Casting the net wider

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Pallet networks are increasingly looking in new directions to develop their businesses.

The creation of the pallet network concept was a saviour for many small transport companies providing them with a cost-effective way to deliver individual pallet loads and, even better, creating new opportunities to become part of a rapidly expanding delivery network.

But the market is increasingly mature and networks are increasingly looking in new directions to develop their businesses.

Despite the austere trading conditions, there are trends in the market that benefit the pallet networks. Anand Assi, projects director at Pall-Ex, says: “Changing supply chain dynamics, repositioning of manufacturing centres in the far east have led to the trend of global outsourcing, this has worked for years; lowering production costs and driving cost-competition. However, as times have become more austere and uncertain, the concept of holding up costs in in-transit stocks is being challenged by notions of “near sourcing”. Near sourcing allows the manufacturing wealth creation to be centred closer to the end customer, and promotes a greater flexibility than those facilities in the far east. Supply chain flexibility allows the quicker response to customer supply, improves agility and lowers overall costs.

Quick response

“All of the above contributes to quick response logistics, with people wanting to have their items delivered at time of need, not to sit in stock rooms. Pallet networks are best placed to respond to these changing times, and above factors will help to drive growth.”

Martyn Young, managing director of Palletways UK Network, agrees that customers are looking for added and best value. Our focus is on continuous service improvement and we have some exciting initiatives that we will be announcing soon which will take our service to a new level. This strategy of adding value but at the same time maintaining competitiveness, is why we grown our volumes over the last year by 12 per cent and outpacing the rest of the sector.”

Palletline managing director Kevin Buchanan describes the market as very patchy. A move towards smaller consignments has benefited the pallet networks, however that has to be set against the depressed level of activity in the retail market.

“Our customers are facing very challenging market conditions. As a result they are questioning everything,” he says. As a result operators are having to work harder for the same money.

Buchanan also points out that there has been a small shift from premium next day services to economy.

In such circumstances it would be surprising if price competition were not fierce. Nevertheless, says Buchanan: “We take the approach that the market needs a quality player.”

Howard Wigham, managing director of CHEP UK and Ireland, points out that one of the factors driving demand is that companies are becoming more interested in smaller display and dolly pallets which can be wheeled straight on to the supermarket or store floor without inconveniencing shoppers. “However, these pallets are smaller and carry fewer goods, so a greater number are required. This whole area of the last mile of the supply chain, which is widely recognised as being proportionally the most costly for retailers, is an area CHEP is actively working in,” he says.

Fierce competition

Pallet-Track was one of the last networks to start and it is now hitting 7,500 pallets a night. Pallet-Track started operations in January 2004 with 46 members, and in 2008 it relocated to a 267,000 sq ft central hub in Wolverhampton. The network currently has 75 UK depots and employs 1,800 staff in its freight operations with a combined turnover in excess of £50 million.

Founder and managing director Nigel Parkes points out that that competition is fierce and companies have to maintain efficiency. “We are using technology to maintain the quality of service. We are now almost paperless,” he points out.

Young agrees that added value solutions are critical to differentiate the offering in what is now a very highly competitive marketplace.

“A key focus on our business is continued investment in information technology. Our unique scanning system, which photographs every pallet on its journey through our UK hub in Lichfield, has been a resounding success with customers over the last year since it was introduced.

Palletways web portal is now fully operational across the pan-European network. The portal is a secure, easy-to-use, web-based system that’s available to all customers. Users can access a range of information and bespoke services: including an invoicing facility and collection request system for customers.

There has always been a significant amount of movement of hauliers between networks. for example, Scottish operator Pollock (Scotrans) recently signed a ten-year deal with Palletways – moving over from Pall-Ex. The 70 year old firm covers the EH postcode areas.

Palletline has also brought in a number of new members this year including Panic Transport (Contracts) of Rugby. Panic was set up in 1990 providing logistics solutions for organisations across a wide range of industrial and commercial sectors including blue chip companies.

