How to Reduce Packaging Costs – Without Increasing Claim Costs

With profit margins shrinking and clients becoming more and more price conscious, it’s natural to try to reduce costs wherever you can. Packaging is as good a place to cut costs as any. However, a reduction in the amount or quality of packaging may result in increased freight damages. Is reducing packaging costs counterproductive? Not necessarily. Here are a few tips for reducing your packaging costs while keeping damages to a minimum.

Think Inside The Box

Is the product’s box the right size for the product, or is it a couple sizes too big? Boxes must provide ample space to fit the product and any padding that’s necessary to protect it, but after a certain point, a bigger box only adds extra expense. Note that an oversized box may add expense in three ways:

1. The higher cost of the box itself

2. The cost for added packaging materials to fill the empty space in the box

3. An increased cost to ship the box.

In fact, reducing package size has become even more important with FedEx and UPS now implementing dimensional weighing. This dramatically raises the shipping price for large volume, low weight packages. Some have estimated that shipping costs for these packages may increase as much as 60%. For these reasons, it is a good idea to review the size of the boxes that you are using in comparison to the size of the products that you ship.

Price Shop

Choosing low quality packaging in order to save packaging costs isn’t always a wise decision. However, keep in mind that the prices of your high quality packaging materials are likely to fluctuate. Keep an eye on prices and make a point to stock up when prices are low. If it has been a while since you’ve compared pricing between suppliers, look around – you might be able to find the same quality materials at a lower cost.

Does the End Justify the Means?

Think about the value of your product. How much are you willing to spend to protect it? Would a 50% decrease in packaging cost justify a 5% increase in product damage? Maybe, maybe not. The next time you buy light bulbs, look at the packaging. The cheap incandescent bulbs are typically shipped in flimsy cardboard, while the more expensive fluorescent bulbs are encased in durable form-fitting plastic. In this case, the packaging is designed to match the cost of replacement, rather than the delicacy of the product.

Test, Test, Test

No matter how you change your packaging, make sure you test the results. Monitor the damage rate of the product closely. Is there increased damage? If so, follow the steps above to determine if the reduced packaging cost is worth the increased claim cost. (Don’t forget to include the administrative cost of claims in your consideration). Also monitor other changes; is there an increase in loss claims? This could indicate a problem with labeling. Have sales changed? This could indicate a positive or negative reaction to your packaging by your distributer or end consumer. With a little luck and lots of testing, you’ll find the most cost-effective packaging.