Organizations should start a Total Cost of Ownership review when packaging costs, damage rates, sustainability demands, or operational changes begin to affect performance. A proactive TCO review helps uncover hidden lifecycle costs and supports smarter, long-term packaging decisions.
Summary of this article
When you look at your packaging costs, you’re probably wondering whether you’re getting the most out of your budget. A Total Cost of Ownership (TCO) review gives you an insight into all the costs associated with your packaging and logistics processes, not just the purchase price. This helps you make smart decisions about where and when you can optimise.
The right time for a TCO analysis can make the difference between cost savings and missed opportunities. By recognising the signs that indicate it is time for a thorough evaluation, you can act proactively before problems escalate.
A Total Cost of Ownership review in packaging and logistics is a systematic analysis of all costs associated with your packaging solutions throughout their entire lifecycle. This includes not only purchase costs, but also operational costs, maintenance, storage, transport and end-of-life processing.
The TCO analysis looks at direct costs, such as materials, production and transport, but also at indirect costs, such as labour time, storage space, damage caused by inadequate packaging and environmental costs. For industrial packaging, this means that you also take into account, for example, the costs of returnable packaging, repairs and the impact on the efficiency of your supply chain.
The difference from traditional cost analyses is that a TCO review shows the full picture. Whereas you might normally only look at what packaging costs to purchase, a TCO calculation provides insight into what that packaging actually costs you over the period you use it.
A TCO review only creates real value when the findings are translated into better packaging choices. At Faes, we look beyond the purchase price of a case, crate or transport solution and assess how packaging performs throughout its full operational lifecycle. That includes transport, storage, handling, assembly, maintenance, repeated use and the specific conditions in which the equipment must remain protected and ready for use. In many cases, the largest costs are not visible in the initial quotation, but appear later through product damage, inefficient workflows, excessive handling time, unclear specifications, unnecessary replacements or packaging that does not fit the real application.
By combining packaging development, custom engineering, production, assembly, testing and knowledge of demanding operational environments, Faes helps organisations connect financial insights with practical improvements. The result is not simply a cheaper packaging solution, but a more reliable, usable and future-proof solution that reduces operational risk and supports long-term performance.
There are various signs indicating that it is time for a TCO analysis. Rising logistics costs, frequent damage during transport or complaints about packaging waste are clear triggers that justify a thorough evaluation.
Specific triggers include significant changes in your business operations, such as expansion into new markets, changes in product volumes or new regulations in your sector. It is also time to take a close look at your TCO if you notice that competitors appear to be operating more efficiently, or if customers are asking questions about sustainability.
Technological developments can also be a trigger. New packaging materials, automation options or digital tracking systems can significantly influence your TCO. It is wise to assess annually whether these developments are relevant to your situation.
Your packaging costs are likely too high if they account for more than 3–5% of your total product costs, unless you work with highly sensitive or high-value products. Another warning sign is when your packaging costs are rising faster than your turnover or productivity.
Also look at operational indicators. If you regularly deal with damaged goods, returns due to packaging issues or complaints about excessive packaging, you are probably paying too much—not only for the packaging itself, but also for the consequences.
Where possible, compare your costs with those of industry peers. In high-tech sectors, packaging costs may be higher due to special protection requirements, but in more standard industries, a significant difference compared to the competition should be a red flag. Also, consider whether you spend a lot of time on packaging activities that could be automated.
A TCO analysis looks at the total costs over the entire lifecycle of your packaging solution, whereas regular cost reviews usually focus on direct, short-term costs, such as purchase prices and direct operational expenditure.
Regular cost reviews often focus on what you pay today: the price of materials, production and direct transport. A TCO analysis, on the other hand, also calculates future costs, such as maintenance, replacements, storage costs and even the costs of inefficiencies in your process.
The time perspective is also different. Whereas a standard cost review usually looks at quarterly or annual results, a TCO calculation analyses costs over several years. This helps you justify investments that appear more expensive in the short term but yield cost savings in the long term, such as sustainable, reusable packaging.
Most organisations should carry out a thorough TCO review every 2–3 years, with annual check-ups to monitor significant changes. For companies in rapidly changing sectors, such as high-tech or medical technology, an annual full review may be necessary.
The frequency depends on various factors. If you work with stable products and processes, a review every three years is sufficient. However, in the event of major changes within your business, new products or significant market shifts, an interim evaluation is advisable.
Also take external factors into account. New regulations, customer sustainability requirements or major fluctuations in material costs may justify an additional review. The most important thing is not to wait until problems pile up, but to proactively assess whether your packaging strategy is still optimal.
An effective packaging TCO review requires input from various departments: procurement, logistics, operations, finance and quality assurance. Each team brings unique insights into different cost components and operational impacts.
Your procurement team knows the direct costs and market trends, whilst logistics has insight into transport and storage costs. Operations understands the impact on production processes and labour time, and finance can calculate the long-term costs and ROI. Quality assurance ensures that cost savings do not come at the expense of product quality or compliance.
Don’t forget external stakeholders either. Your packaging suppliers can provide valuable insights into new technologies and optimisation opportunities. Customers can provide feedback on their experience with your current packaging. For regulated sectors, such as medical or defence, input from compliance experts is essential to ensure that cost optimisations meet all requirements.
Would you like to know how we at Faes help organisations optimise their packaging costs? Our packaging management services combine TCO analysis with practical implementation, so that you not only gain insight into your costs, but can also take concrete steps towards more efficient packaging solutions.
The most overlooked costs include damage-related expenses (returns, replacements, customer compensation), labor time for manual packaging processes, storage space for oversized packaging, and disposal costs. Many organizations also miss opportunity costs from inefficient packaging that slows down operations or requires additional handling steps.
Calculate ROI by comparing the total lifecycle costs of both options over 3-5 years. Include savings from reduced damage, improved brand reputation, potential premium pricing for sustainable products, and avoided future compliance costs. Factor in customer retention benefits and potential new customer acquisition through sustainability positioning.
Enterprise Resource Planning (ERP) systems can track direct costs, while specialized packaging software like TOPS Pro or Cape Pack can model different scenarios. Spreadsheet templates work for smaller operations, but consider logistics management platforms that integrate cost tracking across your entire supply chain for more comprehensive analysis.
Segment your analysis by product category or packaging type, then identify common cost drivers across segments. Use weighted averages based on volume or revenue contribution for shared costs like storage and handling. Consider creating packaging families that can serve multiple product lines to achieve economies of scale while maintaining product-specific protection.
The main challenges include resistance to change from operations teams, upfront investment requirements for new packaging systems, and coordinating changes across multiple suppliers or locations. Address these by starting with pilot programs, clearly communicating cost benefits to stakeholders, and implementing changes in phases rather than all at once.
Monitor regulatory trends in your industry and include potential compliance costs in your projections. Build in a 10-15% buffer for regulatory changes in highly regulated industries. Consider investing in packaging solutions that exceed current requirements to avoid future upgrade costs, and maintain relationships with regulatory experts who can advise on upcoming changes.
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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