The pallet exchange networks have weathered the recession over the last six years remarkably well, owing mainly to their cost effectiveness for 1-6 pallet load consignments, but their big challenge now is to ensure that their ultimate customers whose use their haulier members stay for the quality of service, suggests Palletline. So how good is that service now compared with about 20 years ago when the networks began and what threats beset the industry?
In simple terms, vehicles using a network run more efficiently than non network operations because there is less empty running. Vehicle fill rates are typically between 70% and 85% in both directions and given that network members have only to deliver to one strategically-located, centralised hub before returning to their local area, mileage rates can be reduced. On-time delivery rates are usually over 99%.
To maintain customer loyalty the networks can enhance service levels mainly in two ways: 1) broaden the scope of their services and 2) invest heavily in technology to improve efficiency and meet enhanced customer requirements. Palletline regards the lack of investment in IT as one of the biggest impediments to increased growth and is crucial in the war against commoditisation. Accordingly, it has invested over £1 million during a four-year period, including a central billing and payments system, and new handheld digital signature capture for generating instant proof of delivery. Ensuring damage-free deliveries is important for service quality so there is a visual record of pallets at point of delivery to prove the quality of each consignment. In-cab Smart Witness CCTV also helps defend the fleet against insurance fraud and staged accidents and allows proactive monitoring of driver behaviour to cut the impact of personal injury claims. Such IT investment means that it is now as simple to send a pallet load to Paris or Madrid as it is to send it to Birmingham.
The pallet networks have not been slow to enhance their service by broadening their range of services provided. UPN, for example, will take half pallets up to 2 mt high, whereas some competitors would charge for a full pallet, and their Micro Pallet service has been “a great success,” says UPN. Among other initiatives, Pall-Ex developed its Eco-Drive, a packaging waste management removal and re-cycling facility. It is not surprising that these and other initiatives have captured the imagination of Continental distribution companies, who now work with British networks to offer pan-European operations that will cut the carbon footprint of the logistics industry nationally. This is hugely important because air pollution, much of it caused by road traffic, has now been shown to be a leading cause of lung cancer and behind soaring rates of asthma. Those network operators who have not broadened their product range, however, will be at risk in a fast-changing, fluid market. The recession has proved a positive driver for those networks which have changed, and a leading influence here comes from JIT deliveries, and smaller loads as businesses try to minimise their stock-holding costs.
Despite the palpable benefits networks have delivered, they have not been well served by governments and other institutions. Fuel costs remain a headache, not only because of their high rates, which admittedly can be passed on as fuel surcharges, but also because network members are at a disadvantage with European counterparts where fuel costs are much less. As if that were not bad enough, the odious banking practises, like interest rate swaps, have added to the sector’s toll of casualties and the banks’ swing from lending anything to anyone to lending nothing to anybody “has further exasperated hard-working hauliers,” says a Palletline spokesman. This means that generations of skill and experience are being and will be lost and not easily replaced unless these hindrances are removed. “The demographics of the sector are the biggest threat we face with an ageing population and an acute shortage of drivers,” adds Palletline. Given that pallet networks now account for about 20 million pallet movements a year, governments and financial institutions should be more accommodating to an industry that has demonstrated clear business and ‘green’ advantages.
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