How do you use a TCO analysis to build internal support for better packaging?

A TCO analysis for packaging includes all direct and indirect costs associated with the packaging process, from procurement and use to returns, repair, and disposal. It goes well beyond the purchase price of the packaging itself. The costs that don’t appear on the purchase invoice are precisely what make the difference in the total calculation.

Specifically, a TCO analysis for packaging covers the following cost categories:

• Acquisition costs: the purchase price per unit, including tooling and minimum order quantities
• Operational costs: time spent on packing, unpacking, storing, and internal transport
• Transportation costs: dimensional weight, in-transit damage, and additional insurance costs
• Damage and return costs: product damage due to insufficient protection, return shipments, and rework
• Maintenance and repair: costs for keeping reusable packaging in working condition
• Waste processing: costs for disposing of or recycling single-use packaging
• Compliance costs: certification, documentation, and adherence to standards such as ADR, UN, or MIL-STD

Bringing all these elements together creates a complete picture of what a packaging strategy truly costs over its full lifecycle.

You calculate the TCO of your current packaging strategy by identifying all costs per packaging cycle and adding them up over an agreed period — typically one year or the expected lifespan of the packaging. You then compare those total costs with the TCO of an alternative scenario.

A practical approach works in four steps:

1. Define the scope: which product, route, and volume are you analyzing? Limit yourself to one product group or packaging type to keep things manageable.
2. Collect data by cost category: ask procurement, logistics, production, and finance for their figures. Think purchase invoices, damage reports, labor hours, and return frequencies.
3. Quantify indirect costs: calculate, for example, how many hours employees spend per week on packaging and translate that into an annual amount.
4. Build a comparison scenario: calculate the same costs for the alternative packaging solution, including a higher purchase price but lower operational expenses.

The result is not an exact scientific figure, but a well-founded estimate that gets the internal conversation started. Even a rough TCO calculation is more valuable than a decision based solely on purchase price.

The most underestimated costs in packaging budgets are product damage, labor time, and return logistics. These items rarely appear on the packaging invoice, yet they do weigh on the bottom line. Organizations that focus only on the purchase price consistently miss a large portion of their actual costs.

Product damage from insufficient protection

When packaging is not matched to the shock and vibration loads of transport, the risk of product damage increases. For high-tech components, medical equipment, or defense materiel, a single damaged part can cost many times more than the packaging itself. These damage costs are often charged to the product budget rather than the packaging budget, which keeps the connection invisible.

Labor time in the packaging process

Complex, non-standardized packaging takes employees more time to fill, seal, and document. If a packaging operation takes five minutes longer per shipment and you process a thousand shipments a year, that adds up to more than eighty hours of additional labor. This is a real cost that is rarely factored into the packaging budget.

Return and recovery costs

Single-use packaging generates waste streams and return costs. Reusable packaging requires well-organized return logistics, but delivers structural savings over time. The costs of a poorly managed return flow — including lost packaging and unnecessary new purchases — are rarely fully mapped out.

You use TCO findings to convince internal decision-makers by translating the numbers into the language of each decision-maker: CFOs want to see cost reduction, operations managers want efficiency, and sustainability officers want less waste. A TCO analysis provides concrete arguments for each of these perspectives.

Some effective ways to present TCO findings internally:

• Compare total costs, not just purchase prices. Show that a more expensive packaging solution works out cheaper over three years than a low-cost disposable alternative.
• Use a break-even analysis. Calculate how many cycles it takes for the investment in better packaging to pay for itself. This makes the decision concrete and time-bound.
• Link costs to risks. Product damage, compliance failures, and delivery delays are risks that decision-makers understand. A TCO analysis makes the financial impact of those risks visible.
• Present scenarios. Show three options: the current situation, an intermediate solution, and the optimal solution. Include total costs over a two-to-three-year period for each scenario.

The power of a TCO analysis as a persuasion tool lies not in the complexity of the calculation, but in how recognizable the costs are. Once a procurement manager sees that damage costs are three times higher than the packaging invoice, the conversation changes.

A TCO analysis is most effective as an internal tool when there is a concrete reason to reconsider a packaging decision — such as a tendering process, a rise in damage claims, a change in transport routes, or a sustainability target. At such moments, the willingness to invest in better packaging is at its highest.

Specific situations where a TCO analysis has maximum impact:

• When transitioning from single-use to reusable packaging, where the higher upfront costs need to be justified internally
• When a product is arriving damaged more often than is acceptable and there is internal debate about the cause
• During international expansion, where transport and compliance costs are increasing
• When an organization wants to reduce its carbon footprint and packaging plays a role in that
• During budget rounds, when procurement departments are under pressure to cut costs and a TCO analysis demonstrates that buying cheaper ends up costing more

Outside these moments, a TCO analysis also works well as a proactive tool for building awareness, though the likelihood of immediate decision-making is lower.

You don’t need advanced software for a TCO analysis. A structured calculation model in a spreadsheet is sufficient for most situations, provided you collect the right data from procurement, logistics, production, and finance. The quality of the analysis stands or falls on the completeness of the input data.

The most valuable data sources for a packaging TCO are:

• Procurement data: purchase prices, supplier invoices, minimum order quantities, and lead times
• Damage reports: the number and value of damaged products per period, broken down by cause
• Labor time records: average time per packaging operation, including unpacking on the receiving end
• Return data: number of return shipments, cost per return, and repair frequency for reusable packaging
• Transport invoices: weight and volume costs, including any surcharges for non-standard dimensions
• Waste processing costs: costs for disposing of single-use packaging materials

A good TCO analysis reveals more than just the purchase price of packaging. By also considering damage, handling, transport, storage, return flows, maintenance and service life, you gain a well-founded understanding of what a packaging solution really costs.

From packaging costs to a substantiated business case

At Faes, we look at the current packaging situation as well as the costs that arise throughout the entire supply chain. This allows existing and alternative solutions to be compared using the same criteria.

Depending on the challenge, we can support you with:

• identifying direct and hidden packaging costs;
• analysing damage, handling, return flows and maintenance;
• comparing different packaging scenarios;
• including service life, reuse and sustainability in the analysis;
• substantiating the packaging decision for internal stakeholders.

Practical example: Remade in Holland

Our collaboration with Remade in Holland shows how this approach can lead to different decisions in practice. Used mobility scooter motors were previously transported in cardboard boxes. Together, we mapped the logistics process and carried out a Life Cycle Assessment.

The analysis showed that reusable packaging was a better fit for the application. It provides better protection for the motors, can be used multiple times and reduces packaging waste.

The case illustrates exactly why a broader analysis matters: the relevant comparison is not the packaging with the lowest unit price, but the solution that delivers the greatest value over its entire lifecycle.

Make TCO a shared decision-making framework

A TCO analysis becomes even more valuable when procurement, engineering, operations and management work from the same cost perspective. The discussion then shifts from “What does this packaging cost?” to “Which solution delivers the best performance at the lowest total cost over its entire lifecycle?”

Would you like to better substantiate your packaging decision and create internal support for a different approach? Discuss your packaging challenge with our specialists. Together, we identify costs, risks and improvement opportunities and translate them into a packaging solution that is both technically and economically well-founded.