Top Five Variables When Calculating Total Cost of Ownership in Thermal Packaging

The age-old question – lease or buy? – it is not just for cars, condos and tuxedos anymore.

When it comes to reusable temperature-controlled shipping containers, leasing and buying each have their own pros and cons. We frequently discuss the best option with pharmaceutical manufacturers and other stakeholders in the pharma cold chain.

To manage the many variables in this consideration, we have developed a detailed calculator to review more than 30 variables that have a direct effect on the end user's total cost of ownership.

Of those 30 variables there are the five which have the greatest effect on cost, including:

• Purchase price of containers and all components.
• Inbound transportation of packaging.
• Outbound transportation cost.
• Payload capacity and efficiency.
• Storage and warehouse costs.

Let us take a look at each of these points.

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1. Purchase price of containers and all components

   The most obvious variable to consider is the price of the container and the components being used in shipments. If shipping in low frequencies, leasing a container at a low monthly cost often makes more sense than outright purchasing a container than spends most of its time sitting on a shelf.

   On the flip side, if you are a high-volume shipper, whose containers are rarely inactive with trained staff at the shipping and receiving ports to handle maintenance, then making the upfront investment of purchasing temperature-controlled containers could be a prudent decision.

   Additionally, your accounting department may have a preference as well. Under most accounting standards, an outright purchase qualifies as a capital cost and a monthly lease qualify as an operating cost. Ensure you have clear policies in place relating to how your organization would prefer to incur costs.

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2. Inbound transportation of packaging

   Shipping temperature-controlled containers from a service center to a packing facility — i.e., the cost of getting our containers to you — has a significant effect on the cost of ownership as well.

   Packing facilities located far away from service centers require additional temperature control measures with a longer temperature control duration. To help reduce these transport costs, look for temperature controlled packaging providers that are consistently building out their service center network. However, if you have the training and personnel, your organization can condition parcels in-house, reducing the cost of inbound transportation.

   Just shipping temperature-controlled containers from a service center to a parking facility can significantly impact cost of ownership.

3. Outbound transportation cost

   Leased, pre-conditioned containers do not require expensive on-site cooling equipment or hiring professionals with special training. You simply need to focus on load and go. However, if you are high volume shipper, having that equipment and training in your toolkit can offset the expense of pre-conditioned containers.

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4. Payload capacity and efficiency

   For years, the industry has worried solely about parcel inner dimensions, working to put as much payload into each container as possible. Recently, we have seen the pendulum swing to a focus on outer dimensions — after all, a 28-liter inner volume is going to be the same no matter the container.

   Consider both a 28-liter container that has walls containing coolant and insulation three inches thick versus a sometimes less efficient 28-liter container with walls six inches thick has an outer dimension 67 percent smaller. While both containers can carry the same payload, smaller overall outer dimensions mean more product per pallet and per truck.

   Previously, the industry was solely focused on parcel inner dimensions, now the focus is swinging to outer dimensions.

5. Storage and warehouse costs

   Another way that outer dimensions can impact the total cost of ownership is terms of storage and warehouse cost consideration. Warehouses charge on a square foot per month model. As a result, the number of owned shippers in your fleet — and the size of those shippers — can directly impact your storage and warehouse overhead costs. Additionally, active shippers that require a plug-in power source during storage will incur an additional storage and handling fee.

    

   In closing, it is important to take as many variables into account as possible when deciding whether an owned, leased or hybrid model is the best course of action for your organization. While these five variables are important, they’re not the only factors worth considering.

   Working together with a temperature-controlled packaging provider that evaluates, not only these factors, but other factors like shipper refurbishment and desired thermal performance, can help better plan and understand your total cost of ownership.

Do you want to read more about logistics? Check out our article on the value of air freights in temperature controlled logistics.