Entering a market filled with large, global third party logistics providers is no doubt a daunting task as a small and medium sized enterprise, says Alex Whiteman.
Large 3PLs have a wealth of assets at hand, and often a vast cash reserve that allows them to compete and evolve. Keeping up with this herd can be difficult without the piles of cash – and being an SME means that cash is something you’re likely lacking. But deep pockets can slow you down, and being light of foot provides speed as a tactical advantage.
Managing director of Harlequin Logistics Paul Smith says that wealth and brand worth plays into the hands of the larger firms, and allows them to buy market share.
“There are those customers that will only buy an ‘IBM’,” says Smith. “Fortunately this sort of customer is diminishing, but it certainly plays into the favour of the larger 3PLs.”
But being small can be a benefit as well as a hindrance. The levels of bureaucracy and focus on short-term results as an SME are far removed from the many layers found in corporate titans. Often decisions fall to one person. As such, a decision can often be quicker to come by. And once a decision is made it can be acted on. New incentives can be quickly rolled out, and new directions found. Jamie Hartles, commercial and marketing director of Howard Tenens notes this when speaking about the firm he heads up.
“The main advantages of working with smaller privately owned logistics companies is that we have less bureaucracy involved in the decision making process and tend to look at relationships and make decisions taking into consideration a longer term perspective,” say Hartles.
However, as a major supplier looking to hire a 3PL, why wouldn’t you just reach for the firm with the largest reach, the firm that can manage every minutia without seeking outside support?
The personal touch
Managing director of Cheshire-based logistics service provider Farrall’s Transport, Mike Farrall, believes the personal touch of smaller firms, and the staff sense of unity is one factor that lures clients in.
“It is all about the staff you have and the ability to provide passion and a personal touch,” says Farrall. “This is something we have, and importantly it is something I do not want to lose from the business. A personal touch equates to a personal connection between the customer and us. A customer knows that if they have an issue they can come straight to the decision maker.”
This is a point also acknowledged by Smith, who adds that being closer to the customer base improves understanding of their needs: “And then there’s the fact that we own our vehicles.”
Large 3PLs typically do not own their own vehicles and have a reliance on sub-contractors for general haulage. Comprised of five hauliers, each owning their fleet, Harlequin is able to move 80 per cent of the goods it transports in its shareholder’s vehicles.
“We are not reliant on sub-contractors to move loads,” Smith says. “If customers want to shop around on the web and ship goods through a faceless haulier, that option is there, but with us they have the benefit of being able to put a face to the name – and contacting us is no hassle.”
Hartles believes Howard Tenens’ ability to compete with larger firms comes through its ownership of the warehousing space in which it operates, which he says enables it to be flexible in its approach to business. The firm boast over three million square foot of space.
“We are also lean in terms of management, ensuring that our overheads remain comparably low,” he says. “In terms of training we promote cross depot and contract exchange days between employees who express a desire to learn and grow, with training programmes that are relevant and targeted towards not only the individuals’ current role but also taking into consideration future development and succession planning.”
Farrall’s has its own training programmes and school, with Farrall adding that being small does not negate a firm’s ability to train its people. The 3PL has a driver solely dedicated to the training of other drivers.
“This leads to more qualified drivers at the end of the day,” he says. “And a more qualified driver is generally a more impassioned driver.”
Farrall says that a lot of larger players in the 3PL market have lost this personal touch, and he believes it is for this reason that Farrall’s has had success when bidding for contracts against larger logistics providers.
“It’s not just small contracts we have won – and our size is no impediment to winning these big contracts” he says. “We have gone up against larger players and won contracts for 70 to 80 loads a day.”
Power in partnering
To fulfil load sizes of this stature, Farrall’s cannot rely solely on its own fleet – which boasts 50 vehicles. Instead it has to leverage the support of other hauliers, striking up alliances and joint ventures.
“As with our size, teaming up with others rarely impedes business,” says Farrall. “The personal relationship we have forged with the client, affords us something of a moral respect and a trust that our partners will provide the same quality we ourselves give.”
Hartles says the size of Howard Tenens leads it to dealing with the big fish in a small pond.
“Therefore each and every one is very important to us and attracts a higher degree of senior management attention than the larger multinationals,” he says. “We also find that our employees take a great deal of pride in working for a privately owned business which is reflected in the service levels we provide.”
In terms of disadvantages, Hartles notes that SMEs obviously lack the recognisable big brand that is attached to multinational logistics companies, which gives some customers added confidence when selecting them.
“Howard Tenens is fortunate that our customer portfolio includes many blue chip brands and household names and stands testament to the calibre of logistics services we provide,” he says.
The 3PL also boasts an extensive portfolio of commercial properties, and a strong relationship with its banking provider, which it has built up over many years of working in partnership.
“As a privately owned and therefore entrepreneurial business we have invested in other activities outside of logistics which in turn enables us to invest in logistics customer requirements such as vehicles and warehouses,” he says.
Farrall adds: “If the job is right, our bank has always shown a willingness to help us out.”
For Smith, the primary benefit posed by being a large 3PL with deep pockets is having the ability to buy market share, and set up automated facilities and warehouses quickly, but as with Farrall and Hartles, he notes that the larger firms still find themselves at the end of the day beholden to their shareholders.
Farrall and Smith also note smaller firms’ speed as an asset. Customers can get a “Yes” to their query fast.
Room to grow
Farrall’s Transport has invested £3.5m into an 81,000 sq ft warehousing expansion of its food grade facility. The investment more than doubles the size of the existing site, and Farrall says it will be ready for business in January.
Located at the Deeside Industrial Estate, approximately 30 minutes from the Liverpool Docks and the Liverpool SuperPort – which is due to open in 2015, the warehouse is within easy access of both the M56 and the M6. “Port centric logistics has started to gather pace as a supply chain strategy and a growing number of retailers and manufacturers are now looking to store goods and undertake logistics activities close to the port of entry,” adds Farrall. “Being within half an hour’s run of Liverpool’s new SuperPort places Farrall’s in a strong position to tap into this developing market when the port opens in 2015.”
In addition, Farrall’s will be re-locating its PalletForce depot from Ashton to the new Deeside warehouse. The move is expected to save two hours a day for each of the vehicles dedicated to PalletForce operations and adds over 10,000 sq ft of covered space and 20,000 sq ft of yard space.
“The new Deeside warehouse is a major investment for Farrall’s Transport, which will see a quarter of our fleet moving down there,” says Farrall. “Moving our PalletForce depot from Ashton to Deeside places us much closer to our customer base, which allows us to offer a greatly enhanced service, with later cut-off times for collection and earlier delivery times.”
According to Farrall, this latest investment is part of a planned business expansion following steady growth in the number of new contract wins. These contracts include international customers, with Farrall noting that they have taken on Polish, Swiss and Canadian customers.
“People are looking for commitment over cost,” says Farrall. “Sometimes they see larger companies as being more committed to paying off their shareholders than committed to their clients’ needs.”
Farrall expects these new customers, particularly highlighting the Canadian, to be long-lasting contracts. But notes that despite this growth in custom, Farrall’s is not focused on fast-growth.
“Our growth is dictated by our clients,” he says. “Customer requirements tell us how we need to grow. But we’ve also grown the staff, not just in terms of numbers but in terms of roles and opportunities available to them.”
Hartles says that while Howard Tenens will of course be looking to secure new business, and where possible investing in and opening new depots, any future growth must be sustainable and deliverable, in terms of maintaining existing customer service.