7 ways to reduce your packaging costs
Every business knows that reducing their packaging costs is a good idea in theory, but many underestimate just how much of an opportunity it is. IKEA, for example, was able to save €1.2 million every year after they redesigned the packaging for a single product. Dell saved $13 million in a single year.
Such savings are possible because fewer packaging costs also always mean fewer costs elsewhere. Cutting out redundant space in your packaging, for example, will reduce the size of your packaging. This will bring down your material and production costs, but it’ll also mean you can fit more products on a pallet, driving shipping costs down too. And, of course, it also reduces your carbon footprint.
Admittedly, addressing packaging costs can be tricky. For decision-makers like founders, packaging is usually trumped by other priorities. For others like procurement teams, packaging may be a priority but often time and resources are scarce. And sometimes just knowing where to start can be hard.
To make the task of reducing your packaging costs easier and faster, we’ve put together a straightforward guide with seven practical strategies. Here it is:
1. Review your current packaging costs
It sounds simple but it’s easy to not have a complete view of the numbers, especially if like most businesses you have tens of packaging SKUs coming from different suppliers. Do you know exactly how much you’re spending on packaging? Do you know how much you’re spending on each component? Do you know how much you’re spending on each packaging bundle?
Answering these questions is the only way to know if there are more cost-effective options you can benefit from. For example, you may find that the mailer box, branded stickers and product labels you use to send your product is actually more expensive than printing everything directly onto a mailer box.
Or you may find that the poly mailer bag you’ve used for years is more expensive than a new mailer bag that’s just come on the market. That’s the case with our recycled mailer bag — a fully customisable, lightweight bag that’s ideal for shipping soft goods. It not only has a carbon footprint 20% smaller than industry-standard poly mailer bags, but it’s also up to 50% cheaper. But without reviewing your current packaging costs, you may miss opportunities like this, and you won’t have a benchmark to improve from. In short, always start with your costs.
Need help reviewing your packaging costs? Book a free consultation
2. Reduce your packaging components
Using fewer packaging components is a sure-fire way to reduce your packaging costs, and the logic is simple. Fewer components mean fewer materials which means fewer costs across procurement, production, transport, logistics and management. It also means a smaller carbon footprint and less waste.
Often though, packaging designs become overly complicated, with more and more components sneaking in over time as businesses try to improve the unboxing experience. Printed collateral like brochures is a prime suspect for this.
What’s more important, however, is that keeping these components in check and reducing them where possible can lead to massive reductions in your packaging costs. One great example of this is Sonos who in 2019, digitised a legal booklet that was previously a printed component of their packaging. According to their responsibility report, the move saved the business 207,000 pounds of paper and $640,000 annually.
Reducing the number of packaging components doesn’t mean you have to downgrade. Packaging like custom inserts can be die-cut to fit multiple products or components, allowing you to secure, protect and showcase a selection of items with a single SKU. In turn, you have fewer packaging components, fewer components to manage and fewer packaging costs.
3. Prioritise high-quality packaging
Low-quality packaging often results in more breakages. This creates an unfortunate domino effect, resulting in replacement unit costs, replacement packaging costs and replacement freight costs. Low-quality packaging also normally needs propping up by additional packaging. A substandard shipping box, for example, may need extra tape to make sure it holds up in transit. It may also need void fill to protect the product, driving up the bundled costs in the process. And when it finally arrives at your customer’s door, it likely won’t be in the best condition — increasing the risk of returns and complaints. In other words, low-quality packaging doesn’t pay off.
On the other hand, high-quality packaging minimises the risk of breakages and reduces the need for unnecessary packaging components (which also means fewer inventory costs). High-quality is a subjective term, but in this context, it’s mostly concerned with products, materials and components that perform better than entry-level alternatives. This could mean thicker liner papers that don’t rip easily, or a double-walled shipping box to protect a fragile item instead of a single-walled box.
This type of packaging may cost marginally more in the short term, but the long-term benefits for your packaging costs are clear.
4. Reduce volume with right-sized packaging
Right-sized packaging is packaging that minimises the redundant, empty space around your product without compromising its safety. This sounds sensible, but many businesses still ship their products in oversized packaging — up to 40% too big according to DHL. And, unfortunately, any increase in volume is an increase in both packaging costs and shipping costs.
