Shipping damage to high-tech products is rarely just bad luck: it is the predictable result of packaging choices made without sufficient knowledge. In this white paper, Faes explains why packaging is not a minor logistical issue, but an engineering challenge with measurable risks.
Summary of this article
A high-value module ships on time. On paper, the packaging meets the requirements, the price is competitive, and the supplier is well-known. Yet upon arrival, problems arise: three of the twelve modules aren’t working properly. An investigation follows; the return packaging proves harder to track than expected; and an engineer gets drawn into a logistics issue that really shouldn’t fall under engineering’s purvie.
At that moment, the biggest costs aren’t in the packaging itself, but in everything else that gets set in motion as a result.
That is the essence of Total Cost of Ownership (TCO) in packaging. The actual costs rarely arise solely from the purchase. They also result from additional handling and storage, damage and return processing, rush orders, and internal coordination. Often, this involves people who should actually be spending their time on core tasks. A study of the costs associated with Dead-On-Arrival (DOA) products—components that arrive at the customer’s site in a non-functional state—at three high-tech OEM companies showed that the total cost of such an incident ranges from 135% to 219% of the unit price of the component, and that the financial loss amounts to approximately four percent of annual component revenue.
These are the kinds of costs that do not appear in any standard reports because they are scattered throughout the organization.
The price per package is a useful benchmark. It appears on quotes, contracts, and budget lines. It’s comparable, negotiable, and directly influenceable. That’s precisely why it’s often given so much weight in decision-making.
In high-tech and industrial supply chains, however, that price alone is too narrow a basis for making a sound choice. Packaging must be suited to the product and to the way it is transported, stored, and returned. Quality processes and sustainability data also play a role. If any one of these elements is not properly managed, the costs shift to operations.
A better assessment therefore starts with a broader question: what impact does this packaging have on the supply chain?
The academic literature on the true costs of packaging failure is limited, but one study provides a well-founded framework for the high-tech sector. The study by Van Swieten (2013), conducted at three publicly traded OEM companies in the medical equipment, electron microscopy, and semiconductor equipment industries, quantified the direct and indirect costs of DOA incidents. The figures are indicative—the three cases differ significantly in product value and distribution profile—but the order of magnitude is consistent.
The average scrap value of a DOA part is virtually equal to the unit price of the part itself in all three cases. Repair processes rarely prove to be cheaper: 96% of the parts that were ultimately written off first underwent repair, with associated labor and transportation costs. Add to that the lost hours of the field service engineer (an average of three to five hours per installation), and the total comes to 102% to 142% of the average unit price.
Express or expedited shipping in this sector costs about eight times as much as standard shipping. Regular parts are shipped via rush delivery in 4% of cases; for DOA parts, this figure rises to 14%, because a second shipment must be arranged while the customer waits. The effect is greatest for parts with a low unit price: in the case of the cheapest parts, this resulted in a transportation cost surcharge of 69% of the unit price; for the most expensive parts, 3%.
Spare parts in the high-tech sector are often slow-moving: an average inventory turnover of about one part per year is realistic. A single DOA for such a part effectively doubles the annual demand and, depending on the service level, can cause a lead time extension that can only be mitigated by holding additional inventory. Depending on the service level, this can increase inventory costs per DOA by 8% to 47% of the unit price.
When added together, the total cost per DOA amounts to 135% to 219% of the unit price of the part. Multiplied by the DOA frequency (between 0.9% and 1.9% of all shipped parts in the three cases studied), the structural loss amounts to approximately 4% of annual parts revenue. For an organization with a 20% operating margin, this represents one-fifth of its profit.
Indicative, not absolute
These percentages cannot be applied one-to-one to every organization. Product profile, supply chain, and service level determine the outcome. What the figures show is the order of magnitude of the problem and the relative weights of the three cost components—damage, transportation, and inventory. For your own organization, the following applies: only when these three components are analyzed separately is a well-founded business case possible.
The costs discussed in the previous chapter do not stem from a single source. They arise at five points in the supply chain, often without their own budget allocation.
When packaging is not well-suited to the receiving process, additional handling steps are required. For example, products may need to be repositioned or repackaged, often followed by an additional inspection. One extra step per shipment may seem minor, but in a repetitive flow involving thousands of shipments per month, it adds up to a fixed cost that is rarely explicitly identified.
With reusable packaging, availability and ownership are often the weak points. If it is unclear where a piece of packaging is located or when it will be returned, the organization buys into certainty. More packaging enters circulation and storage facilities fill up, while visibility actually decreases. The extra inventory feels like a solution, but it is merely a symptom.
