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Sofrigam develops ‘TCO Calculator’
Rueil-Malmaison, France: – Temperature-controlled logistics and pharmaceutical cold chain specialist Sofrigam SA has developed a guide to calculating Total Cost of ownership (TCO), which measures the real cost of packaging solutions.
In an article on its website, Sofrigam outlines the principles for quantifying TCO and the variable parameters that companies can influence to reduce the overall cost of their cool-chain shipping and storage operations.
TCO (Total Cost of Ownership)
Total Cost of Ownership (TCO), also called life cycle cost analysis, quantifies all the lifetime costs associated with adoption of a particular solution. Thus, purchase cost is only one part of an equation that also includes the costs of adoption, installation, maintenance, materials, operation, energy consumption, upgrading and future proofing. Together, these variables are known as total life cycle costs.
It follows, therefore, that the longer the period of ownership, the less significant is purchase price in that total equation.
The TCO concept first arose in the late 1980s in the IT industry as a way of calculating the true cost of different systems, where the costs of software, user training, hardware upgrades and downtime could easily overshadow the price of the core platform. Since then, TCO analysis has expanded to cover a wide range of industries from aerospace and buildings to medical and laboratory equipment.
Cool-chain TCO parameters
For temperature-controlled logistics, Sofrigam says TCO is determined by the following core calculations:
- Initial cost of the solution
- Cost of transport
- Cost of storage
- Cost of preparation
- Cost of packaging
- Cost of repatriation (reuse)
- Cost of deviation (cold chain shipping packaging with inadequate security)
- Cost of supplier after-sales service, etc.
“A TCO analysis is complex to carry out because the numerous parameters to be considered are sometimes difficult to accurately record. However, it is an objective and precise method of comparison,” says the guide.
The challenges for TCO analysis
“This analysis provides a powerful approach to help our clients with financial decisions regarding their choice of cold chain shipping packaging solutions,” commented Sofrigam Marketing Director, Laetitia Perche.
“Not using a methodical approach to implement cold chain shipping packaging solutions is a mistake that can very often turn out to be costly over the long term,” she added.
Where the purchase of one packaging solution is less expensive than another, this does not mean that it will also be cheaper over time, once total cost, including transport, handling, preparation, security, etc. is aggregated.
Calculating TCO for airfreight
The TCO calculations become increasingly detailed once precise application is identified. For example, where a temperature-controlled package is being transported by air, the relevant parameters include total mass of the solution (including packaging, energy source, plus additional add-ons and accessories), external dimensions of packaging, net volume available for shipped products, Initial cost, along with security and performance levels required.
These six parameters will together determine the TCO of an airfreight solution, with changes to any one potentially affecting the total cost of ownership.
“For any particular client application, optimizing TCO will depend on reducing mass, cost and external dimensions of the packaging solution, to maximize ratio between payload and overall size/weight and provide most appropriate levels of security,” Laetitia Perche explained.
“This may seem easy, but can be quite complex, depending on key factors such as quality constraints, usage conditions, product filling rate, etc.
“Arriving at the precise TCO calculation also requires knowledge of client internal processes (storage, preparation, packaging, etc., recognition of technologically obsolete client equipment, mapping of theoretical logistical circuits (e.g. Temperature Profile, use of cold room, loading area, etc.) versus actual conditions of use,” she added.
Collaborative approach to TCO analysis
The objective of TCO audit is to find the best compromise in order to best satisfy the clients requirements from financial, quality and operational perspectives.
The guide emphasizes that the precision of the analysis can be increased by working in partnership with all involved parties including suppliers, hauliers, internal teams, end client, etc. This co-operative approach is one that Sofrigam has implemented for all commercial dossiers for more than three years now, with expertise offered as a support service to clients.
This collaborative cross-sectional approach allows the client to benefit from the advice and the expertise of their packaging supplier in writing the specifications and appreciate the impact of decisions about packaging solutions and their effect on the TCO.
“Since 2015, this approach to assist financial decisions has allowed our client, most often Big Pharma companies, such as GSK, Pfizer, Pierre Fabre or Sanofi Aventis, to lower their TCO by an average of 20% over approximately two years,” said Laetitia Perche.
With over 40 years of experience, Sofrigam provide a comprehensive portfolio of innovative packaging and related solutions that allow pharmaceutical and other clients to optimize their temperature-controlled logistic chains.
From its French roots, Sofrigam has become a global company, operating in the USA, Canada, UK and across Europe, with manufacturing centers in North America and Europe.
Sofrigam manufactures a range of standard and made-to-measure thermal packaging products, including cartons, cases, bags and pouches that cover every step in the cool chain, from manufacturer to end-user.
It also offers customized services designed to achieve secure, cost effective and ecological cold chain logistics in shipping, storage and packaging.
Sofrigam Services accompany clients through every step of the logistics chain while prioritizing safety of goods and reducing costs. Advanced software and other solutions allow clients to audit their cold chains, monitor shipments, analyze logistics lanes, manage Inventory and optimize ordering.
Sofrigam can also deliver best Time to Market through thermal simulation equipment combined with its ‘cut & glue’ customization process that gives customers the ability to adapt any catalog product to its own needs with development time reduced to as little as 15 days.