But by choosing right-sized packaging, you can dramatically reduce your packaging costs. It’s this exact strategy that allowed IKEA to achieve their saving of €1.2 million every year. When they realised they could break down their Ektorp sofa and flat pack it instead, they were able to reduce the packaging size by 50%, removing all the air they were previously shipping and paying for.
With Sourceful, you can right-size packaging online, from shipping boxes and mailer boxes to stickers. Or if you need something more bespoke, you can work with our design team to create a packaging solution that meets your exact needs — without any expensive air.
Ready to create right-sized packaging? Chat to an expert
5. Order larger quantities
Leveraging large order quantities to drive down unit costs is a smart way to reduce your packaging costs in the long run. What’s more, the savings can be significant. If you ordered 500 Sourceful mailer boxes, it would cost you £1.03 per unit. Order 10,000 and the unit cost would be £0.61 — a 40% saving per unit. Not only is this a direct way to reduce your packaging costs, but it can also make high-quality packaging more affordable by mitigating the slight cost increase.
Using this strategy does, however, come with challenges. First, ordering larger quantities will affect cash flow, something which must be assessed before moving forward. Second, storing larger quantities requires extra space and capital. For most fast-growing businesses, both of these challenges can be difficult to manage, which is why we always recommend working with experts to help you find the right balance. Luckily, Sourceful has a team of dedicated logistics experts and offers international warehousing, allowing you to order larger quantities, free up your own space and reduce packaging costs.
6. Reduce the number of suppliers
Having multiple suppliers is often seen as an advantage because you can shop around for the best price. Whilst there may be some truth in this, it only considers the shelf price of whatever you’re buying. In reality, finding new suppliers is time-consuming for your procurement team as is managing existing suppliers. And as your number of suppliers keeps climbing, this can quickly become hundreds of hours for your business — hours which cost you money.
In contrast, having one supplier is a simpler, more efficient and more cost-effective approach. For packaging, a single supplier means every SKU is consolidated in one place, making it easier, faster, and cheaper for your team to manage. It’ll also allow you to build a better supplier relationship, in turn increasing your purchasing power and even leading to better payment terms. And, unsurprisingly, all of this can reduce your packaging costs.
7. Keep compliant with new regulations
One final way to reduce your packaging costs is to keep compliant with new regulations, which is crucial to avoid your costs spiralling upwards. And as governments try and incentivise more sustainable products, new regulations are becoming unavoidable. In this year alone, the UK government introduced the new and substantial Plastic Packaging Tax, and more recently in June, Scotland introduced their landmark ban on single-use plastics.
Not ensuring all of your packaging components are compliant can result in your packaging being subject to ever-increasing costs, which if left unchecked, will add up.
Finding ways to reduce your packaging costs is more important than ever as supply chains are put under increasing pressure from material shortages, climate events and soaring prices. So now’s the time to review your current packaging costs, stop shipping air and keep compliant with new regulations.
If you have any questions about reducing your packaging costs or need some guidance, we can help. Contact us
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Why the full life cycle matters
Data is the foundation of sustainability. It shows us the extent that our climate is changing. It’s the vital information that combats greenwashing, which nearly half of all green claims in the EU are guilty of . It’s the backbone of the IPCC’s (Intergovernmental Panel on Climate Change) reports (e.g. ). And it’s the foundation of every Life Cycle Assessment.
Life Cycle Assessments (LCA) are a powerful, science-based tool for estimating the potential environmental impact of products, processes, or services throughout their life cycle . For a full LCA, teams will typically look at data from five life cycle stages:
- Raw materials extraction
- Secondary packaging & transport
- Product use
- Final disposal
Missing one or more life cycle stages, however, directly affects the quality of the assessment. Leading organisations are on the same page. For example, The Competition and Markets Authority (CMA) , the Advertising Standards Authority (ASA)  in the UK and the European Commission for the EU all underline the need for high-quality data across the full life cycle to avoid making misleading environmental claims.
