How often should a procurement team conduct a TCO analysis?

A procurement team should ideally conduct a TCO analysis at least once a year, supplemented by an analysis whenever there is a significant change in the supply chain or packaging strategy. An annual review ensures that hidden costs — such as maintenance, return logistics, and damage — are identified in a timely manner. The appropriate frequency depends heavily on the dynamics of your industry and the complexity of your packaging solutions. In this article, we answer the most frequently asked questions about TCO analysis for packaging.

What changes in TCO when you switch packaging partners?

When you switch packaging partners, your TCO shifts on multiple levels simultaneously. Not only does the purchase price change, but transition costs, integration time, quality differences, and logistical adjustments all affect the overall cost structure. A switch may look cheaper on paper, but it often brings hidden one-time and recurring costs with it.

When changing partners, these are the cost items that change most significantly:

• Start-up costs: new molds, engineering processes, and approval procedures take time and money.
• Loss of knowledge: an existing partner knows your product, your processes, and your tolerances. Building that knowledge takes a new partner months.
• Quality risks: during the transition period, the risk of damaged shipments temporarily increases, along with associated damage claims and rework.
• Logistical integration: new arrangements for inventory management, return flows, and fulfillment all need to be set up from scratch.
• Compliance verification: in sectors such as defense or medical, a new partner must be recertified for UN, NEN, or MIL-STAN standards.

Switching partners is sometimes the right decision, but a full TCO analysis before making that decision is essential. Calculate not only what you save on unit price, but also what the switch itself costs over a period of at least two years.

What events make a new TCO analysis necessary?

A new TCO analysis is necessary whenever there is a structural change in your products, processes, markets, or supplier relationships. Do not wait until the end of the year if something fundamentally changes in your packaging chain in the meantime. Certain triggers make a re-analysis urgent.

These are the most important events that require a new TCO analysis:

• Product changes: a new product, a modified dimension, or increased sensitivity requires a review of packaging specifications and associated costs.
• Volume changes: significant growth or decline in shipping volume affects economies of scale and the efficiency of your current packaging solution.
• New destinations: international expansion means different climate conditions, transport modes, and regulations, all of which directly impact packaging requirements and costs.
• Damage spikes: an increase in damaged shipments is a signal that the current packaging is no longer adequate and that the TCO has become unbalanced.
• Supplier changes: a new packaging supplier or a change in the logistics chain requires a recalculation of total costs.
• Sustainability targets: if your organization sets new ESG goals, packaging costs and choices must also be reassessed.
• Contract renewal: for every contract renewal with a packaging partner, an up-to-date TCO analysis is the foundation for fair negotiations.

A good rule of thumb: if more than two of these situations apply at the same time, a full re-analysis is not optional — it is a requirement.

How often does a procurement team typically conduct a TCO analysis?

Most professional procurement teams conduct a TCO analysis on an annual basis, combined with a quick interim check when relevant triggers arise. An annual analysis aligns with the budget cycle and provides a structured moment to identify hidden costs and evaluate supplier performance.

In practice, the frequency varies by industry and by the complexity of the packaging solution:

• High-tech and medical: due to strict quality requirements and high product values, a full analysis is often conducted twice a year.
• Defense and security: contract cycles and certification requirements determine the frequency here, typically tied to project phases or procurement processes.
• Standard industrial sectors: once a year is common, with a lighter interim review following major volume changes.

An annual TCO analysis is the minimum. But the real value lies in consistently tracking cost data throughout the year, so that the annual analysis becomes a confirmation of what you already know rather than a search for answers.

Which cost items are most often overlooked in a packaging TCO analysis?

In a packaging TCO analysis, the purchase price and transportation costs are typically included, but a range of indirect and hidden costs are routinely left out. Yet those overlooked items are precisely what determine whether a packaging solution is truly cost-effective in the long run.

