The Search for a China Pallet Standard
November 10, 2010
Symptomatic of the fragmentation in China’s logistics sector is the lack of standardization in truck and pallet sizes among the thousands of players in the logistics industry. Speaking at a Global Supply Chain Council workgroup in Shanghai in September, Farid Pazun, a logistics specialist in freight and packaging at Continental Automotive, said that “The diversity of pallet sizes and the incompatibility of pallets and containers with Chinese trucks decrease the efficiency of logistics processes.”
As China went through an accelerated industrial revolution, foreign players arrived in droves bringing with them a multitude of manufacturing processes and standards which extended to packaging. In many cases they did not take into account local conditions. “The result is a huge diversity of pallet sizes and low and improper utilization rates of pallets in Chinese trucks and in standard sea freight containers,” Pazun said.
An analysis of Continental Automotive Group’s tier one suppliers revealed that seven out of nine plants in China showed a packaging diversity of about 20 different pallet sizes and more than 40 different box sizes currently cycling in the supply chain. The survey, conducted by the Continental Logistics Automotive Asia team, revealed that among just four different automotive suppliers, there are 34 different pallet sizes in use. “Reducing this number of pallet sizes in the Chinese market to just one or two brings huge supply chain and monetary benefits to the OEMs” said Pazun.
Currently used pallets, especially the Euro pallet, with a size of 1200×800 mm show very low ground utilization factors and result in customers shipping a lot more air. The utilization rate of the Euro pallet in a standard 20′ container is about 77 percent and in Chinese trucks averages about 80 percent. The inefficiency and cost saving potentials are obvious.
The big question is which size to use as a standard: the Euro pallet with 1200 x 800mm Euro pallet, the 1200x1000mm pallet or the 1100x1100mm pallet or one of the many others? According to Pazun, all of these pallet sizes show relatively low utilization factors in the Chinese trucks. However, there are two pallet sizes, which show very good utilization rates in sea freight containers and trucks. These are the 1140 x 980mm and 1140 x 790 mm pallets.
Based on Continental’s analysis, depending on the type of goods transported, either pallet achieves a high utilization in standard containers and truck cargo areas. Both also prove compatible with most Chinese trucks in current use. Pazun also notes that both of these two pallet sizes have a small difference in size to the two most common pallet sizes: 1200 x 800mm and 1200 x 800mm.
According to Pazun, “These two pallet sizes present an opportunity to set a standard which is beneficial for the Chinese economy and different supply chain parties in terms of reducing their transportation costs, which can reach about 50 percent of total logistics spending.” The recommended pallet sizes will be implemented by Continental Asia’s sourcing supply chain and usage will also be encouraged on the distribution side.
Continental’s pallet standardization project has been introduced to governmental organisations such as the ministry of transportation and other automotive suppliers such as Bosch, ZF, Behr and Brose as well as to OEM’s such as Shanghai GM and Shanghai VW. “The feedback has been very positive so far and the implementation in the supply chain is already in progress,” says Pazun.
Professor Qingyi Wu, the founder of the Pallet Committee China and the vice chairman of the China Federation of Logistics & Purchasing, noted that “These sizes need to be introduced to Chinese suppliers and OEM’s to make sure it is implemented in the whole Chinese domestic market. This increases the efficiency, supports the standardisation process and makes for a smoother supply chain.”