To quantify the impact of not assessing the full life cycle, we ran our own tests using our proprietary LCA engine. Here’s what we found: focusing only on a product’s raw ingredients can conceal between 25-70% of the product’s emissions. Put another way, selective reporting on a product’s emissions will never lead to accurate claims. The full life cycle matters.
Third parties: an extra layer of security
We’ve seen how LCAs rely heavily on the quality and completeness of data. But to ensure the highest standards of accuracy and consistency, third parties offer an extra layer of security. These include standards like ISO 14040 and 14044 and methodologies like the Product Environmental Footprint created by the European Commission.
A proprietary methodology
To go one step further, we developed our own LCA methodology. This allowed us to go beyond the static nature of a normal LCA and instead build an engine that could assess billions of product variants from different suppliers, giving results in real time whilst not compromising on accuracy. After building our engine, we commissioned an external panel of LCA experts and academics to review it to verify that our model conformed to the leading ISO standards.
It’s this rigorous homegrown approach that’s allowed us to develop a catalogue of science-backed products that in turn empower brands to make measurable progress. And it’s allowed us to support those brands in communicating that progress confidently with their customers.
What does the data say?
Our approach to LCA allows us to pinpoint both a product’s carbon hotspots and the biggest opportunities to reduce its carbon footprint.
We’ve found that the production of packaging components, international transport and disposal represent the majority of a packaging product's footprint. Let's dive deeper:
1. Production of packaging components
This stage, which includes the extraction, transport, and refinement of materials, typically accounts for the majority of the life cycle impact (for example, c.70% of our Eco Mailer Box’s total carbon footprint). An example of how we’ve reduced these emissions is custom sizing. By making custom sizing available for our packaging boxes, we’ve empowered brands to remove the empty and wasteful space that has become standard in the packaging industry. We estimate that this can reduce the total carbon footprint of a mailer box by around 8%.
Freight is carbon intensive, especially international air shipping which can represent up to 90% of the life cycle of packaging. But opting for sea freight instead can lower that number by 60%, which is the case with our recycled mailer bag. Whilst this is the best situation, we know that time is a significant constraint for brands, making sea freight often unfeasible.
We launched split delivery as a solution; a freight option where brands can choose how much of their order to send via air and sea. This allows brands to meet short-term demand whilst benefiting from sea freight’s significantly lower emissions. If a brand ordered 20,000 units and sent 10% by air freight, they could reduce their carbon footprint by up to 50% compared to sending the entire shipment via air.
3. End of life
End of life (also known as disposal) is an often overlooked but significant life cycle stage. Even for a cardboard box that can be easily recycled (71%, 2021 UK data, ), disposal still accounts for c.15% of its total carbon footprint. Disposal also varies dramatically between materials, making it a crucial part of any comparison. For example, whilst cardboard’s recycling rate in the UK is 71%, flexible plastic’s is unfortunately only 6% . This pushes disposal to account for c.21% of our recycled LDPE mailer bag’s emissions.
Always consider the full life cycle
For an accurate account of a product’s emissions, the full life cycle is essential. This is why authorities like the CMA and ASA require businesses to be clear on which stages of the life cycle they’ve included when making claims about a product’s environmental impact. Gold standard claims will always look at the full life cycle and selectively reporting on emissions will result in unreliable and dubious claims. This will put you at risk in a world that is demanding action and clarity.
With the full life cycle in hand, however, you can measure and track real progress, identify the best opportunities and communicate confidently with customers.
- Abnett, K. (2023). EU proposes clampdown on companies using fake ‘green’ claims. Reuters. Available here [https://www.reuters.com/business/sustainable-business/eu-proposes-clampdown-companies-using-fake-green-claims-2023-03-22/#:~:text=EU proposes clampdown on companies using fake 'green' claims,-By Kate Abnett&text=To use such labels%2C a,under an environmental labelling scheme]. (Accessed: 21 Aug. 2023).
- IPCC (2023). Climate Change 2023: Synthesis Report. doi: 10.59327/IPCC/AR6-9789291691647.
- PRé Sustainability (2020). Life Cycle Assessment (LCA) explained. Available here [https://pre-sustainability.com/articles/life-cycle-assessment-lca-basics/] (Accessed: 21 Aug. 2023).
