Risk of Loss: Calculating Possible Damages vs. the Cost of Stretch Wrap

Have you ever purchased a product from a retail location that was visibly damaged? The likelihood is low, as these products are normally caught and removed before they reach store shelves. These broken and damaged goods are referred to as unsaleables. Unsalables are products that arrive at their destination in a state that renders it unfit for sale to the end consumers. Unsaleables can be broken down into three key areas: Product Related, Market-related and Packaging-related. We will focus on Packaging-related unsalables or products that arrive with damage caused while moving through the distribution channel.

The Costs of Damage Related Unsaleable

Recent studies have shown that unsaleables caused by damages can make up as much as 2% of total goods shipped*. That would mean that for every $100,000 dollars shipped, $2,000 of that shipment will be damaged and unfit for consumers. The cost of damage can grow even higher when we consider the hidden costs that are not dictated by the product value. These can include but are not limited to:

Sorting and handling of products
Temporary storage of damaged goods
Reverse logistical cost of returning damaged products
Repairing or salvaging useable products
Consumer impact and time-sensitive losses
Unfiled freight claims for small “insignificant” amounts of damage

The Costs of Damage Related Unsaleable

1 – Take the number of compromised loads over 12-month period

2 – Divide that by total number of loads shipped for your Risk of Loss

Example: If you shipped 1,000 loads and 17 of them became compromised: 17/1000 = 0.017 or 1.7%

Calculating Damage Using Risk of Loss

By calculating your businesses Risk of Loss, you can calculate and judge your possible damage value. If we use our value from the “Calculate Your Risk of Loss” section, we can see this business has a Risk of Loss of 1.7%, slightly below the average rate. If they were preparing to ship a full truck load that holds $50,000 worth of product, they can estimate the possible losses due to damage at roughly $850. This loss may differ per truck load, but by using a Risk of Loss rate we are able to make a best possible estimate.

Preventing Damages and Reducing Unsaleables Costs

It can be a dangerous place on the roads, rails and waves. Your shipments face a wide range of risks and environmental hazards such as bumps and sudden stops. Each time a load is put under an external force, it faces the risk of shifting or toppling, damaging products in or around the compromised load. These shifts and collapses often go unnoticed throughout the transportation process, and are discovered upon delivery to their destination.

With product damage making up an estimated 48% of all unsaleables*, it is vital that a variety of methods have been developed to reduce the risk of damage. A cost-effective and efficient method of protecting your products during transportation is the use of stretch wrap. Stretch wrapping is the process of wrapping a load with a stretchable film that is pulled taught either by a Stretch Wrap Machine or with a Hand Wrapping Applicator.

How Stretch Wrap Protects Your Shipments

The properly applied stretch film will form a containing barrier around your load. This barrier creates a constrictive force commonly referred to as “containment force” or “force to load”. Containment force is the restrictive pressure or hugging pressure applied by stretch wrap that holds loads in place, prevents slipping and maintains pallet structure. Two key factors determine containment force, the wrap force (tightness) of the applied film and the number of wraps or revolutions of film. The wrap force of stretch wrap is derived from the amount of stretch that is applied in the wrapping process. When using a Stretch Wrapper, it is common to see stretch rates that range from 225% to 250%. The higher the rate of stretch film, the fewer wraps that will be required to reach your desired containment force.

The Cost of Stretch Wrap

Stretch wrap film offers shippers and packers a cost-effective and efficient way of preventing costly damage. The plastic films used are mass produced and vary in cost based on the type of film and weight of the roll. The use of film varies based on the load being wrapped and can be impacted by aspects such as load weight, height and the number of rotations required. When properly applied, stretch film per pack costs can be cents per load. On average, it is estimated that a fully wrapped truck load of pallets would require roughly between $10 to $18 worth of stretch film. That’s some very cost-effective insurance for your products. When considering average weight, a truck can carry is between 21 and 22 tons worth of products at an average of $725 per ton, the average application of film ($14) would protect $304 to $319 worth of products.

The Cost of Damages vs. the Cost of Stretch Wrap

With an understanding of Risk of Loss and the hidden cost of unsaleables, it is easy to see the benefit of using stretch films. With costs estimated as low as $10 per truck load, stretch film is a cost-effective and reliable way of preventing unsaleables. Stretch wrap machines offer even higher levels of control with refinable processes that can optimized for each type of pallet packed. Stretch wrappers offer control over aspects such as the number of wraps used, the amount of stretch applied to the film and can even increase the number of wraps on a particular level to improve stability. With a low per pack costs stretch wrapping offers businesses a manageable way to control secondary packaging costs while improving product security and safety.

Improve Stretch Wrap Efficiency with Crawford Packaging’s Wrap It Right Program

Crawford Packaging’s revolutionary Wrap It Right program leverages years of stretch wrap experience to improve stretch wrap efficiency. With a precise analysis of your existing stretch wrap equipment, products and practices, we aim to increase stretch wrap savings through a variety of control methods including:

Improved Film Consumption Rates
Decreased Wrap Times
Proper Stretch Rates and Containment Force
Stretch Wrapper Health Analysis