Like any industry or companies in the world these days, everyone is always looking for ways to cut costs. When companies plan to reduce costs, their first focus is often what product changes can be made, many overlook entirely the option of refining the product’s packaging instead. Enhancing and optimizing the package design can save a company boatloads of money. Most of the time, this simply comes down to ridding the packaging of dead weight. Reducing packaging costs without compromising on quality and design, however, is no easy feat. This example, based on our research into packaging and manufacturing costs for Avon Advance Techniques, highlights the cost trade-offs associated with their shampoo packaging.
The senior brand manager for Avon wanted to examine the cost of trade-offs implicit in their packaging decisions on the Advance Techniques hair care packaging. This is a high volume key product for the company and a reduction in packaging cost will reap considerable savings. The challenge is to reduce the cost of the overall product packaging without compromising quality or the brand.
Result to reducing package costs by 35%, which were implemented across 18 skus with a net saving of over 600k. As a result, the senior brand manager got a promotion and became the associate marketing director for the brand.
Analysing the packaging spend can often reveal inefficiencies and areas where we can reduce costs. This is why it is important to be able to analyse the cost make-up of the overall packaging. If we do not know the key factors that are determining the price of the packaging, and therefore the overall packaging spend, then it is much harder to identify areas where we can drive cost savings.
Once we understand the reasons the packaging has been designed or manufactured in a specific way, it enables us to decide if these reasons are still valid, whether specific compromises can be made without affecting the packaging effectiveness, or if there is just a much better (and potentially cost-effective) way of doing things.
By examining opportunities throughout the entire process, we can find easy and creative ways to improve cost. By analyzing and understanding the role of each function we can develop a better and more efficient design. By making small changes, we can make a significant difference.
Form Optimization: Using stock vs custom components can net significant savings on tooling. Shaping the package to a more bulk friendly design can also optimize packing density.
Size Optimization: Shaving off a millimeters from the outer wall of the container or using lighter, more durable materials can recover weight. Smaller packaging not only costs less to manufacture, it also lowers shipping rates.
Labeling Optimization: Previously designed products can be upgraded to reduce the packaging cost with new technologies. Many companies have reduced their packaging cost by simply adjusting the design in a way that would decrease the number of materials and effects used. Companies can use techniques that would eradicate labels and print directly onto the package to reduce materials and labor.
Having the right packaging that aligned with Avon’s business goal maximized their bottom line and profits, which resulted in 35% reduced packaging costs for this line and a net saving of over 600k across 18 skus. The learning here is packaging is not just a box that contains the product. It is a coordinated system of preparing goods for efficient, safe and cost-effective movement through the entire supply chain.