- Competition & Markets Authority (2021). CMA guidance on environmental claims on goods and services. Available here [https://www.gov.uk/government/publications/green-claims-code-making-environmental-claims] (Accessed: 21 Aug. 2023).
- Committee of Advertising Practice (2021). The CAP Code. Available here [https://www.asa.org.uk/static/47eb51e7-028d-4509-ab3c0f4822c9a3c4/The-Cap-code.pdf] (Accessed: 21 Aug. 2023).
- DEFRA (2023). UK statistics on waste. Available here [https://www.gov.uk/government/statistics/uk-waste-data/uk-statistics-on-waste]
- WRAP (2021). Recycling your customers’ plastic bags and wrapping. Available here [https://wrap.org.uk/resources/guide/recycling-your-customers-plastic-bags-and-wrapping]
To achieve net zero and limit the worst of climate change, we have to rethink our reliance on plastic.
This statement is more urgent than ever, but the problem with plastics is unfortunately much bigger than just climate change. In reality, plastics also directly threaten human health and endanger habitats when leaked into the natural environment. Paradoxically, one of the main culprits of this damage is also claimed by some as the next green solution — compostable plastics.
To unpack this new material, we conducted a study on the environmental impact of compostable plastic bags, to find out if they truly offer a more sustainable alternative to traditional materials like paper, fossil plastics and recycled plastic. In this article, we’ll focus on one part of the study: the damage that leaked compostable plastics have on our ecosystems.
The consensus on compostable packaging is unclear
The biodegradable plastics market is projected to expand 2-3x between 2021 and 2026 . And at Sourceful, we’ve seen firsthand the escalating demand for compostable packaging. But whilst many brands are running towards compostable plastics, the consensus is still murky, with other companies (like Tesco and Abel & Cole) publicly distancing themselves from them. We wanted to use our research to help fill the vital knowledge gap and build consensus.
Compostable plastics are often considered a green alternative because they degrade and so are often (incorrectly) assumed to effectively disappear in the natural environment. The theory is that this reduces the amount of plastic in the ocean and the risk of microplastics. But as with most things — it’s not that simple. Life cycle assessments (LCAs) have historically struggled to account for leaked waste and microplastics because of a lack of data, even though both play a major part in a material’s overall environmental impact.
To tackle this, we partnered with the Sustainable Materials Innovation Hub at the University of Manchester. This gave us access to the latest labs, data on new and innovative materials and their in-house expertise — all invaluable to our study. Together, we investigated how traditional fossil fuels and compostable plastics behave when leaked. Here’s what we found.
The impact of leaked waste is twofold
One of the major environmental impacts of plastics (fossil and compostable), besides their carbon footprint, is their effect on the natural environment when leaked.
Leaked plastic waste generates both physical (e.g. animals ingesting microplastics or being entangled in larger pieces) and chemical risks (e.g. the leaching of toxic additives like plasticisers and flame retardants) to wildlife from the breakdown of plastic into microplastics and nano-plastics. Not only does the breakdown of plastics directly leach toxic elements but they can also act as a magnet for other environmentally harmful pollutants.
To make matters worse, leaked plastic waste has also been found to be directly connected to climate change. Researchers at the Ocean University of China found that microplastics reduced the growth of microalgae and the efficiency of photosynthesis, in turn degrading plankton’s ability to remove carbon dioxide from the atmosphere . The knock-on effect is that the ocean itself cannot capture carbon as efficiently; an essential resource in our fight against climate change, given that it sequesters 30-50% of total CO2 emissions from human activity.
Compostable plastics and leaked waste
The longer a plastic takes to break down, the more likely it will be ingested or cause entanglement. Put another way, the risk of adverse effects increases the longer a plastic persists. To account for this, we assessed each material for its degradation time in freshwater, marine, and soil environments, and used that data to identify a leaked waste impact rating for each material.
