At an early stage of a China sourcing project, buyers need to estimate logistics costs from China to Europe for the parts or equipment they plan to source in China.

Here is the simpliest way to estimate those logistics costs:

1. Estimate the number of parts you can pack and fit in a pallet with external dimensions 1200x1000x750mm. Take into account the required packaging to prevent the goods to be damaged during the 6 weeks transport. For heavy goods, limit the number of parts to reach 700 kg.
2. Multiply this number of parts by their FOB China price. The result is the total value of goods contained in 1 standard pallet. Convert it in Euro.
3. In the curve below, read on the Y axis the percentage of add-up logistics costs from China to Europe corresponding to your total value of goods per pallet:

Notes:

1. These estimates are valid for transport by fully loaded containers. This means pallets are stackable and Purchase Orders quantities are properly calculated (Inside a 20 ft container, 30 of those pallets for a maximum of 21 tons).
2. If the actual choice of pallet is different, the estimated costs are still valid, as long as containers are full.
3. The estimated logistics costs include Sea freight by container and average logistics costs from Port to factory in Europe.

This is a good rule of thumb to select which parts shall be sourced in China:

1. Simple parts with limited added value, parts too large or that cannot be packed nicely and densily will bear too high transport costs and are not good candidates for sourcing in China
2. Best candidates are parts with high added value that can be packed densily

Nicolas Cappuccio

October 2007

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