The Strategic Advantages of Packaging Cost Control

Packaging is a necessary tool for almost every manufacturer, food company, restaurant organization and consumer brand. Bottles, films, corrugated boxes, cartons and trays all play an important role in getting products to customers. But does your team actually realize how much you’re paying for them?

Packaging pricing can be easy to accept as a given, especially when you’ve worked with the same suppliers for years. The problem is that knowing what you’re paying isn’t the same as knowing what you should be paying. That’s where strategic packaging cost control comes into play.

What’s really behind your packaging price?

A supplier gives you a price, your team negotiates and you agree on a number. It sounds simple enough. But that final number can reflect much more than the cost of the material itself. Raw materials, labor, equipment, energy, manufacturing, freight, overhead and supplier margin can all play a role.

Without visibility into those factors, procurement teams may know their current price without knowing whether it still reflects the market. PacIQ uses real-time market intelligence and proprietary cost models to help organizations determine what they should be paying for resin- and paper-based packaging.

Better data leads to better negotiations

Think about your next supplier negotiation. Are you going in with a clear target price based on the underlying costs? Or are you relying primarily on your previous price, a supplier quote or another benchmark?

Understanding the economics behind a packaging item gives procurement teams a stronger starting point. Instead of simply asking a supplier to lower its price, you can have a conversation based on the factors that actually drive cost. We explore this approach in Behind the Numbers: How Cost-Deconstruction Models Reveal the True Cost of Packaging. That kind of transparency can turn a difficult pricing conversation into a more productive one.

You don’t always need a new supplier

When companies start looking for packaging savings, changing suppliers can seem like the obvious solution. But switching suppliers can bring qualification work, testing, operational changes and additional risk. If your existing supplier is meeting your quality and service expectations, replacing them may not make the most sense. There may be opportunities within the relationship you already have.

Packaging pricing can become misaligned with market conditions over time, even when the supplier and specifications remain the same. A closer look at the underlying costs can help uncover those opportunities. Our approach is designed to pursue savings while maintaining the same suppliers and specifications whenever possible.

Small improvements can add up

Packaging is often a high-volume expense, meaning even a modest percentage improvement can translate into significant savings when applied across millions of units or a large annual spend. The bigger issue is what happens when prices gradually increase without anyone taking a fresh look at the underlying economics.

A price can start to feel “normal” simply because you’ve been paying it for years. Regularly comparing packaging costs against market conditions can help prevent that from happening. Our packaging cost reduction checklist offers several areas procurement teams can review.

Where could those savings go?

Packaging savings can have an impact beyond the procurement budget. Reducing unnecessary costs can create room for other priorities, whether that’s equipment product development, technology, workforce initiatives, margin improvement or sustainability projects.

For example, investments in recyclable materials, lightweighting or new packaging technologies may be easier to pursue when there’s additional financial flexibility. We explore that connection in our blog, “How Packaging Cost Control Can Help Fund Your Sustainability Strategy.”

Don’t wait for the next price increase

Packaging markets are constantly changing, with raw material costs, supply and demand and other market factors all affecting pricing. If you only review packaging costs when a supplier announces an increase or a contract is about to expire, you’re already reacting to the change. Market intelligence can help procurement teams evaluate price-change requests, identify opportunities to negotiate and understand whether current pricing still reflects market conditions.

Cost control doesn’t have to hurt supplier relationships

Saving money doesn’t have to mean damaging the relationship with your supplier. A supplier needs an appropriate margin to operate and provide reliable service. At the same time, buyers need confidence that they’re paying a fair and competitive price.

When both sides can discuss actual cost drivers and realistic target pricing, negotiations can become less about demanding an arbitrary reduction and more about finding a price that makes sense. Depending on the engagement, we can work behind the scenes with a procurement team, provide packaging expertise or participate directly in supplier negotiations.

Think your packaging costs may have room for improvement? Contact RTi Global to access the opportunity.

Frequently asked questions about packaging cost control

Do I have to change suppliers?

No, our goal is to achieve savings with no supplier or specification change.

What if I have current contracts in place?

It’s best to engage when the current contract is within 6-9 months of expiration. If major savings are identified, contracts can sometimes be pulled forward for negotiations.

Are you directly involved in negotiations?

Our typical engagement model is to be behind the scenes, unknown to the supplier. If specifically requested by the client, we can participate or take full ownership of negotiations.

What is the time frame for typical engagement and time to savings?

This is highly dependent on the complexity of spend, the category being examined and the level of detailed specification data available. Corrugate is typically the quickest category to benefit at 3-4 months.