Our study found that whilst compostable plastics do reduce the risk of some adverse effects (less risk of entanglement and a shorter period of microplastics), they are not a cure-all for plastic pollution. Compostable plastics can persist in the natural environment for over half a century, which puts into question the popular claim that these plastics are the next green solution. This matches up with the conclusions that Narancic et al. made in their study . Here’s an overview of degradation times for fossil plastics and common compostable plastics:
- Fossil plastics take around 4-5,500 years to degrade in soil (with some studies suggesting this is even higher, at around 10,000 years); the worst and longest degradation time amongst all plastics. This is made worse by the common use of harmful additives .
- Compostable plastics like PLA take on average 1-63 years in soil to degrade completely. In water, PLA does not degrade at all.
- Other compostable plastics like TPS and PHB take on average 4-6 months to degrade completely.
So compostable plastics do have a tighter degradation window than fossil plastics, and they also typically contain fewer toxic additives (such as flame retardants and stabilisers). But they still can have a significant degradation window, especially and unfortunately PLA, one of the most common materials used in compostable packaging (including coffee lids and bags).
Admittedly, it is still hard to know the exact time it takes for a plastic to decay; the field of estimating polymer lifetimes is still relatively new. But we do have enough comparative data to give us an indicative hierarchy of materials that we can use to assess performance and inform decisions.
Compostable plastics do slightly reduce the risk of microplastics because of their shorter degradation times. But our larger study showed that compostable bags emit 1.5-2x more greenhouse gas emissions over their full life cycle than virgin fossil plastics. In addition, given they are still relatively new, there are uncertainties about the unintended consequences that could come from their use. ****This begs the question: are the reduced risks from leaked waste enough to offset the increase in carbon footprint? For now, we don’t think so.
What does this mean for my packaging?
It’s clear that we need to move away from fossil plastics. And in their current state, compostable plastics are not the next green solution. So, what’s the answer?
First, brands should follow the waste hierarchy. Can this packaging component be removed? Can we use less materials without compromising function? How can I design this product so it’s easy to recycle?
Second, brands should prioritise responsibly sourced paper if possible, which typically has the lowest impact of any material. Its full life cycle emissions are low, and there’s no risk of microplastics if leaked. That’s not to say it’s perfect; forests are often mismanaged and producing and recycling paper still generates emissions, uses large amounts of water and potentially also harmful chemicals. This is why certifications like the Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification (PEFC) are so important.
Paper isn’t also appropriate for every use-case and product, like liquids. This is why we stress prioritising paper if possible. Packaging should always be carefully matched with the product, and blanket rules rarely result in success.
For more information about this study, email email@example.com
Thanks to Dr. Guilhem de Hoe and Dr. Chloe Loveless from the University of Manchester for leading the collaboration.
Our study focused on the typical compostable plastics currently seen on the market (PLA, PBAT, PHA and TPS). Our study did not include a nascent group of materials classed as unmodified natural polymers, which we’re interested in exploring in the future.
- MarketsandMarkets. (2021). Biodegradable Plastics Market - Global Forecast to 2026.
- Zhang, C., Chen, X., Wang, J., & Tan, L. (2017). Toxic effects of microplastic on marine microalgae Skeletonema costatum: Interactions between microplastic and algae. Environmental Pollution, 220(B), 1282-1288. [Link] https://doi.org/10.1016/j.envpol.2016.11.005
- Narancic, T., Verstichel, S., Chaganti, S. R., Morales-Gamez, L., Kenny, S. T., De Wilde, B., Padamati, R. B., & O’Connor, K. E. (2018). Biodegradable Plastic Blends Create New Possibilities for End-of-Life Management of Plastics but They Are Not a Panacea for Plastic Pollution. Environmental Science & Technology, 52(18), 10441-10452. [Link] https://doi.org/10.1021/acs.est.8b02963
- Chamas, A., Moon, H., Zheng, J., Qiu, Y., Tabassum, T., Jang, J. H., Abu-Omar, M., Scott, S. L., & Suh, S. (2020). Degradation Rates of Plastics in the Environment. ACS Sustainable Chemistry & Engineering, 8(9), 3494-3511. [Link] https://doi.org/10.1021/acssuschemeng.9b06635
Right-sized packaging is the opposite of shipping small products in big boxes. It’s packaging that minimises the empty space around your product — whilst not comprising its safety or your branding. Or put another way, right-sized packaging is the most effective, and most efficient, size packaging for your product.
