30 May 2012
Sum of the parts
When a number of local transport firms come together under the umbrella of a national pallet network, their combined muscle can offer a highly cost-effective means of moving goods for manufacturing customers, as Laura Cork discovers
Haulier with bells on, or sophisticated transport solution provider? Your view of a pallet network could be either of these extremes or, more likely, somewhere in between but what's indisputable is that these distribution co-operatives have enjoyed a surge in popularity and, in turn, revenue.
The network providers would say this is down to their ability to deliver palletised freight at a cost that manufacturers themselves can't hope to compete with. Is it true? Yes – unless your in-house transport operation could deliver a single pallet from your factory to a site hundreds of miles away by 9am tomorrow for the princely sum of £30 all-in. As you'd expect, the per-pallet sum varies in terms of distance and volume of freight moved, but £30-£40 is a ball park figure cited by several providers.
Pallet networks haven't been around for long – it's generally agreed that Palletline was the first to launch this type of logistics service in 1992, so it is celebrating 20 years in business this year. Yet despite its relative youth, the speed of growth has meant this quickly became a mature – and saturated – market.
Google 'pallet network' today and the list is extensive: as well as Palletline, you'll find The Pallet Network, Palletways, Palletforce, Pall-Ex (with its fire-breathing owner), United Pallet Network (UPN), Pallet-Track and, bucking the trend for the obvious name, Fortec. The ownership model varies, but from the customer perspective, the offer is essentially the same: they will collect anything from a single pallet to a full load and deliver to your customer, certainly next day and some go further with timed delivery slots to support just-in-time operations.
Other logistics businesses offer palletised freight distribution via hubs – DHL and Norbert Dentressangle, for example – but this is fulfilled by their own vehicles rather than member/partner hauliers. And these, plus some of the pallet networks, extend their reach well beyond our shores.
Hub of the matter
The pallet networks' hub and spoke distribution model has proved its worth. Before the first network came on the scene, groupage – or freight consolidation – was the only truly cost-effective means of getting small amounts of product to a customer many miles away. As Pallet-Track's managing director Nigel Parkes explains, the result was probably the same whether your transport department was internal or external: "If you had a stillage of bolts for delivery from your factory in the south of England to a site in Swansea, the local haulier – or your own transport manager, if it was in house – would have to find other consignments to create a load to make the journey cost effective." That could mean a delay of several days. It seems inconceivable now, but it was the advent of lean manufacturing and just-in-time in the early 1990s that really drove the increase in demand for faster, more efficient delivery methods. And so the pallet network was born.
Given the proliferation of these networks, it must surely have been difficult for a relative newcomer like Pallet-Track to make its presence felt? Parkes says not. When he launched his business eight years ago, some viewed it as a risky move. "There was a belief at the time that we wouldn't succeed and that there was no room for another network. Yes, the market was maturing but my argument was that the last mobile network to launch was Orange and they haven't done bad! It's not only about demand, in my view – we believed we could do things better and take market share. And we have."
Parkes reckons the underlying structure can't beaten : "Hub and spoke networks are highly efficient because they remove empty running – there's very little empty space in vehicles. The reality is there's no more efficient way to transport goods."
Once the single hub and spoke structure reaches capacity, it expands to regional hubs: "Once critical mass is reached, the hub and spoke system needs to become regionalised. But the principle is the same: you're creating smaller – satellite – systems around the main system."
Today, Pallet-Track has a 267,000 sq ft hub in Wolverhampton which was purpose built four years ago. It has already reached 80%-plus capacity here and Parkes says he is now looking at widening his net to establish regional hubs in the north, the south and Scotland.
As he points out, the term 'pallet distribution' is something of a misnomer since almost anything can be moved via this type of network, if packaged correctly. Whether a small part pallet or a large stillage, all networks will take the booking – though, as Parkes points out, some find it easier than others to move the product. In a £1.5m deal last year, he bought 40 forklift trucks from Linde Creighton which have specially-designed forks to adjust automatically to the maximum width of load being picked up. "It means we can be very flexible in terms of the product we can move, but also improves our efficiency because the driver doesn't have to get on and off to adjust the forks. That, in turn, has a third benefit – safety. Drivers aren't allowed to get off their trucks anywhere in the hub, they have to go to safe areas to do it, so these forklift trucks save us time and improve safety."
