What are Set-Up Fees in Packaging?
Setting-up packaging manufacturing machines involves two expenses that you, the packaging buyer, must pay for: skilled labor and machine time.
Very skilled experts are required for things like calibration and color matching. They have to perform test-runs to make sure that everything is functioning properly and that what comes out on the other end will be exactly what the customer expects. Color matching is often a difficult area (making sure the color is the same as what the client wanted based on the “proof” or prototype that they had “signed-off” on.) This process can take anywhere from 1-3 hours and beyond. And depending upon how fancy or elaborate your packaging is (lots of exterior embellishments or structural enhancements) the time it takes to “set-up” will be longer, more involved and cost you more.
Set-up fees in packaging are almost always included in the unit cost. In other words, they are not a separate item listed on the packaging price quote the way tooling is. Although set-up fees are linked closely with tooling costs. For example, the cutting die tooling made for you has to be mounted onto the cutting machine and tested. Likewise for the printing plates, foil stamp die and/or embossing die tooling, they all have to be mounted, positioned and tested. Those are all set-up costs.
It isn’t just a case of “pressing start” and then “pressing stop”. Unfortunately these sophisticated machines can be finicky and challenging. There are so many variables that go into customized packaging.
Imagine a company that manufactures a product, the same product, over and over again. How about cotton swabs for example? This company’s machines would be perfectly tweaked and calibrated to consistently pump out millions and millions of the exact same cotton swabs everyday. The margin for error is so much less than for a company that produces different products from day to day, as is in the world of custom packaging.
You, as the packaging buyer, may consider these more of “cost of doing business” expenses for the manufacturer and you’d be correct. But there may be times when this expense is an extra itemized addition to your price quote. If that’s the case, I hope that this short article sheds some light on what that means.