Shipping goods is among the supply chain’s costliest sections. That’s because the hidden costs related to packaging can drive up the overall cost of doing business. These costs are often unrelated to the expense of physically producing the packaging itself and— whether major or minor—can dramatically impact your company’s bottom line.
That, in turn, can threaten its survival in today’s hotly contested environments. If insufficient quality packaging is used, it can boost the total costs of shipping goods in terms of the percentage of products damaged in transit. Below are some factors that can impact transportation costs:
- Transportation costs – These are the actual cost of moving goods from point to point. The most critical factor in supply chain costs, these costs are often 50% of the total cost.
- Product protection – Poor packaging that doesn’t protect products creates costs associated with damaged goods. Packaging that provides more protection than needed produces hidden location costs.
- Warehousing costs – The products may have to be stored depending on the goods. That can be a function of packaging and can generate hidden costs if the product’s storage approach isn’t right.
- Administration costs – Tracking the allocation of resources to shipment and handling, contacting suppliers, coordinating operations, and so on boosts logistics costs.
- Environmental costs – These costs can also boost expenditures in terms of utilization of landfill costs, fuel costs, and similar expenses. These costs can be concrete or subtle. Either way, they can boost the overall costs of a given operation.
Packaging optimization, however, slashes hidden costs. It can reduce the number of suppliers and vendors used in shipping, simplify interactions with suppliers and vendors, reduce handling costs, and protect products more efficiently and effectively.
Using returnable packaging can also help cut hidden transportation costs. In fact, returnable packaging is among the most effective ways to save logistics time and money. So it’s no surprise that the global returnable packaging market size was valued at USD 98.55 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 5.7% from 2021 to 2028.
Packaging optimization, however, can dramatically cut costs and boosts your bottom line. The right packaging reduces administrative costs, slashes handling, and protects your product from damage resulting from in-transit activities, among other benefits. Plus, if you use returnable packaging, you can significantly cut the hidden costs of shipping a package.