August 30


Rack Bag ROI: Calculate Your True Dunnage Costs

By Steve Melito

August 30, 2017

dunnage costs, fabric dunnage costs, packaging costs

What are your dunnage costs? What are really paying for parts bags? If you don’t know your true packaging costs, your return on investment (ROI) may be less than you thought. Even worse, you may be paying a lot more than you should for parts bags. Consider the following example.

Purchase Price and Dunnage Costs

Vendor A offers you 500 rack bags at $500 each. That’s a quarter-million dollar ($250,000) investment. You think you’re getting a good deal because Vendor B offered you rack bags at $750 each for a total of $375,000 across your fleet. All sewn fabric dunnage is the same, right? By paying Vendor A’s $500 per bag instead of Vendor B’s $750 per bag, you can save the company $125,000 up front. The Purchasing Department thinks you’re a hero and you’re ready to ask your boss for a raise.

There’s a problem, however. It’s not a small one either. Vendor A’s fabric dunnage will last two years if you’re lucky. Vendor B’s rack bags will last a solid four years. Over the course of a four-year period then, you’ll need to buy twice as many rack bags from Vendor A as you would from Vendor B. That’s when you realize the Finance Department will call you a zero instead of a hero if you don’t forecast your costs.

If you buy fabric dunnage from Vendor A, the lower unit price ($500) will require a higher expenditure overall ($500,000 for 1000 rack bags). In other words, Vendor A’s $250,000 quote looks like a savings, but it’s really 50% less than what you’d need to spend. When you compare Vendor A’s $500,000 to Vendor B’s $375,000, you nearly fall out of your chair. Choosing Vendor A won’t save you $125,000. Instead, you’ll pay Vendor A $125,000 more!

Maintenance and Repairs

The numbers in this example are simple, but don’t discount them because the math isn’t complex. If you want to find fault, however, it’s that the comparison doesn’t account for some additional costs. For each rack bag that fails, let’s say that your company pays $100 in labor to change-out the bag. This means that during a four-year period, you’d spend $50,000 to change-out all 500 of the rack bags that you bought from Vendor A.

That’s not the only problem. Vendor A’s rack bags don’t just fail because of lower-quality materials or manufacturing defects. Part of the reason the dunnage doesn’t last is because of design. Vendor A received CAD files from your packaging designer and manufactured the rack bags exactly as specified. Vendor B looked at the CAD files, but also tested your parts with a prototype bag. After loading and unloading some sharp parts, Vendor B recommended design changes that increased puncture-resistance.

Maybe all of Vendor A’s rack bags aren’t punctured by sharp parts, but you’ll still need to pay for some repairs. There’s another cost to consider, too. If Vendor A’s dunnage doesn’t protect high-value parts from scratching, you’ll have to pay for replacements. There could also be idle time on the assembly line if workers don’t have the parts they need to get the job done. Labor and material costs vary, but the bottom line is that Vendor A is costing you more.

Control Dunnage Costs with Hold-True

Hold-True is a Made in the USA manufacturer of sewn fabric dunnage that uses high-quality materials and expert manufacturing to give you the rack bags that you really need. We don’t just look at your CAD files either. Instead, through what we call “analog design”, Hold-True tests your parts in prototype bags under real-world conditions. Our rack bags may cost more up-front, but they deliver greater ROI because they last longer. To learn more, contact us.

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