In fact, one of the ways that pallet networks have grown in the past is simply to poach members from rival networks.

That’s all very well, says Parkes, but you can’t just keep doing that – you have to develop the business. There is a limit to what you can do with regards to territory, he says pointing out the problems of too many members covering too few postcodes.

“It’s possible to get too greedy with too many members selling on each area.”

Expansion on the continent is one area of growth for many network operators.

Palletways has been developing networks on the continent for a number of years. Young says: “We have embarked on a major investment programme in Europe. This has involved setting up a number of domestic networks and joining these up through a bespoke IT platform, developed in house, to provide a pan European delivery service, which is reaping rewards in terms of volume movements between the UK and continental Europe.

Growth strategy

“Our European network forms a vital part of our growth strategy. We can use our network of some 300 depots across Europe to collect goods on one vehicle in the UK, whether they are quarter, half or full pallet loads and deliver them to multiple end points across 11 countries.”

Pall-Ex has also set itself the target of becoming a pan-European network. It is currently establishing a network in Poland, Pall-Ex Polska, which is set to be fully operational by May 2013 following the appointment of logistics operator KMC Services as its national partner.

Poland is Pall-Ex’s fifth European network, joining Pall-Ex Romania, Pall-Ex Italia and Pall-Ex Iberia, and more recently Pall-Ex France. It is currently seeking partners in Germany, Scandinavia and Turkey, as well as other areas of the continent and beyond.

Assi says: “Customers continue to demand more and more from their supply chain partners, expansion into Europe is just one aspect of this growing need. More and more, we are exchanging palletised freight across the European continent, therefore a reliable last-mile, pan European service is becoming an order-winner for many operators looking to become a one-stop shop distribution solution to their customers.

Other opportunities also exist for growth, however, with the European territory opening up, and the presence of free zones, increasing levels of FDI, and changing social and economic factors; pallet networks offer an interesting market opportunity.”

Pallet-Track’s Parkes is looking at Europe but expects the company’s growth to be concentrated on the domestic market, he says. “We are cautious about Europe – we think the market needs to settle down over the next two or three years.”

Of course, there is plenty of competition in continental markets. Dachser, for example, recently launched a director pallet service to Poland for UK exporters. Nick Lowe, Dachser’s UK managing director, says: “Despite a slight strengthening of Sterling against the Euro a few months ago, the prevailing exchange rate conditions still favour UK exporters and assists them to be competitive in European markets. Of course, the tailing off in demand across almost all economies makes trading conditions very difficult, but UK exporters certainly have an opportunity to gain market share.”

Palletline recently opened a hub in Scotland so that consignments that originate and finish in Scotland do not have to go via the Midlands. “It’s ahead of its growth plan,” says Buchanan. It’s largely achieved what it set out to.”

The success of the Scottish hub means that there could be more regional hubs in the future. It would be logical to look at a similar system for the South West.

The Palletline approach is to work with a regional partner to develop regional hubs and sharing facilities – and consequently avoiding the need for substantial investment costs. The Scottish centre wouldn’t have made sense financially otherwise, says Buchanan.

Like the other networks, Palletline is looking at expanding its continental traffic though it has no plans to set up domestic networks in other European countries. Instead the aim is to offer a one stop shop to customers using partnerships across Europe.

Palletways’ Young says: “Another area that we are looking at is the development of regional hubs – we have already achieved considerable success with London. It enables us to increase cost efficiencies and provide a more sustainable service in terms of miles travelled.”

Pall-Ex launched an overnight service in London as one way to get around the potential congestion expected to result from the Olympics, and is now looking at making it a permanent part of its service.

Over a seven-day period, 4 per cent of the network’s pallet volumes in London migrated to the new overnight offering, being delivered between 6pm and 6am.
Managing director Adrian Russell, managing director of Pall-Ex, says: “This new service has already made a big impact in a relatively short space of time. Over the coming weeks, we expect pallet volumes to continue to grow.

