste charges
• Value of an improved supplier position with customers that have sustainability requirements

A TCO calculation only becomes convincing when the comparison goes beyond the purchase price of the packaging. Damage, labour, handling, storage, transport volume, return flows, maintenance, repair, replacement and end-of-life can have a far greater impact on the business case over the service life.

The key question is therefore not whether custom packaging costs more to purchase, but whether the additional investment is recovered over the full period of use through lower costs, reduced risk and a more efficient logistics process. Conversely, a TCO analysis may also show that a standard solution is sufficient for a particular application.

From packaging costs to comparable scenarios

Our specialists start with the current situation: what is being packaged, how often is it shipped, which handling steps are required, and where do costs or losses arise within the supply chain? An existing packaging solution, a standard alternative and a custom packaging concept can then be compared using the same assumptions.

Depending on the challenge, we may consider:

• purchase cost and expected service life;
• damage, returns and product failure;
• labour involved in packing, unpacking and internal transport;
• dimensions, weight, stackability and transport volume;
• return logistics, maintenance, repair and replacement;
• reuse and end-of-life processing.

Engineering and economic justification come together in this assessment. A change in construction, protective interior or dimensions only becomes relevant when it is clear which technical problem it solves and what effect it has on costs and processes.

Practical example: Remade in Holland

At Remade in Holland, used mobility scooter motors were previously transported in cardboard boxes. Together with Faes, the logistics process was analysed and a Life Cycle Assessment was carried out. This led to a switch to reusable custom cases that are better suited to the transport flow, can be used repeatedly and reduce the amount of packaging waste.

The case illustrates why a business case becomes stronger when it assesses not a single unit price, but the entire life cycle and logistics application.

Not the lowest purchase price, but the best-substantiated choice

A robust TCO business case makes assumptions explicit and shows where the break-even point lies. The question is not only: what does this packaging cost? But: what does each option cost over the agreed service life, at the expected number of use cycles and within our actual supply chain?

Do you have quotations, shipping volumes, damage records, handling times or an existing packaging concept and want to know whether custom packaging can be economically justified? Put your packaging challenge to our specialists. We help make the relevant costs and scenarios transparent and translate them into a technically and economically substantiated packaging decision.