Stan­dard­iza­tion of sup­ply chain equip­ment ‘vi­tal’

China Daily (Hong Kong) - - BUSINESS - By CHEN YINGQUN cheny­ingqun@chi­

China needs to speed up the way its sup­ply chain is be­ing stan­dard­ized if the ef­fi­ciency of lo­gis­tics is to be im­proved and costs re­duced, said the head of a lead­ing US lo­gis­tics com­pany.

Slow­ing eco­nomic growth in China makes ef­fi­ciency more nec­es­sary than ever, said Peter Mackie, group pres­i­dent of Chep Pal­lets, a lo­gis­tics so­lu­tions com­pany spe­cial­iz­ing in the man­age­ment of stan­dard­ized unit­load equip­ment.

“Lo­gis­tics in China is very frag­mented,” Mackie said. “So you have a very large num­ber of sin­gle op­er­a­tors who op­er­ate with pal­lets and trucks of very dif­fer­ent shapes and sizes.

“The real barrier to sup­ply chain de­vel­op­ment in China is able to move the very frag­mented sec­tor to new truck stan­dards.”

The lack of a stan­dard means goods need to be han­dled man­u­ally as they move from one type of sup­ply chain to an­other. But over the next few decades, China faces a short­age of la­bor; so, the per­for­mance of the sup­ply chain would likely de­te­ri­o­rate if stan­dard­iza­tion is not re­al­ized soon, he said.

Chep has been work­ing with the re­search in­sti­tute of the Chi­nese Acad­emy of International Trade and Eco­nomic Co­op­er­a­tion, part of the Min­istry of Com­merce, since 2014, to help speed up the de­vel­op­ment of stan­dards for pal­lets, ve­hi­cles, fa­cil­i­ties and other equip­ment. The goal is to build stan­dard­ized and more ef­fi­cient sup­ply chain man­age­ment.

Chep and CAITEC are run­ning about 30 pi­lot pro­grams in China that are sub­si­dized by the cen­tral gov­ern­ment. The min­istry has also adopted stan­dards based on their re­search, such as declar­ing “1.2 me­ter x 1 me­ter” as the na­tional stan­dard pal­let size last year.

China’s to­tal so­cial lo­gis­tics costs were 10.8 tril­lion yuan ($1.6 tril­lion) last year, or about 16 per­cent of GDP, the Na­tional De­vel­op­ment and Re­form Com­mis­sion said.

The pro­por­tion is much higher than that in de­vel­oped coun­tries, Mackie said. He hopes more com­pa­nies, big and small, will play a role in stan­dard­iz­ing the sup­ply chain in China, and that what has been learned in pi­lot projects can be widely ap­plied, re­sult­ing in ma­jor im­prove­ments.

Stan­dard­iza­tion is crit­i­cal

But the fastest growth oc­curs when the sup­ply chain is re­ally un­locked, and it is still at the very early stage for us.” Peter Mackie, group pres­i­dent of Chep Pal­lets

in lo­gis­tics, he said. In Europe and the United States, the dis­tri­bu­tion cen­ter and the sizes of sup­ply chain equip­ment — such as trucks, pal­lets, turnover bas­kets and con­tain­ers — are iden­ti­cal in all mar­kets, cre­at­ing ef­fi­ciency in the flow.

Chep set up op­er­a­tions in China 10 years ago and says it has en­joyed an­nual growth in turnover of about 20 per­cent a year on av­er­age in re­cent years. It has built a net­work of more than 80 on-site cus­tomer service points and service cen­ters, and owns and man­ages a pool of more than 4 mil­lion pal­lets. Its cus­tomers in­clude Nes­tle, P&G and Unilever.

“But the fastest growth oc­curs when the sup­ply chain is re­ally un­locked, and it is still at the very early stage for us,” Mackie said. “There’s a very strong cor­re­la­tion be­tween pop­u­la­tion in a coun­try and the po­ten­tial size of pal­let mar­ket, so China’s (huge) pop­u­la­tion means it’s the most im­por­tant mar­ket for us in the long run.”

Sup­ply chains world­wide are wrestling with chang­ing con­sumer be­hav­ior, and in some ways Chi­nese con­sumer be­hav­ior is unique, he said.

One as­pect is the growth of e-com­merce, fore­cast to be about 10 times big­ger than the sec­ond-largest mar­ket — UK, by 2020. In China, about 8 per­cent of gro­cery con­sump­tions hap­pen on­line, while in Ger­many such spend­ing ac­counts for only about half a per­cent of the to­tal gro­cery mar­ket.

“Many more con­sumers in China are choos­ing that method to get the prod­ucts they want, and that has im­pli­ca­tions for the sup­ply chain,” Mackie said.

The sup­ply chain is also af­fected by the grow­ing num­ber of peo­ple liv­ing in cities. In a dense ur­ban en­vi­ron­ment, they will be do­ing their shop­ping in a dif­fer­ent way com­pared with those liv­ing in ru­ral ar­eas.


Peter Mackie, group pres­i­dent of Chep Pal­lets, gives an exclusive interview dur­ing the China Fo­rum on Open­ing and De­vel­op­ment in Bei­jing, in late Novem­ber.

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