TCO optimisation is all about reducing all costs associated with industrial packaging, not just the purchase price. By taking into account lifespan, usage, transport, damage and circularity, packaging becomes a strategic cost-saving factor throughout the entire supply chain.
TCO optimisation for industrial packaging goes beyond just looking at the purchase price. It encompasses all costs incurred throughout the entire life cycle of your packaging solution – from purchase and use to maintenance and waste disposal. By mapping out these total costs, you can make smarter decisions that are more cost-effective in the long term and often more sustainable as well. More and more companies are looking to this holistic approach to optimise their packaging processes.
TCO (Total Cost of Ownership) optimisation in industrial packaging is a strategic approach in which you identify and minimise all costs throughout the life cycle of a packaging solution. Unlike the traditional focus on purchase costs alone, TCO looks at the complete cost picture, including use, maintenance, transport, storage and waste disposal.
In industrial packaging, the difference between purchase price and total cost of ownership is often considerable. Packaging with a lower purchase price can ultimately be more expensive if, for example, it is more susceptible to damage, provides less protection (leading to product damage) or is not reusable.
Companies that apply TCO optimisation take a critical look at questions such as:
By taking this broader view, companies often discover that investing in higher-quality, more sustainable packaging solutions yields long-term cost savings, while also contributing to sustainability goals.
A complete TCO analysis for industrial packaging includes various direct and indirect cost components that together form the total cost picture. It goes beyond just the purchase price and maps out all costs during the life cycle.
The most important cost components are:
In addition, there are also hidden costs that are often overlooked:
By taking all these cost components into account, you get a realistic picture of what a packaging solution really costs, enabling you to make better decisions.
Calculating the Total Cost of Ownership for your industrial packaging involves a number of logical steps. By following this method, you will gain a complete insight into the actual costs and be able to compare different options objectively.
Follow this step-by-step approach:
The basic formula for calculating TCO is:
TCO = Purchase cost + (Annual operating cost × Lifespan) + Disposal cost – Residual value
For reusable packaging, you can also calculate the cost per cycle:
Cost per cycle = TCO ÷ Total number of usage cycles
Let’s illustrate this with an example: Suppose you are comparing two packaging options:
TCO Option A (for 20 cycles): 20 × £5 = £100
TCO Option B: £50 + (20 × £2) = £90
In this example, option B is ultimately more cost-effective, despite the higher purchase price. This illustrates how TCO analysis helps you look beyond the initial costs.
Circular packaging is an essential pillar of TCO optimisation because it directly contributes to long-term cost reduction while also delivering sustainability benefits. Circular packaging focuses on maximising value over multiple life cycles, rather than the single-use and disposable model.
The main ways in which circular packaging contributes to TCO optimisation are:
Practical example: A robust flight case designed for reuse may initially be more expensive than a traditional wooden crate, but if it can be used 20-30 times with minimal maintenance, the cost per usage cycle drops dramatically. In addition, it offers better protection, which reduces product damage.
Circular packaging solutions also offer indirect cost benefits:
By integrating circular principles into your packaging strategy, you not only create a more sustainable solution, but also build a more economically advantageous model in the long term.
TCO optimisation of industrial packaging delivers significant operational and financial benefits for your logistics processes. These benefits extend beyond cost savings and contribute to a more efficient, reliable and sustainable supply chain.
The main advantages are:
Practical example: For companies in the defence or medical sectors, a TCO-optimised packaging solution can mean the difference between damaged equipment and perfectly functioning equipment at critical moments. The initial investment in high-quality, customised packaging pays for itself through reduced downtime, longer service life and better operational performance.
By applying TCO optimisation to your packaging processes, you create a competitive advantage through:
TCO optimisation requires an initial investment in time and resources, but the results deliver a lasting return that significantly improves the operational efficiency and financial performance of your logistics processes.
At Faes, we understand that every packaging challenge is unique. As experts in customised industrial packaging, we are happy to help you optimise the TCO of your packaging processes. We look not only at the packaging itself, but at your entire supply chain to create a solution that perfectly matches your specific needs.
Thijs Canjels is Business Innovation Manager at Faes and specializes in packaging management and supply chain optimization. In his blogs, he shares insights on efficiency improvements, cost savings and the strategic role of packaging in modern supply chains.
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