Total cost of ownership reveals that packaging costs extend far beyond the initial purchase, including logistics, maintenance, and damage risks across the full lifecycle. Optimized reusable packaging systems reduce hidden costs and create long-term efficiency within the supply chain.
Summary of this article
When choosing industrial packaging, you often look first at the purchase price. But what if you look beyond that? Total Cost of Ownership (TCO) provides a complete picture of all the costs incurred throughout the lifecycle of your packaging. From purchase and use to maintenance and disposal – everything counts. For reusable industrial packaging, this insight is even more important because it has a longer lifespan and influences various cost components. Let’s answer the key questions about TCO in industrial packaging.
Total Cost of Ownership (TCO) is a calculation method that maps out all costs associated with the purchase, use, maintenance and eventual disposal of industrial packaging. Unlike simply looking at the purchase price, TCO gives you a complete picture of the actual costs over the entire lifespan of your packaging solution.
For reusable industrial packaging, the TCO consists of various cost components:
By including all these factors in your calculation, you get a realistic picture of what a packaging solution actually costs you. This helps you make better decisions that look beyond just the initial investment.
Calculating the Total Cost of Ownership for reusable industrial packaging involves a number of logical steps. Start by identifying all cost components and then gather the data to arrive at a total calculation.
Follow these steps for an accurate TCO calculation:
Determine the expected lifespan of the packaging in terms of usage cycles or years
Calculate the purchase costs including design, engineering and production
Identify operational costs such as transport, handling and storage per cycle
Estimate maintenance costs based on repair frequency and average repair costs
Calculate damage costs by multiplying the damage percentage by the value of damaged products
Add administrative costs for tracking, management and inventory
Calculate end-of-life costs for disposal, recycling or reuse
The basic formula for TCO calculation is:
TCO = Purchase costs + (Operational costs per cycle × Number of cycles) + Maintenance costs + Damage costs + Administrative costs + End-of-life costs
For different types of reusable packaging, the weight of each cost component varies. With robust flight cases, the purchase costs are higher, but the damage costs are lower. With lightweight transport packaging, the operational costs are often decisive in the TCO calculation.
Dead On Arrival (DOA) refers to products that arrive damaged at the end user. This cost component has a major impact on the TCO of industrial packaging. DOA costs go beyond just the value of the damaged product; they also include replacement costs, administrative processing, reputational damage and customer satisfaction.
The main factors influencing DOA costs are:
Even a small DOA rate can significantly increase the TCO. Suppose you ship products with an average value of €10,000. With a DOA rate of 2%, this costs you €200 per shipment. On an annual basis with 500 shipments, this amounts to €100,000 in direct damage costs, not including indirect costs.
Investing in high-quality, bespoke packaging can drastically reduce the DOA rate. A reduction from 2% to 0.5% in the above example would yield annual savings of €75,000, which often quickly justifies the higher initial investment in better packaging.
Investing in premium reusable packaging is cost-effective when the total savings over the product’s lifetime exceed the higher initial investment. The decision depends on various factors that you must carefully weigh against your specific situation.
Premium packaging is usually cost-effective in these situations:
High product value: When the contents are valuable, the risk of damage outweighs the additional packaging costs
Frequent reuse cycles: The more often the packaging is used, the faster the investment is recouped
Complex logistics chains: Where there are many handling points or international shipments, more robust packaging offers greater protection
Critical applications: For medical equipment, defence equipment or precision instruments where failure is unacceptable
Extreme environmental conditions: When exposed to moisture, temperature fluctuations or harsh conditions
To determine the break-even point, calculate when the savings on damage, maintenance and operational costs offset the additional investment. For many industrial applications, this point lies between 10 and 25 usage cycles, depending on the specific circumstances.
A practical example: a standard transport crate costs €200 with a lifespan of 20 cycles and a 5% risk of damage. A premium alternative costs €500 with a lifespan of 100 cycles and a 0.5% risk of damage. For products worth €5,000, you save €225 in damage costs per cycle ((5% – 0.5%) × €5,000). After just two cycles, you have already recouped the €300 price difference, whilst still having 98 additional usage cycles to spare.
