Packaging is often considered an afterthought when it comes down to businesses, but it can significantly influence the bottom line. Ranging from weight to materials and size, there are various factors that can impact the packaging costs, as well as fulfillment, warehousing, and shipping costs. For the majority of companies, inefficient packaging translates into wasting hundreds of thousands of dollars with each passing year.
However, picking suitable materials, reducing the packaging size, and redesigning the packaging can result in significant cost savings. To illustrate, IKEA has saved around $1.4 million every year by redesigning the packaging solutions of one sofa. However, the smaller brands are having a hard time optimizing the packaging, which results in higher costs. So, with this article, we are focusing on various reasons behind increased packaging costs and how they can be mitigated.
Increase In Material Costs
For the most part, corrugated cardboard and papers are used to create the packaging boxes, but the costs of these raw materials have reached an all-time high. Multiple factors have contributed to these higher costs. To begin with, there are national and regional lockdowns, and there is a shortage of staff during the COVID-19 social distancing protocols, which are leading to lesser availability of the papers, resulting in increased costs.
In addition to this, increasing paper exports and planned maintenance have resulted in an imbalance in the cardboard and paper market, which needs to be corrected. In simpler words, the price of raw materials is increasing, which is resulting in high packaging prices. As far as reducing the price is concerned, it depends on the packaging style and type.
The brands need to analyze the materials that the packaging utilizes and shift to the cheaper and more lightweight board grade, which mitigates the chances of packaging cost increases factored in by the materials. In addition to this, you can shift to the packaging designs that promise efficient utilization of materials or opt for custom-sized boxes to reduce the consumption of materials. In fact, you can also visit TheSpeedyPack for affordable packaging solutions.
Shifts In Supply & Demand
With the COVID-19 pandemic, there has been a surge in demand for corrugated packaging. To illustrate, the consumers are locked in homes, which has resulted in an extreme increase in online shopping. For this reason, online businesses are in need of more packaging to complete the order shipping. Integrated with the challenges regarding paper manufacturing, there has been an irreverent increase in prices of finished packaging and raw materials.
The costs have increased even more as businesses have started stockpiling the supplies. This is because the businesses are hoarding the packaging because of stretched-out packaging delivery timelines.
When it comes down to the supply and demand issue impacting the costs, there is nothing much a brand can do to reduce the prices. However, the brands can opt for vendor-managed inventory (VMI) agreements to reduce the delivery timelines.
Ranging from increasing labor costs to shortage of labor and an increase in the minimum wage, there are various factors that are leading to increased costs of packaging, and the packaging suppliers have no choice but to increase the prices. Truth be told, there is no apparent solution to this problem because post-pandemic inflation is doing more damage to the entire situation.
Transportation is another factor that’s contributing to the ever-increasing costs. To begin with, the fuel costs have been increasing exponentially in the past six months, which has directly influenced the price of fuel, hence higher transportation costs. In addition to this, the workload for third-party delivery companies and couriers is also increasing, which leads to a significant rise in the price. It might seem like there is no direct relation with packaging, but it surely impacts the delivery costs.
To reduce transportation costs, there are various things that you can try. First of all, if you have your own warehouse area, you can order larger packaging volumes at once to eliminate the chances of repetitive deliveries. In addition to this, you can opt for a different material (more lightweight) which reduces the overall shipping weight, reducing the shipping costs.
It might not seem like a direct link to inflation, but the operations of packaging manufacturers can have a significant impact on the packaging costs. It can be fueled even more by the rising packaging supplier costs and overheads. So, with the erratic material supply and higher demand for packaging, the packaging manufacturing plants aren’t operating well. In addition, they have to focus on meeting the consumer requirements as well. Not to forget, the costs of operating the machinery are rising, given the power and labor costs.
When it comes down to the solution, the brands need to rethink their packaging and operational processes to see if the resources are being used efficiently. Also, if there are issues with the production processes, the brands need to fix them to bring down the prices hikes caused by inefficient functions.
The Bottom Line
Now that you know various reasons behind the increasing packaging costs, it will be much more convenient to address the issues. By ensuring efficient and lean packaging, there will be a significant improvement in cost performance, promising the balancing of packaging factors. In fact, you can read more at WeCustomBoxes.