Case study- Put a sock on it

Simon Garrett of Garrett Transport in Saffron Walden has patented the PalletSock – which is designed to eliminate the need for stretch wrap.

It is made from woven polypropylene “big bag” material with four elasticated panels which grip the pallet – like an elasticated sock.

Garrett Transport is a member of a pallet network. Garrett points out that with the hub system, pallets can to be handled up to eight times on single journey increasing the potential for damage to the stretch wrap.

The PalletSock is more than five times thicker and is quicker to apply than stretch wrap, says Garrett. It will also last for 50 cycles.

Equipment- Testing times for longer trailers

Knights of Old has invested in two Palletforce-branded ‘super trailers’ as part of a government trial to spur economic growth, reduce lorry miles and cut air pollution.

Each trailer is 15.65metres long, two metres longer than current maximum lengths, and Knights of Old has been given special permission to operate them as part of a Department for Transport 10-year trial.

In practice this means the double-deck trailers have 13 per cent more loading space and will each be able to carry an extra eight full-size pallets on their nightly journeys to and from the Palletforce distribution hub, in the Midlands.

The new trailers have been welcomed by Michael Conroy, chief executive officer of Palletforce, who said: “These new trailers are set to reduce lorry miles, congestion and air pollution and are another smart way to help the UK compete globally. We’re proud to be working with Knights of Old on trialling something that will benefit the future of our industry.”

The Department for Transport predicts that the new trailers could reduce UK lorry miles by 100-180million in a year.

Pall-Ex also see opportunities. Anand Assi says: “Of course in the UK, and owing to the historic ability of us having high bridges and tunnels we have been operating successfully with double deck trailers for over 15 years. This allows us to seek out consolidative efficiencies. Any ability to improve the utilisation of vehicles is a positive. Manufacturers often package their goods for distribution in a manner to compliment the high cube efficiency of these larger trailers.”

Huntingdon based UPN depot, Williams Transport has invested over £45,000 in a new longer trailer. Director Malcolm Shovelton says: “Our next day pallet business has grown considerably since we joined UPN and has quickly become a major part of our business. The network approach has helped us to increase the efficiency across our fleet, which is great for our business, our customers and for the planet. When we heard about the trial, we were really keen to get involved. Wilson Trailers could design a trailer for us and take care of all the admin associated with the scheme, so we worked alongside them to make an application, which proved successful.”

However, Parkes is cautious about the potential for longer trailers. Pallet-Track members are trialling the trailers, but says Parkes, a key measure of success is whether operators are able to retain some of the profit from their use or whether all the benefit will be passed on to clients. He points out that with double deck trailers, much of the advantage was passed on the clients diluting the revenue per pallet moved.

Palletline is also looking at longer trailers. Buchanan points out that while they can carry more pallets, there is a weight penalty because of the need for a steering axle. “I don’t think they will suit everyone,” he says.

And, says Whigham, “it is not a one size fits all answer as if you don’t have the volume you are simply transporting more air then you were before – and that’s not cost effective. There are also operational factors to consider – not all routes are suitable for longer trailers.”

Case study- Fuel for thought

Palletline recently joined FairFuelUK, the organisation that is campaigning for a reduction in the level of fuel duty.

“The price of fuel is one of the biggest challenges to the industry. Over-taxation of hauliers is suppressing growth in the UK economy,” says Buchanan. “When you take too much out it creates a downward spiral. People who need to run vehicles are being over-taxed to the detriment of their businesses.”

He points out that is a large imbalance in the number of foreign vehicles coming into the country. These vehicles pay no road tax here and do not buy fuel here, he says.
Whigham points out that the high price of fuel will impact on the number and type of pallets in the supply chain as operators are keen to maximise the load space on a truck – cube optimisation is a very important factor in driving supply chain efficiency.


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