Is paying per pallet wrapped the best option to manage packaging costs?

How to understand and calculate your packaging costs per pallet wrapped

Understanding packaging costs per pallet wrapped is something we always advocate at MorsaPack.  

This allows a business to weigh up not only the packaging materials cost, but also the costs of applying these materials and then the costs associated with transporting palletised goods too. 

However, there are different methods for calculating this.  

‘Price per pallet wrapped’ is one option a packaging supplier might offer, appealing to those keen to avoid initial outlay for packaging machinery. This sees suppliers install a machine free of charge and then supply pallet wrap film and a maintenance package for a fixed price per pallet wrapped, based on a minimum number of pallets per month. 

We recommend a different approach. In our experience, working with a supplier from whom you can rent or buy machinery, and pallet wrap films, is always best. This way, you can better understand how pallet wraps work in conjunction with the machinery itself – can the machinery achieve the maximum stretch capacity of a wrap, for example? It also gives you more flexibility to bring in new or updated technologies. 

Option 1) Buy a pallet wrap machine

This requires either an initial investment, or a finance deal requiring regular payments, and ongoing maintenance costs, alongside the costs for the pallet wrap film itself. There will also be associated running costs to power the pallet wrap machinery too. 

Let’s base this on a £6,000 pallet wrap machine, paid over 5 years at £100 per month, with a fully inclusive maintenance package of £75 per month (higher than we would advocate based on our Machinery Maintenance packages) and a film-only wrap cost of £0.75 per pallet. The table below shows what the expected costs could be for such a machine and wrap with some seasonality to the users work. 

As this shows, there is some variation in costs but the investment is balanced out in the months with higher throughput. 

Renting the machine would show similar variations on seasonality alongside fixed monthly costs, though these would likely be different for rental and maintenance. 

Option 2) Pay per pallet wrapped

Based on a user wrapping the same number of pallets each month and on a contract of 500 pallets per month, this would be: 

While we have seen these figures used, this does not account for seasonality or other fluctuations in throughput, leading to unnecessary costs. 

There are other considerations here too, including: 

• Contracts – Are you in a contract with one supplier who dictates the type of pallet wrap film used? 

• Technology – As technology advances, so do pallet wrap machines on the market. Being fixed to a long contract means missing out on new technologies, or paying for machinery that is no longer used. 

• Business changes – If circumstances change – whether within, or external to, your business – your pallet wrapping operations may need flexibility or downtime, which a fixed contract may not allow for. 

• Commodity prices – If the raw materials used to make pallet wrapping films increase, or decrease, will you feel the effects or benefits of this? 

• Film defects – If using ‘price per pallet wrapped’, would broken film on a wrapping be charged for twice? 

We will always advocate for carefully weighing up the costs of packaging materials and machinery costs. We can help you to do this – contact us today.