The benefits of right-sized packaging are many. As a business, you reduce your material usage, which means fewer costs across procurement and production. And smaller, lighter packaging also means fewer costs across transport and storage. All of this means a smaller carbon footprint, less waste and a better, less frustrating customer experience.
Whilst right-sized packaging seems a logical choice, businesses are notorious for using oversized packaging. According to DHL, the average box is 40% too big for its contents. In part, this is because businesses often buy large volumes of stock packaging to reduce unit costs. As a result, they have just a few packaging options for all their products. Products are then shipped in the nearest fitting packaging, regardless of their size. In practice, this means companies end up shipping the product and all of the air around it, which is expensive and wasteful. To put the scale of this waste into context, eliminating the 40% excess volume DHL cite would mean 24 million fewer truckloads annually — in the USA alone.
Another catalyst of oversized packaging is e-commerce. Unlike traditional retail, e-commerce is more complex and more people are involved across fulfilment, freight and last mile delivery — with up to four times as many touch-points. And with more touch-points, the risk of damage increases. According to one study, the average package is dropped 17 times in transit. Businesses use oversized packaging and void fill to minimise this risk and avoid breakage costs. Reducing breakage is important, but many companies don’t realise that with right-sized packaging they can both minimise risk and reduce costs, all whilst being more sustainable.
Let’s dive deeper into why your business needs right-sized packaging.
1. Slash costs across your business
Right-sized packaging is an ideal strategy to reduce costs for any business. In fact, choosing right-sized packaging can have a fortunate snowball effect across your business. Smaller packaging means fewer material costs, which then means fewer production costs and handling fees. And it means fewer transport costs as more packages can fit on a pallet. Or if you’re sending single products via a courier or Royal Mail, your package may fit into a cheaper parcel bracket. And finally, you can store more products for less, which also increases your buffer stock — a useful way to build a more resilient supply chain.
One famous example of right-sized packaging is IKEA’s Ektorp sofa. IKEA’s engineers worked out that instead of shipping the sofa as one piece, they could break it down and ship it as parts. This allowed them to eliminate the air they were shipping (and paying for) and reduce the packaging size by 50%. For IKEA, the result was an annual saving of €1.2 million and 7,477 fewer trucks on the road every year.
2. Reduce your carbon footprint
Whilst IKEA reduced their packaging costs, they also reduced their carbon footprint. Fewer materials meant fewer resources and less energy used to produce those materials. And it meant significantly fewer transport emissions as well as less waste. Although there are exceptions, the rule of thumb is when you use less, your carbon footprint falls, and right-sized packaging is an opportunity to use less. It’s important to remember that right-sized packaging is about removing redundant materials and keeping those that serve a purpose. This makes it a simple way to create more sustainable packaging without jeopardising your product.
3. Create frustration-free packaging and empower your customers
Consumers are tired of bad packaging, so much so that they’ve started Reddit threads to showcase the worst examples. Youtube too is full of consumers venting their anger about oversized packaging.
Their irritation is twofold. First, oversized packaging is often frustrating to open, with unnecessary materials creating a more complex, sometimes overwhelming experience. And second, oversized packaging is wasteful. At a time when research is showing that consumers want to be more sustainable, using excessive packaging hinders their efforts and doesn’t reflect their values. Right-sized packaging, however, addresses both parts of their annoyance. By keeping material usage down, it creates a frustration-free packaging experience and empowers your customers to play a part in reducing waste. A win-win for them and you.
Managing right-sized packaging is hard, but Sourceful can help
As great as right-sized packaging is, it isn’t perfect. Problems often arise because right-sized packaging is only right for one product, which means you may end up with a lot of packaging SKUs. Managing this can be tricky, but with the right tools, it doesn’t have to be. With Sourceful, you can use smart tools like Auto-Stock to manage, track and replenish your packaging in one place. You can also store everything in Sourceful’s warehouse. Fast-growing brands like Zoe and Floom already use Auto-Stock to easily manage their packaging, no matter how much they have. Want to learn more? Contact us.
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