When we receive price quotes for our product packaging, our first inclination is to compare price per quantity. In the custom packaging industry, that approach is incomplete. Choosing a vendor based solely on price per quantity could be very unwise as there are many factors that determine the quality and value contained in a typical price quote.
Here are 9 important elements I consider when reviewing a price quote for packaging, and especially when comparing quotes between multiple vendors.
1. Price per Quantity
This is the obvious one. Sometimes a vendor can really give you a price break if you order just a few more units. Be sure to ask each vendor where their “sweet spot” is. You may be surprised that just by ordering an extra thousand or even hundred units, the final price per unit could be substantially less. And of course, make sure when comparing multiple vendors’ quotes that the quantity they are quoting is the same (sorry, I had to say it)
A price quote should always list the type of material, thickness/caliper, coloring, coatings etc. This is especially important when comparing quotes from vendor to vendor. A cheaper price can mean much cheaper materials are used. For example, say you are looking for a custom folding carton and you receive three quotes from separate vendors, two are about the same price but one of the quotes is dramatically cheaper. Look at the materials. Often enough you’ll find that one vendor quoted a different material, if you didn’t specify, because perhaps, that is the most commonly used material in their facility or they just wanted to be your lowest quote. This doesn’t mean that cheaper materials can’t do the job for you, but sometimes cheap materials are not worth it and may not hold up in the retail marketplace.
These fees are normally separated out from the unit cost and are usually a “one-time fee” for the current shape/artwork of your packaging. And if you ever reorder (the exact same order), then this tooling fee will no longer apply to your future orders unless something changes i.e. packaging dimensions.
Such tooling can be dies such as cutting die, foil die, embossing die or color plates, color cylinders etc.. Sometimes tooling is included as some customers prefer only to know one price for the entire project – “the bottom line” in other words. So be careful here. Some tooling costs (depending on the type of packaging you need) can be extremely high. But if you are planning to stick with a particular vendor and will be having a lot of reorders, then the tooling costs can be less significant when spread out over time.
If you don’t see any tooling fees or “set-up” costs, ask if they are included in the unit price, otherwise you may be in for a huge surprise! The last thing you want is to be stuck with extra charges for tooling (that wasn’t on the original price quote) after you have spent a lot of time submitting artwork and getting a prototype made etc. Finding another vendor at this point can set you back many days if not weeks. I’ve seen it happen often enough.
Also good to note is that tooling costs are linked with printing costs. In most cases the higher quality printing method that is used for your packaging, the more expensive the tooling costs are. They go hand in hand (except for digital printing which requires no tooling).
4. Valid Date of Quote
The cost of the raw materials that packaging manufacturers need to run their business adjusts often. Between the time of the quote and the time you actually make a purchase, raw materials can change price for manufacturers. They do not normally apply the updated charges to you unless they reach a threshold and can no longer bare the cost of increase.
Price quotes are often valid for only a 30 day period. After this time and until you place the order, don’t be surprised if the unit cost has gone up. Often times, even if you plan to reorder the same packaging every few months, you’ll receive a new price quote that can be either more or less. So if you plan on many reorders it can be advantageous to have a “blanket” purchase order, where the unit cost is locked-in over a period of time, say one year, and materials are purchased in bulk and held just for your orders.
5. FOB (“Free On Board” or “Freight On Board.”)
This tells you who is paying for shipping or freight. If the quote states FOB “your city destination”, then shipping is included in the unit cost. If shipping is not included, the price quote would say FOB “factory city location”, in which case you would need to pay additional for shipping (on top of the unit cost and tooling fees etc.).
In my experience, shipping out of state or out of range of a local truck, is often not priced upfront as the cost can be unpredictable. To get a freight quote, pallet information is needed and during quoting this isn’t an automatically known detail. If you absolutely need to know freight for budgeting reasons, ask for it to be included as an estimate, so you have an idea of what to expect.
“Overs” and “Unders” are annoying to buyers but essential for manufacturers. Packaging manufacturing needs a 10% margin of error and sometimes, depending on the type of manufacturing, up to 30%. Usually this 10% is not included in the cost on the price quote.
If you do not want any overs, 10% will be added into the unit cost anyway – there is no escaping it. This way, at least, you are guaranteed the exact amount of your order or a little extra (up to 10%). This should to be determined upfront and before the order is placed or you are subject to paying up to 10% for the overs (extra product) after the job is completed.
This is manufacturing, after all, and any number of things can and will occur during the course of production – don’t give your vendor a hard time about paying them. Instead, understand they are a part of the process.
However, if you only want an approximate number of packaging units, then you should opt for “Unders“. For example, let’s say you want approximately 1,000 folding cartons. You don’t care if you end up with 900 or 1,000 units. Submit the order for 1,000 units and tell them you’ll accept 10% under and no less. You will end up getting anywhere from 900-1000 units. This way you won’t be paying for more than 1000 units.
With both overs and unders, it’s important to stress that you are only paying for what they ship. So, if you order 1,000 units and you opt of 10% under, and they deliver 950 units to you, you only pay for those 950 units.
I hope that makes sense, but a more detailed explanation of “Overs and Unders” is located here
7. Printing Method
If your packaging requires custom printing, be sure you are aware of what type of printing the manufacturer is going to use. Printing methods dramatically change the pricing structure when comparing price quotes, but each printing method has its strengths and weakness as well as price variations.
For example, lithography is known for higher quality print than flexography. Lithography is the print method most of our printed retail packaging uses, while flexography is used for most of our shipping boxes (corrugated boxes). A type of flexography is also used in flexible packaging such as stand-up pouches, while the higher premium print method for flexible packaging is called rotogravure. The more premium and/or additional print methods that are required for your product packaging, the higher the unit cost will be. Generally, higher quality printing comes at a higher cost. Is your product packaging worth it? That depends on your product and target market.
8. Lead Time
Lead Time is an average estimated time the vendor needs to complete production – this does not include any proofing time, sampling time, or freight time. It only includes “production”, from the time all proofs have been approved until the day it ships or is ready for pickup.
Most price quotes should state a standard lead time, but if it does not, be sure to ask. Depending on the location of the manufacturing (overseas, for example) lead times can be a couple of months!
Your production lead time is not officially locked in until the purchase order is signed and proofs are approved, then allow a couple of days for the manufacturer to do their scheduling and your job completion date (lead time) should then be made known to you.
Always give yourself an excessive abundance of lead time (if you can) when you buy packaging. There are always unforeseen issues. And even when you get a lead time locked in by a manufacturer, that is not written in stone. Even though manufacturers do their best, problems that delay your packaging are common.
9. Reputation of the Packaging Manufacturer (or Broker)
Even though the name of the packaging company is written on the price quote, we do not always know about their reputation. And often times we can never really know how good a manufacturer is until we use them. Even still, good manufacturers can have bad days.
If I knew a certain company had an excellent reputation and they were more expensive than another company of which I knew nothing, it would weigh heavily in my decision making. And depending on the circumstances, I might happily go with the more expensive company if I felt I could rely on them more to do a great job.
Price quotes for packaging can be difficult to understand and compare. I hope these 9 points will help you make better packaging buying decisions