What’s in the box?

Most of us have experience modeling the SHOULD COST of our products.  After all, that is what we sell.  But have you ever considered the packaging involved with your product?  Nearly everything bought or sold has been in a package at some point in its value stream.  I challenge you to find something on your desk right now that didn’t come in some package, or the components that make it up didn’t.

One argument often stated is that packaging makes up such a small percentage of the final cost, so why bother?  Another is that packaging is inexpensive.  The counterargument is that packaging is rarely challenged and often an afterthought.  When this is the case, it is an easy place to hide additional profit. 

While many companies are very good at SHOULD COSTING the purchased materials that make up their components, they often overlook the packaging.  This is again because of the thought that it is small compared to other elements.  It is also true that most SHOULD COSTING solutions don’t include the data required to model.  In the past, I created Excel spreadsheets to fill this gap.  There is one solution dedicated to packaging on the market now, Benchmark Consulting Global Ltd.  If you are currently using Excel as your prepackaging solution, I think you will be glad you checked them out.

Take a minute and think about any assembly line.  How are the materials getting to that line?  Most likely in either returnable dunnage or in disposable boxes.  If they are in boxes, how much SHOULD that box cost?  Is the box design with cost in mind?  How much is it contributing to the cost of your final product?  How many components fit inside that box?  How many boxes are you receiving and paying for each year?  Does that box come on a pallet?  How much SHOULD that pallet cost?  How many pallets are you using per year?  Do the parts and boxes have labels on them?  Maybe for barcode readers?  How much SHOULD these be costing you?

Now, switch your perspective and think about your outgoing products.  Same questions.  Do you know how much your outgoing packaging SHOULD COST?  Do you know what that is costing you per year? 

Some common everyday examples:  Shoes are packaged in individual boxes, these boxes are shipped in larger boxes, and these are then placed on a pallet.  Golf balls are packaged in sleeves.  These sleeves are packaged into larger packs for the point of sale.  These packs are packaged into cases, and a larger number of these are placed on pallets for shipment to the stores.  These cases are placed on pallets.  Medical devices are packaged for point of use.  These are packaged into cases for delivery to the hospitals.  These cases are shipped out by the manufacturers on pallets.

You can see how quickly the packaging cost can grow.  If you could see the same level of cost savings you do on your “main” components, why wouldn’t you look at SHOULD COSTING packaging?