Packaging that is missing at the wrong time can hold up an entire shipment. Employees search for a solution or are forced to choose an alternative that is less suitable, thereby increasing the risk of DOA. This deviation takes time and coordination and can also cause additional damage.
For high-value products, the impact extends beyond repair or replacement. An incident leads to a quality investigation and customer contact, while delays and discussions about liability require additional resources. Even when the packaging ultimately turns out not to be the sole cause, the uncertainty costs time.
Organizations are increasingly required to demonstrate which materials they use, how packaging is processed, and whether reuse is possible. If that data must be collected only after the fact, a reporting request turns into remediation work that can take days—a topic discussed further in Chapter 5.
A common trend in practice is the shift from packaging as a stand-alone purchasing decision to packaging as a supply chain process. In the collaboration between Faes and KMWE, the challenge went beyond simply making a single type of packaging stronger or cheaper. KMWE was dealing with large goods, high volumes, and pressure on storage capacity. Faes therefore took on the management of the packaging flow. Inventory in the warehouses was linked to automatic orders via the Enterprise Resource Planning (ERP) system. Radio Frequency Identification (RFID) made packaging traceable. Just-in-time delivery and a fixed rotation of load carriers and bins supported daily operations.
In this case, the value does not lie in a spectacular percentage savings on the unit price. It lies in manageability. Employees need to coordinate less on an ad hoc basis, and the organization is less dependent on individual knowledge regarding the location of packaging. As a result, it becomes clearer more quickly what is available. This is precisely where the difference lies between purchasing packaging and managing a packaging flow.
The relevance to TCO is therefore less about the exact savings and more about the impact on operations. The hidden costs discussed in Chapter 3 become more manageable once additional handling, returns, and rush orders are managed as part of a single process, rather than as separate transactions.
Compliance often only becomes apparent when someone asks for proof. A customer wants to know what materials were used, an auditor requests evidence of reuse, or a reporting process requires data on waste streams. Two European developments will accelerate this demand in the coming years.
The PPWR (Packaging and Packaging Waste Regulation) entered into force on February 11, 2025, and will apply starting August 12, 2026. The regulation applies to all packaging placed on the EU market, regardless of material or origin, and sets requirements for recyclability, material selection, reuse, and verifiability. There is no exemption for small businesses, and non-EU suppliers must also be compliant in order to place their packaging on the EU market. Starting in 2030, all packaging on the EU market must be designed for material recycling.
The scope of the CSRD (Corporate Sustainability Reporting Directive) has been significantly narrowed by the Omnibus I Directive of February 2026. The reporting requirement applies starting with the 2027 fiscal year to companies with more than 1,000 employees and more than €450 million in net revenue. For those who fall below the threshold, less stringent requirements or voluntary standards now apply. That sounds like a relief—and in principle it is—but the underlying reporting needs from customers and supply chain partners do not disappear. A large OEM (Original Equipment Manufacturer) that is itself subject to reporting requirements will therefore continue to ask its suppliers for substantiated material and lifecycle data.
For packaging, this means that data is becoming less of a “nice-to-have.” The organization must be able to demonstrate how a package is constructed, how long it lasts, and what happens to it at the end of its life cycle. That information must be available whenever a customer or auditor requests it. If it is only collected at that point, it creates unnecessary pressure on operations.
For each package, first determine the material composition and weight of the individual components, such as substrate cardboard, EVA foam, and an RFID tag. Next, note how each layer is sorted or recycled and how many usage cycles are expected. The origin of materials and the end-of-life processing route should also be included in the same central specification. Such specifications do not have to be identical for every package, but they must be readily accessible. If you wait to compile this information until an auditor requests it, it will be too late.
Sustainability only works when the logistics can support it.
Reusable packaging only creates value when it is returned, available when needed, and lasts long enough. The return flow must also match the pace of the operation. When packaging is lost, part of the sustainability benefit is offset by additional transport, inventory, and coordination.
Recyclability cannot be assessed separately from the application either. The chosen material must provide sufficient protection and be suitable for cleaning and processing after use. For high-value products, inadequate protection can ultimately cause more waste than the packaging saves in material. A single DOA involving a component worth €15,000 outweighs a few hundred grams of additional packaging material.
When switching from single-use to reusable packaging, a Life Cycle Assessment (LCA) is a useful tool for determining the true environmental impact. In the Faes case for Remade in Holland, the LCA and the analysis of the logistics process formed the basis for the transition from cardboard boxes to reusable cases. This reduced waste while improving both product protection and the logistics process.
