The global giants might make the headlines, but often it is the smaller players that together make up the powerhouse of logistics developments.
The third party logistics sector has seen its fair share of consolidation over recent years. In one giant deal, UPS is in the process of taking over TNT while Gefco is on course to become a subsidiary of Russia’s rail operating company.
Caterpillar has just divested itself of its third party logistics business, while in the pharmaceutical sector, Movianto has been taken over by Owens & Minor.
But, perhaps less ostentatiously, small and medium logistics players have been going from strength to strength.
iForce chief Mark Hewitt sees clear advantages in the agility and focus that a smaller 3PL can bring: “With a big logistics firm, as a client you are effectively a small fish in a big pond, whereas your position with a small or medium logistics business will be one of more importance and influence. By nature they are likely to be more agile and able to offer a more focused level of expertise. There is less distraction and you are safe in the knowledge that your business is inherently more important to them.
“Smaller logistics providers can also provide a better level of service, through this dedicated expertise and react faster to client needs as they have the ability to make quick decisions, unencumbered by the protracted decision processes often seen in large organisations. This ensures a constant high level of focus on the client and its business.
Potter Group managing director Matthew Lamb says: “It might take an international giant six months to get a decision on a major investment decision, whereas a smaller organisation can make the same decision in a matter of days.
“There is also a real strength in being able to call on local business networks,” says Lamb. He points out that around each of its depots, it has a strong network of business advisors who can help Potter put solutions together quickly using local knowledge.
He is very clear: “We don’t need to be the biggest. A lot of our customers like the fact that they have good access to senior decision makers at board level.”
He points out that smaller operators can also take advantage of greater speed of decision-making when it comes to investment decisions.
“It comes down to the question of whether ‘God is on the side of big the battalions?’, and history shows that that is not the case. Just look at the stories of David and Goliath, the Spartans at the Battle of Thermopylae, or Henry V’s army at Agincourt,” says iForce chief Mark Hewitt.
“It is false logic to say that if you are a small agile specialist, that by just trying to be bigger, you’ll be better. This defeats the object of being specialist.”
Hewitt points out that in the retail multichannel arena, smaller players can definitely have the edge. iForce has unrivalled experience in the multichannel logistics field having been involved in both the fulfilment sector and returns processing service areas with major UK retailers for a number of years. “We are fast, flexible and very dedicated to what we do; we have built a reputation for excellence, and this hasn’t happened by accident.”
Such considerations are not lost on customers. Brian Gaunt supply director of Kath Kidston, which uses iForce, says: “Do you want to go with a Norbert, Wincanton or a DHL, where effectively you’d be a tiny part of their turnover and get a similar level of attention, or do you want to go with a smaller logistics provider where you are much more important to their business? We wanted a provider to grow with and one that would care about our business as much as we did.”
Greencore Grocery recently renewed its £3.2m contract with Potter Group Logistics. Supply chain director Jeremy Cotton says: “Potter Group Logistics has stored raw materials on our behalf for some years. Recently, they started handling the storage and delivery of finished goods to our customers. I am pleased to say that they give a good, reliable service and I look forward to developing our relationship with them further as we expand into the future.”
Blackburn-based MDA works with some leading consumer brands including Molson Coors, Kraft and Research in Motion. Managing director Dale Stokes says: “Small and medium logistics providers are often the most innovative players in the market as they look to gain ground on established, big name organisations.
“Flexibility in operations and faster decision making is also a massive benefit to being a smaller-sized provider. If one of our client brands has a major campaign promotion coming up that is scheduled to coincide with trade and broadcast support and requires us to quickly receive, kit and despatch numerous promotional items we’ll bend over backwards to make sure the clients’ needs are met.”
However, concedes Hewitt: “Perhaps, where smaller operations don’t have the advantage is in the area of geographical coverage where the bigger logistics companies’ national footprint allows them to take on contracts to move vast quantities of similar stock around the UK, at low commodity prices. iForce is more specialised, which can only be a good thing in terms of our quality of service, focus and agility.”
One of the ways smaller operators have been able to take on the industry giants is through collaboration with other operators. Potter Group Logistics has seen substantial growth this year following the acquisition of House of James Transport, the York-based logistics and pallet network operator. Sales have grown by about a third to some £25m. In addition, says Matthew Lamb, it has been able to exploit the synergies between the two businesses.
Southampton based Meachers Global Logistics has formed a strategic alliance with the Isle of Wight’s largest independent operator Steve Porter Transport Group.
The strategic partnership agreement that will see the businesses co-operate on the delivery of inbound and outbound freight from the Isle of Wight via Southampton.
Meachers will begin trunking Steve Porter Transport’s overnight groupage loads from the Isle of Wight to Midlands distribution centres located in Northampton and Coventry for onward national distribution.
“Further strategic alliances are inevitable. The art is identifying synergies with limited overlap and clearly identifying the business case. Our partnership with Steve Porter Transport Group, is a good example of how two businesses can complement each other geographically,” says commercial director Gary Whittle.
“Collaboration between SMEs is the smart way forward,” says Lamb, when scale is important to enable companies to provide a full product offering as well as getting economies of scale in buying.
Northamptonshire-based C Butt can trace its history back to 1919 when it was founded by Charles Butt. And it has now joined the Pall-Ex pallet delivery network serving the CV postcodes, expanding into the NN postcode region next year.
