I. Background Overview

Recently, Frad Risk Management was approached for risk consulting by a freight forwarding company providing export logistics services for a new energy enterprise. The cargo primarily consisted of wind turbine equipment, transported by sea from China to various European countries. Due to the large size and irregular shape of wind turbine components, they were traditionally transported using flat rack containers, which incurred high shipping costs.

To reduce transportation expenses and improve efficiency, the shipper adopted a new packaging design. However, following the implementation of this new packaging, the cargo damage rate significantly increased. Many shipments were found to have collision or scratch damage upon receipt by the consignee, necessitating return to the Chinese manufacturer for repair, which led to substantial insurance claims.

II. Introduction to New Packaging and Transportation Process

The new packaging consists of a non-enclosed fixture, comprising a framework constructed from several metal rods and a supporting base. The cargo is detachably secured to the supporting base with bolts. The framework can be conceptually understood as similar to a car's A-pillar, offering a certain degree of protection. The overall dimensions (length, width, height) of the framework are slightly larger than the equipment itself. The entire assembly is then covered with a white tarpaulin.

The equipment's transportation journey begins at the Chinese factory, where it is moved by flatbed truck to the port. At the port, it is loaded into a 40-foot container, subsequently shipped by sea to the destination country's port, and finally transported by truck to the consignee.

III. Risk Analysis

1. The new packaging relies solely on a metal rod framework, which provides limited resistance against mechanical damage. However, the framework's resistance to pushing, pulling, and shearing forces is fairly inadequate; it can be deformed by manual force. Given that the export transportation of this equipment involves multimodal transport with various logistics stages, particularly during sea transit, the complex marine environment inevitably causes unavoidable vertical pitching and horizontal rolling of the vessel. The rigidity of the framework is insufficient to withstand the resulting forces, and it may undergo plastic deformation due to prolonged exposure to alternating stresses. Once deformed, its structural dimensions will deviate from the design specifications, leading to collisions or chafing between the cargo edges and the framework.

2. The framework's width, at 2300mm, is very close to the internal width of a 40-foot container, which significantly complicates loading and unloading operations. Furthermore, the white tarpaulin covering the framework is a visually expansive color, making the actual external width of the cargo appear to exceed the standard dimension. This obstructs the view of the loading personnel, impairing safety observation during the loading process and further increasing the likelihood of collision or chafing between the cargo and the container walls.

3. During the welding and manufacturing process of the framework, certain production tolerances exist, which may result in slight deviations in the overall structure or critical positioning points. These minor deviations will further reduce the effective clearance between the cargo and the framework, exacerbating the potential for contact and abrasion during transit.

IV. Proposed Improvements and Solutions

Based on the identified risks, we propose the following improvement recommendations:

Addition of Cushioning Materials: Install cushioning materials between the equipment and the framework. This is a low-cost solution, but consideration must be given to the limited available width between the equipment and the framework.

Enhancement of Framework Structural Rigidity: Increase the rigidity of the framework material and add diagonal bracing to enhance overall stability.

Alternatively, consider using fully enclosed wooden crates for complete encapsulation and transport via bulk cargo vessels. However, this option is higher in cost, and due to the nature of the equipment, it cannot be stacked, potentially leading to low utilization of bulk vessel hold capacity and some dead freight.

Or revert to using flat rack containers, which, despite higher costs, offer more reliable protection.

V. Insights

We must acknowledge that, solely from the shipper's immediate benefit perspective, the current packaging solution might appear to achieve a form of "Pareto optimality" among transportation costs, efficiency, and insurance premiums. If the savings in transportation costs can offset the increase in next year's premiums, such a choice might seem commercially sound, especially in the context of a Chinese insurance market still largely driven by price factors.

However, from a macro perspective, this phenomenon represents a waste of overall societal resources. To fundamentally improve this situation, a dual transformation in both cooperation models and mindsets is required from both insured and insurer parties. This is precisely why Frad Risk Management is actively promoting joint risk assessment and risk education initiatives within the industry. Frad Risk Management collaborates deeply with numerous leading enterprises and large state-owned enterprises in China, providing comprehensive services including risk surveys, consulting, and training. Our aim is to assist clients in risk identification and loss prevention, while simultaneously enhancing insureds' overall awareness of insurance, thereby fostering the sustainable development of the insurance industry.