From 800 pallets a night at its launch, Pallet-Track is now moving 9,000 pallets every night. Parkes claims quality of service is the hook – notably end-to-end tracking, which includes electronic signatures and can include scanning of customer paperwork to the system.
"There will always be room for manufacturers to run their own vehicles – for example, if they sell a product that has to be commissioned or installed by an engineer," he says. "But apart from that, I see absolutely no reason why a manufacturer would want his own transport for normal product placement – a manufacturer could never compete with a pallet network operation in terms of vehicle fill rate, efficiency and cost."
Take the Pallet-Track network as an example, says Parkes: "We have a 2,500-3,000 vehicle capacity in 75 locations every night. So a product collected at 6pm today could be delivered virtually anywhere in the country at 9am tomorrow. None but the largest multinational could compete with that."
It's certainly a sound case – particularly if you throw in the fact that timed deliveries for sequenced operations can be accommodated, too.
Garden product manufacturer Hozelock has renewed its contract with Palletways for distribution of an anticipated 24,000 pallets per year to DIY outlets and garden centres across the UK, Ireland and Europe.
Hozelock's Minworth factory at Sutton Coldfield is ideally situated close to the Palletways Birmingham depot. Unusually, the arrangement is not for collection and delivery: the manufacturer delivers its pallets direct to the Palletways hub, where the network takes over, sorting them for onward distribution.
The Palletways network has 106 members in the UK. Five of these are fully-owned depots – Birmingham, London, Scotland, Oxford and Dartford – and the other 101 are privately-owned logistics businesses operating under franchise to the Palletways network.
Palletways' core business is small consignments, one to six pallets, and it's precisely this size delivery that Hozelock uses the pallet network for, supplementing a separate transport operation.
When the renewal was announced, Hozelock's group supply chain director Terry Bennett explained the reason for sticking with Palletways: "Palletways provides us with the level of flexibility required to meet the demand within the marketplace, especially during peak seasons such as spring, summer and bank holidays."
Most customers expect hubs to operate 24/7 but not necessarily bank holidays which, as it turns out, was the clincher for this deal. Michelle Naylor, general manager at Palletways Birmingham, explains more: "Hozelock decided to stay open on bank holidays some time ago and they wanted a partner who could meet that requirement. So we open our national hub here in Lichfield on bank holidays – the freight doesn't go anywhere beyond that on the day because our members generally don't work on bank holidays, but what it means is that Hozelock can bring their trailers here and we unload them before moving goods out the following day. It means Hozelock doesn't have stock and trailers waiting around – the process continues to move and that's worked really well for them."
The manufacturer trunks goods to the Palletways depot: usually six or seven lorries each day, but this can be as many as 16 per day at peak times, says Naylor. "We're a 24-hour operation, so they can trunk in at any time. We turn the vehicle around, empty it and it goes back to the Minworth factory."
Most manufacturing customers are using this service to supplement an in-house or outsourced transport operation, says Naylor. "If you have anything over six or seven pallets, it becomes less cost effective to use us. Small consignments of one to six pallets is our core. Lots of customers have their own fleet: one here in Birmingham has 100 vehicles but it doesn't pay to transport less than five pallets, so they give those consignments to us."
It's easy to see why, in Hozelock's case, it is financially justifiable to use a pallet network if you have many small consignments for numerous sites, with dozens or even hundreds of potential delivery points. But what if a manufacturer has just three or four customer sites to deliver to: can that be equally cost effective? Naylor responds: "It's a set cost per pallet, so yes, absolutely. With fuel prices continuing to rise, so too do our volumes. Manufacturers don't want the hassle of running their own fleet, plus the unpredictability of fleet costs and legislative issues surrounding agency drivers, for example.
"For £40 for a first-time user, we'd collect and deliver a pallet on next-day delivery to 70% of the UK. You couldn't drive it there yourself for that," she says.
DHL Supply Chain
Fortec Pallet Distribution Network
Pallet Track Ltd
Palletways UK Ltd
The Pallet Network Ltd
United Pallet Network (UK) Ltd
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