These are the cost items most often underestimated or forgotten:

• Maintenance and repair: reusable packaging such as flight cases and racks requires periodic maintenance. These costs are rarely included in the initial TCO.
• Return logistics: collecting, cleaning, inspecting, and storing empty packaging has a direct cost that varies significantly by packaging type.
• Damage compensation and rework: products damaged due to inadequate packaging lead to claims, remanufacturing, and reputational harm. These costs are difficult to quantify but very real.
• Storage costs: large packaging inventories take up warehouse space. The larger the buffer, the higher the storage costs.
• Engineering time: internal hours spent specifying, testing, and approving packaging represent labor costs that are rarely factored in.
• Compliance costs: in regulated industries, certifications, audits, and documentation take time and money that are not always visible on the packaging invoice.
• End-of-life costs: disposing of, recycling, or destroying packaging carries a cost that is lower for sustainable alternatives.

A thorough TCO analysis therefore does not begin with the quote, but with a complete overview of all processes in which packaging plays a role — from engineering to disposal.

What is the difference between a TCO analysis and a price comparison?

A price comparison looks exclusively at the purchase price of a packaging solution. A TCO analysis — or Total Cost of Ownership analysis — calculates all costs over the full lifecycle of the packaging, including use, maintenance, logistics, and disposal. The difference is fundamental: a price comparison can lead you to the cheapest option, which may ultimately prove to be the most expensive.

What a price comparison measures

A price comparison is quick and straightforward: you compare quotes based on unit price, lead time, and minimum order quantity. This is useful for standard products with a short lifespan and few associated processes. For complex industrial packaging, a price comparison is structurally inadequate, because the purchase price typically represents less than half of the true total cost.

What a TCO analysis measures

A TCO analysis maps all cost layers over a predefined period — often two to five years. This includes acquisition, engineering, transportation, storage, maintenance, return logistics, damage costs, and disposal. For reusable packaging, a TCO analysis shows that a higher initial investment pays for itself through lower operational costs over time. For single-use packaging, the opposite may be true. The TCO analysis provides the substantiation that a price comparison simply cannot offer.

How do you incorporate sustainability into a packaging TCO analysis?

You incorporate sustainability into a TCO analysis by explicitly quantifying the environmentally related costs and savings alongside the financial costs. Think of CO2 emissions, material consumption, waste costs, and the value of reuse. Sustainability is no longer a soft factor — it has direct financial consequences through regulations, customer contracts, and operational costs.

Here is how to concretely integrate sustainability into your packaging TCO analysis:

• Lifespan and reuse: calculate how many cycles a reusable package lasts and compare the total material cost with a single-use solution over the same period.
• Waste processing costs: single-use packaging generates waste that must be disposed of. These costs are directly measurable and belong in the TCO.
• Carbon footprint: a growing number of organizations are required to report their Scope 3 emissions. Packaging falls within that scope. A lower carbon footprint can help meet customers’ contractual sustainability requirements.
• Circular principles: packaging designed for repair, reuse, and recycling reduces total material costs over time. This is measurable and deserves a place in the TCO calculation.
• Future regulations: stricter European regulations on packaging waste and extended producer responsibility make sustainable choices financially smarter now than being forced to adapt later.

Including sustainability in your TCO analysis is not an ideological choice — it is a financially sound one. Organizations that invest today in circular and sustainable packaging solutions will avoid higher compliance costs down the line and benefit from lower operational expenses.

How Faes supports a complete packaging TCO analysis

Faes supports procurement teams in conducting a thorough and objective TCO analysis for industrial packaging. Not with a standard calculation model, but with sector-specific expertise in high-tech, medical, defense, and security industries — where packaging must meet demanding requirements and hidden costs can be substantial.

What Faes offers in practice:

• End-to-end process analysis: from engineering and production to storage, return logistics, and maintenance — all cost layers are made transparent.
• Digital tools: with PackAssist and StackAssist, you gain control over inventory management and packaging optimization, delivering direct cost savings that become visible in your TCO.
• Circular packaging solutions: Faes designs packaging based on reuse, repair, and recycling, ensuring that the TCO remains structurally lower over multiple years.
• Compliance expertise: in-depth knowledge of UN, NEN, and MIL-STAN standards prevents costly mistakes and certification issues that go undetected in a simple price comparison.
• Complete peace of mind: through Packaging Management, Faes manages the entire packaging process — from inventory management to fulfillment — so you can focus on your core business.

Want to know what your packaging solutions truly cost over their full lifecycle? Contact Faes to discover where the hidden costs lie and how to structurally reduce them.