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Pallet networks roll with the punches

11 June 2013

Online retail has changed the game for pallet networks with smaller consignments and deliveries to residential addresses now much more commonplace. HSS editor Simon Duddy talks to a number of key pallet networks about this and other major developments.

The rise of online retail and portcentric logistics in recent years might have been assumed to be a disruptive challenge to the pallet network hub and spoke model, as both of the new developments imply a more direct supply chain. In the case of online retail, the shop is bypassed and goods delivered straight to the customer. In the case of portcentric logistics, the inland warehouse is, in theory, bypassed as goods are transported straight to the end user.


However, talk to the pallet networks and it is clear this is not how they see it. The consensus is that both of these developments offer increased opportunities to pallet networks.


UPN director David Brown explains: "Growth in eCommerce and online trading has reduced consignment sizes, which will have driven more freight to networks, as other methods of transport are unlikely to prove cost effective.”


Currently, the average size of each consignment on UPN is 1.4 pallets. The company does not expect this to change much and sees the reduction of the number of pallets in each consignment having a greater impact on depots than networks.

"Smaller consignments does mean more collections and deliveries for depots, but it will result in higher incomes for the depots, so would not be seen in a negative light,” continues David.

"However, depots may find it harder to manage a larger number of customers, with lower average incomes from each individual customer. This is driving forward many new IT advances, which are designed to allow smaller clients to price, order and pay for services online, allowing depots to focus on service, rather than managing customers.”

UPN sees eCommerce continuing to grow at the expense of the traditional retail sector.

David explains: "Consignment numbers should continue to increase to the benefit of UPN. Some other networks may have a history for handling larger consignments, which may be under some threat through substitution sales.”

Palletline firmly believes that the opportunities outweigh the challenges in the eCommerce boom and has closely aligned to the key online retailer Amazon. 

Palletline managing director Kevin Buchanan says: "Flexibility and reliability are essential to take advantage of the eCommerce market. These qualities enabled Palletline to achieve preferred supplier status to Amazon. With minor modifications to our existing service, we now provide a small consignment consolidation service at each of the major online retailer’s regional UK distribution centres.”


Palletline has also increased investment in internet based booking which has facilitated an increase in ad hoc orders, to both business and residential addresses. The latter has grown in particular and residential addresses now account for around 25% of Palletline’s total volumes.

 

The increasing demand for home delivery places new demands on pallet networks and they have responded. Palletways already has a significant amount of business in this area, including later/timed deliveries and multiple pallet size options.

Palletways UK MD Andy Turner says: "Palletways Fulfilment is able to offer a complete service with goods held in its warehousing/ fulfilment centre adjacent to the Palletways National Hub. This allows customers to order up until 7pm for next day delivery.

"The increasing volume of home delivery will require high quality communication, flexibility and technology to support it. Our advanced tracking technology, together with e-mail and text alerts, is already in place to provide transparency to customers.”

London Gateway
When open, the London Gateway, based in South Essex 25 miles from central London, will be the UK’s first 21st Century major deep-sea container port. With these new facilities will come a rise in portcentric logistics.

Pall-Ex Group managing director Adrian Russell sees Gateway as a potential boon to pallet networks. 


"This isn’t seen as a threat to Pall-Ex,” he says. "But it does give the business a new set of opportunities, given the network of European logistics that we have in place. 

 

"The majority of portcentric operations will cater for the London area, while the rest of the country will still require the services of a pallet network. We have already engaged in some positive discussions with businesses involved in the area, so that both of these logistics methods can work smoothly together. Pall-Ex is set up to deliver a palletised freight network that spans the continent, and will be able to service every corner of the UK even better by working with services around the London Gateway.”

The first phase of London Gateway is scheduled to open at the end of the year and Marks & Spencer has announced it will begin construction of a major new distribution centre on the site in 2014. The port is building considerable momentum and that has been noted by Palletways’ Andy Turner.


"We foresee the London Gateway will provide a much needed boost to the UK’s manufacturing and consumer industries and subsequently create a greater demand for domestic pallet network services.


"Palletways is focused on optimising our logistics operations to ensure they are as efficient and cost effective as possible. Our trunking system, which uses dedicated hubs across the UK and Europe, reduces the road mileage, costs and vehicle emissions of every delivery. Portcentric operators will be able to take advantage of this by connecting to our network.”


Youngs Transport (YTL) is part of the UPN pallet network and its managing director Rob Hollyman sees the threat to his business as minimal and opportunities as huge.


"We going back to yesteryear by re-introducing portcentric operations, it’s where we were 50 years ago. We are based in Purfleet in South Essex and the fact that it is local to us, lends itself to being a big opportunity. There will be a lot of warehousing in the port, picking and packing operations, and of course it all needs distributing. A fair percentage will go by rail but the single and low number pallets will go by road and who better to distribute those than a pallet network? There will be less empty running and lower carbon footprint.”


In conclusion

Looking to the future, pallet networks have an adaptable and responsive business model that looks set to cope with the challenges the market will throw at them.


Adrian Russell says: "Palletised freight networks have existed for some time in their most basic forms, but there are almost limitless areas of expertise and growth that the model can be adapted and expanded into. 


"Right now, it is a competitive market place for all variants of logistics, so pallet networks must add bespoke services to their core offering, identifying solutions for problems in sectors such as retail. Take our own Retail Plus+ as an example, which answers retailers’ needs for flexible deliveries, outside of timed pedestrian zone hours.”


To conclude, if the model is to survive, it won’t be on price alone, says Kevin Buchanan. He predicts successful companies will be the ones that put the emphasis on quality of service.


"In this climate, pallet networks are a natural choice. But economic necessity is understandably not enough for some. Businesses which have been historically sceptical of pallet networks will naturally seek out the most respected and reliable provider to ensure their service remains consistent – or improves,” he explains.


"Aggressive price cutting is ultimately a dead-end. At some point, mounting service compromises will outweigh lower costs and customers will look elsewhere.”

 
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