David Weston, C Butt’s pallet distribution manager, says: “We will operate two pallet distribution hubs as part of our initial roll-out programme, including a part conversion of an existing facility at Sywell, Northamptonshire. The two sites will be serviced with vans and a rigid fleet, supported with a double deck trunking operation from Northampton to Lutterworth, then on to the central Pall-Ex hub at Ellistown.”
The operator is no stranger to collaborative working. It already has a partnership with Hyundai Merchant Marine (Europe) to form Hyundai and C Butt Solutions, which is focused on developing full supply chain solutions through multimodal distribution.
The service is branded G2L (global 2 local) and is designed offering seamless implementation. Operations director Karl Hodgkinson says: “Our current services excluded small volume deliveries and collections. Initial discussions with Pall-Ex supported short and long term opportunities for both organisations.”
House of James was member of the Palletline network before the Potter Group takeover – and this membership has now been extended to Potter Group as a whole. This has not only enabled Potter to offer the Palletline service to existing customers, but also to benefit from procurement opportunities.
Potter Group is also a member of the Transport Association, a loose alliance of some 60 regional transport operators, which offers backloading opportunities and other practical benefits.
The past year has also seen the merger of Knights of Old with the Mainland Group creating a business with sales approaching £50m. Knights of Old can trace its history back to 1865 when William Knight began transporting goods using a horse and cart. In 1918 the company began to use motorised vehicles. The company became Knights of Old Limited in 1957.
The combined business has some 200,000 sq ft of warehousing, 400 staff and 200 trucks.
The opportunity to offer a wider and more substantial product portfolio was a clear objective for Ian Beattie, managing director of Knights of Old. “The group will be better placed for growth and progression in what is a very competitive market. We have combined resources such as knowledge, equipment and facilities which will help the group reach the next level.”
Of course, SMEs face a whole range of problems that never make the agenda for large companies. No-one questions the geographical coverage of DHL, or for that matter, Wincanton’s ability to fund a contract win.
“One perceived risk could be to whether a small/medium provider has the ability to scale at the required speed and reliability,” says Mark Hewitt.
“In this regard any potential client looking to outsource should look for a demonstrable record that shows whether their preferred partner can step up to managing scale. This is particularly important when under pressures of peak, when volumes can increase up to tenfold. However, this risk can be offset by the likelihood that they will also be more qualified specialists, so it could be viewed as a balance of risks, but a service provider’s track record should speak for itself.
“Another perceived, though not necessarily actual, risk could be lack of geographical cover by the smaller providers, but in reality, most clients nowadays recognise that it’s all about multichannel and the new world that this can bring is not really about geography anymore but rather an ability to scale, with agility and precision and to deliver outstanding service.”
Lamb agrees that customers need to be convinced of the financial strength of their logistics partners and this can be an issue for smaller organisations – particular when market conditions are tough.
“Cash flow is the killer in this business,” he says. “Customers want to be sure that your business is sustainable and robust,” says Lamb pointing to the strength of Potter’s balance sheet and portfolio of owned sites.
Nevertheless, says Hewitt: “I don’t believe that fundamentally SMEs have more challenges than the larger logistics firms, because in the end you have to have a solid business case that justifies the expansion. Financial decisions are made on profitable plans, and even though they may have deeper pockets, they wouldn’t invest just for the hell of it.
“Where the challenge perhaps lies more is on cost. Larger firms can be brutal on initial pricing at the pitch stage to gain competitive advantage, even though in the long run, it could quite possibly cost the client more.
“Also, the larger businesses have more empty space, and their ability to heavily discount this space to win business is again something that could be seen as a challenge to the smaller providers.”
Case study- Growing markets
Bradford-based Advanced Supply Chain has been expanding rapidly and at the end of last year opened a warehouse in Corby taking its total warehousing space to over one million sq ft.
The company, which focuses on retail and apparel, reckons it is on course to increase its turnover from £20m to £30m over the next financial year. Advanced was formed as a garment processor in 1997, and now works with retailers such as Makro, Matalan, George and Debenhams. It has a partnership with Chinese logistics company Sinotrans, to offer customers end to end logistics.
Earlier this year Matalan chose Advanced to provide a range of pre-retail operations as part of a move to reduce input costs. The fashion and homeware retailer, which has about 200 stores, carried out an audit of the end-to-end supply chain as part of its business cost analysis and identified the need for increased pre-retail operations within the UK.
Terry Broadhead, imports and distribution manager at Matalan, says: “ASC worked closely with us in reviewing certain parts of the supply chain. They helped to identify a number of areas where efficiency could be improved to generate tangible savings and operational advantages.
“Their expertise, flexibility and bespoke control systems will ensure the success of the operation, and the new service will help our strategy of countering rising raw material costs to continually offer consumers best value goods.”
Case study- Attractive targets
Smaller players can be attractive take-over targets for some of their larger competitors.
Slough-based Rico has built a £45m business specialising in the supply of spare parts, predominantly into the technology industry.
And it has just been taken over by TVS Supply Chain Solutions the Chorley-based operator which is part of TVS Group, the giant Indian motor part manufacturer.
Rico’s approach involves a combination of strategic warehousing, rapid delivery and service engineer expertise. As well has technology it also has clients in the automotive, medical and beverage sectors. Rico managing director Sam Sharma (above) will continue long term to oversee the business. Sharma says: “This gives Rico the tremendous potential of expanding its offering across Europe and the globe, with a major partner who has both the credibility and financial standing in this highly exciting industry sector.”
Richard Slee, chief executive at TVS SCS, says: “We now have the capability to manage high quality parts, keeping inventory low yet availability high and with an added rapid response capability.”