How much does packaging cost? How much do I need to budget for all my packaging needs? These are questions I hear constantly. Why? Because the answers to these important questions are pretty hard to come by. This is due to the nontransparent nature of the packaging industry in general. Getting price estimates can be challenging and time consuming, and if you don’t know the right questions to ask, these estimates can be dramatically over or underinflated and therefore misleading. In addition, most packaging companies are reluctant to offer price quotes and estimates, or even general pricing. This is because of the complicated nature of pricing packaging and the endless variables that affect that price. Indeed these packaging companies also do not want you shopping around, so they are not going to make that easy for you to do.
So in this Part 3, the only way I can realistically help you budget for packaging costs is to give you an idea of what costs you can expect to incur and a few tips on how to save money.
This is a topic that I have only been writing about fairly recently but will continue to do so in the near future and beyond because I think it’s important.
The Cost of Packaging
Packaging costs can be separated into several categories:
- Raw Materials
- Type of Packaging
- Volume
- Production Costs
- Transportation Costs
- Fulfillment / Warehousing Costs
These categories directly influence one another to further complicate the issue. For example, the type of packaging directly affects the production costs for certain types of packaging. Rigid boxes are more expensive to produce (production cost) than folding cartons even though they are the same type of packaging – Boxes.
1. Raw Materials
There are 4 main types of raw materials used in packaging.
- Paper (wood)
- Plastic
- Metal
- Glass
Put simply and very basically, the more raw materials that go into your packaging the more expensive it will be. These prices will be fairly constant because these markets are relatively stable. But they do fluctuate from time to time and shortages can cause increases in price to your overall packaging costs.
2. Type of Packaging
As you can imagine, the type of packaging you decide on can massively affect cost. For example, polybags (single layer plastic bags) are much cheaper than stand-up pouches (multi-layer plastic bags). For boxes, we often have folding cartons, corrugated boxes and rigid boxes, with rigid boxes being generally much more expensive.
If boxes are what you’re needing, I have 3 articles that discuss costs associated with this type of packaging:
- Here I talk about the costs of rigid boxes
- Here I present solutions to the high price tag of rigid boxes
- And again I discuss the costs associated with rigid boxes versus folding cartons
If you are interested in POP displays, I have an article that discusses those costs here.
3. Volume
The amount of units of packaging you order affects the price significantly. Typically, the more you order the cheaper the price per unit of packaging. If you only order a very tiny amount, the costs will be much much higher.
For example, the price may be 10 cents per packaging unit at 50,000 units and 5 cents per packaging unit at 100,000 units. However, the volume to price ratio has a threshold whereby after a certain number of units the price won’t get any lower. For example the price may be 5 cents per unit at 100,000 units and 5 cents per unit per 200,000 units.
4. Production Costs
Packaging production has it’s own unique costs directly associated with your particular packaging. Tooling costs and set-up fees are the two most important.
When you create custom packaging special cutting dies and/or printing plates are manufactured that are distinctive to your packaging. This is called tooling and you usually have to pay for these separately. If you decide at a later date to change aspects of your custom packaging like the dimensions of it, for example, you will likely have to pay to get new tooling created. I will be discussing tooling later in more detail in Part 6 – Working with Your Packaging Vendor. So, in the interest of staying on topic, you can check out the Costs of Tooling here.
Set-up fees are the costs associated to “set-up” certain packaging manufacturing machines for your specific custom packaging – your tooling, printing plates etc. The reason this is a separate cost to you is because it would be more expensive to run, for example, 20,000 units of 4 different SKUs at 5,000 units, each with four separate tooling and set-ups, compared to just running a straight 20,000 units with only one set-up. I have an article that explains this in more detail here.
5. Transportation Costs
Shipping your packaging from the packaging manufacturing facility to the location of your choosing can be expensive. Freight costs are constantly rising. Shipping overseas is often times more expensive than the actual overseas produced packaging.
But freight charges often involve more than just moving the packaging from A to B. For example, if you give your packaging vendor “pack-out” instructions directing them on how you want your shipment packed, you may be charged extra for that. For instance, if you want certain SKUs packed in individual boxes, or only allow a certain number of units to be packed in each shipper box, or place a restriction on how tall you will allow the pallet to be etc., these conditions can cause the packaging company to incur additional expenses that could be passed on to you. Do you require a liftgate on the truck or do you have a forklift? All of these particular details can cost extra money if it creates more work for your packaging vendor.
6. Warehousing / Fulfillment Costs
There may be times when you need to order packaging ahead of time and store it. Sometimes the manufacturer will offer to do this for a small fee, other times a large fee. Or perhaps you have your own warehouse perfect for this. Either way this extra cost to warehousing should be included in your total “cost per unit of packaging”.
If you are in need of fulfillment (your product put in it’s packaging) be sure to check with your packaging vendor as they may have relationships and logistics already in place with fulfillment companies that can save you money. These fulfillment companies may also hold packaging inventory for you as part of your contract with them that can reduce or eliminate separate warehouse costs.
I have created a generalized pricing chart to give you a basic idea of various packaging costs. Check it out here
For packaging tips on how to save money on your custom packaging boxes, take a look at this article here
I have also created a Packaging Price Spectrum that, at a glance, gives an approximate range of what you can expect to pay for various types of packaging.