Hidden costs are often overlooked in TCO calculations, but have a significant impact on the actual total cost of ownership. These non-obvious cost items can sometimes account for up to 40% of the total costs.
The main hidden costs are:
A concrete example of hidden costs is the time employees spend handling damage claims. If an employee spends an average of 3 hours handling a damage claim (including documentation, communication with customers, arranging replacements), and you have 50 damage claims per year, this amounts to 150 working hours. At an hourly rate of €50, this amounts to €7,500 in hidden administrative costs.
Environmental impact is also becoming increasingly important in TCO calculations. Sustainable, reusable packaging reduces waste and CO2 emissions, which is not only good for the environment but also increasingly yields financial benefits through lower waste disposal costs and an improved reputation.
At Faes, we do not see Total Cost of Ownership as a theoretical calculation, but as a practical starting point for designing better industrial packaging. In many projects, the lowest purchase price rarely results in the lowest total cost. The real costs often arise later: through product damage, inefficient handling, downtime, unnecessary volume in storage or transport, rapid wear of components, or packaging that does not fit the logistics process properly.
That is why, when developing a reusable packaging solution, we first look at the complete use case. How often will the packaging be used? Which equipment or components need to be protected? Will the packaging be handled manually, with a forklift or within an automated process? Is stackability important? Does the content need to be directly accessible on site? And which environmental factors, such as moisture, dust, vibration or rough handling, play a role?
By addressing these questions early in the process, we can make choices that are not only technically sound, but also have a direct impact on costs throughout the full lifecycle.
Based on our experience with custom cases, industrial packaging, foam interiors and robust transport solutions, we look at aspects such as material selection, wall thickness, latches, hinges, handles, internal fixation and repairability. Sometimes the biggest TCO gain is not found in one more expensive or stronger material, but in a smarter overall design: an interior that prevents product movement, a modular structure that allows parts to be replaced, a more stackable case that reduces transport volume, or a construction that can be handled more quickly and safely.
We also take the operational side into account. Packaging should not only protect, but also fit within the customer’s process. This includes return flows, cleaning, inspection, storage, maintenance and replacement of wear parts. By considering these factors during the engineering phase, we help prevent packaging from requiring unnecessary time, space or maintenance in practice.
This is how Faes helps customers make TCO concrete. We translate usage requirements, risks and logistical conditions into a packaging solution that lasts longer, protects better and works more efficiently in daily operations. As a result, reusable packaging becomes more than a separate cost item: it becomes a strategic part of a more reliable and cost-efficient process.
Total Cost of Ownership provides a complete picture of what industrial packaging actually costs you. By looking beyond the purchase price alone and including all cost components in your calculation, you can make better investment decisions. Premium reusable packaging may seem more expensive at first glance, but often delivers significant savings through lower damage rates, longer service life and reduced hidden costs.
For complex products in sectors such as high-tech, medical or defence, where reliability is crucial, a thorough TCO analysis is indispensable. At Faes, we help customers every day to strike the right balance between initial investment and long-term savings, so they can choose the most cost-effective packaging solution for their specific situation.
Start by systematically recording all costs: purchase, transport, damage claims, repairs and administration. Then identify the largest cost items and focus on these for improvements. Consider a pilot with alternative packaging solutions and measure the results. Also involve operational staff in this process; they often spot practical opportunities for improvement that are overlooked in financial analyses.
The most common mistakes are underestimating the lifespan of premium packaging, ignoring hidden costs such as administrative processing, and failing to include damage rates in the calculation.
It is also often forgotten to factor in the impact of seasonal peaks on packaging requirements, as well as the depreciation of packaging over time. Ensure a comprehensive inventory of all cost components and base calculations on actual data rather than assumptions.
Material properties directly determine the lifespan, maintenance frequency and level of protection offered by packaging. High-quality materials such as reinforced plastic or aluminium have a higher purchase price but last much longer and offer better protection. Lighter materials reduce transport costs but may be more susceptible to damage. Also consider the conditions in which the packaging is used; some materials perform better in fluctuating temperatures or humid environments, which can significantly reduce the TCO.
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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