The broader lesson is that circular packaging only works when returns, maintenance, and availability are properly organised. Service life and relevant data must also be monitored. With that foundation in place, sustainability becomes practical and measurable. Without it, sustainability remains nothing more than a claim.
The shift from price discussions to TCO conversations begins with three concrete actions, each of which delivers value on its own.
Systematically record DOA incidents. Distinguish between mechanical damage, moisture damage, user errors, and damage caused by electrostatic discharge (ESD). Additionally, track the route, season, and interim storage location using a rolling 12-month average. The three OEM companies in the Van Swieten study had DOA rates ranging from 0.9% to 1.9%; one of the three companies reduced its logistics-related DOAs from 0.46% to 0.22% over a five-year period, in part by reducing the number of packaging types from approximately 600 to 25. Without a baseline, you cannot measure progress.
Damage, transportation, and inventory behave differently and require different interventions. An internal TCO analysis of a single product line (for example, the top ten most sensitive parts) usually provides direction within a few weeks. Not as a spectacular final figure, but as a targeted indication of which component has the greatest impact on your products.
Waiting for the first audit is too late. Record the material composition and weight for each item. Then add information about recyclability, reusability, and the supplier. If this is done step by step for new items and replacements, the effort required will be minimal. A centralized specification prevents the need for corrective action when PPWR compliance or a customer request unexpectedly requires attention.
Packaging is often assessed based on the most visible part of its cost: the price per unit. As a result, other costs remain hidden—costs that can quickly amount to between 135% and 219% of the unit price per incident and, on an annual basis, may consume approximately four per cent of component revenue.
TCO reduction becomes possible when packaging is treated as an integral part of supply chain performance. Product protection and availability are then considered alongside return flows, data, and sustainability. This requires insight into the right indicators, separate calculations for damage, transport, and inventory costs, and centrally available packaging data before it is urgently needed.
When packaging is managed as a supply chain process, organisations gain control over costs that would otherwise remain scattered across different departments. This is precisely where the hidden TCO of packaging lies.
Do you recognise this challenge within your organisation?
Contact us at info@faes.nl or through the contact form on our website.
Source 1: Van Swieten, T.V. (2013). “Signed, Sealed, Delivered; It Is Broken — A Quantitative Analysis of the Costs of Dead-on-Arrival Products.” Master’s thesis in Econometrics, Operations Research and Actuarial Studies, University of Groningen. The research was conducted in collaboration with Faes Group at three publicly listed high-tech OEM companies. It is used as the primary research basis for the DOA cost claims throughout this document.
Source 2: Van Swieten (2013), Table 17. The financial impact of DOAs expressed as a percentage of revenue from component-related activities, averaging 4.1% across the three cases studied. Used to substantiate the figure of approximately four per cent in lost revenue.
Source 3: Internal Faes Packaging customer case study (KMWE). Figures such as the reduction in scanning activities and inventory availability are only shared externally following validation and approval by KMWE. Used for the KMWE case in Chapter 4.
Source 4: Regulation (EU) 2025/40 on packaging and packaging waste (PPWR), which entered into force on 11 February 2025 and will apply from 12 August 2026. Source: Official Journal of the European Union; a summary is available via environment.ec.europa.eu. Used for the PPWR requirements discussed in the regulatory chapter.
Source 5: Omnibus I Directive (EU) 2026/470, adopted by the Council on 24 February 2026 and entered into force on 18 March 2026. It raised the CSRD reporting thresholds to companies with more than 1,000 employees and net revenue exceeding €450 million, applicable to financial years beginning on or after 1 January 2027. Used for the CSRD thresholds in the regulatory section.
Source 6: Van Swieten (2013), Chapter 4. The number of packaging types was reduced from approximately 600 to 25, while information provision to logistics partners was improved. As a result, the percentage of logistics-related DOAs fell from 0.46% to 0.22% over a five-year period. Used to support Section 7.1 on making the DOA rate visible.
This white paper was published by Faes Packaging as part of its knowledge centre for engineers and supply chain professionals working in high-tech industries. Its content is based on published academic research conducted by Van Swieten at the University of Groningen in 2013, in collaboration with Faes Group, as well as European regulations—including PPWR 2025/40 and Omnibus I 2026/470—and practical experience gained from customer cases.
The percentages derived from the Van Swieten study are indicative and apply to the industries included in the research. Applying these figures to a specific organisation always requires a tailored analysis.
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.
More articles by Thijs CanjelsGood packaging doesn’t just happen by chance. Using a tried-and-tested approach, our specialists guide you step by step from the initial idea to the finished product.
