The benefits of JIT deliveries are well known but far less obvious is JIT’s ability to spawn new types of logistics business models that both enhance profitability and favourably impact the environment. One shining example is the pallet exchange networks, a British innovation spawned back in the early 1990s, which has gone on to galvanise European freight logistics as well as provide innovative environmental services that significantly cut CO2 emissions.
Like many revolutionary innovations, the simplest ones are often the best and there is nothing complex about the pallet networks but they probably needed the catalyst of JIT freight movements, goaded by the need for cost efficiencies, because this form of distribution inevitably lends itself well to small consignments of freight, typically up to six pallet loads. The problem, however, was to ensure that hauliers not only had a full outward bound consignment but also full return loads. The simple solution was to create a hub and spoke distribution model in which a network of member hauliers collects freight from customers and takes it to a central hub, where pallets are sorted and loaded onto network members’ vehicles responsible for the destination postcodes of each member’s home area. This ensures almost full loads for return journeys, and so dramatically cuts empty lorry running which at one time averaged 50% of all lorry movements. Within the UK, these networks now account for about 20 million pallet movements annually and so have sharply cut CO2 emissions.
Great though the success of pallet exchange networks has been it is not without problems and obstructions, some of which are Government inspired and others by the changing nature of shopping. The Government’s introduction of the driver CPC could lead to driver scarcity, believes Howard Tenens, and so become more of a challenge facing the industry. “The more the Government can do to encourage and promote the vocation the more it would ensure longevity of supply of professional drivers in the marketplace,” says the company.
The longest running complaint the industry has is over the high cost of fuel which puts UK network members at a disadvantage to their European rivals. In a survey the Pall-Ex network issued to all its members, every response but one highlighted fuel costs as the first area they would like to see addressed in 2014, which CEO, Hilary Devey, has branded as crucial.
The importance of e-commerce is also behind some of the issues worrying the networks because the move from mostly commercial deliveries to a high proportion of business to consumer deliveries generated by online shipping has sharply changed the way many haulage companies and pallet networks are expected to operate. Most network haulier members use 18-tonne-plus trucks, with tail lifts, for deliveries, more and more of which are going to private addresses where access can be difficult. There is a risk that the networks could suffer the same misfortunes which hit the parcels sector in the 1990s. One reason why the correct resources often cannot be deployed on tail-lift deliveries to private addresses is cost. One possible solution would be to have a two-tier charge – one for deliveries to commercial sites and one for private addresses, but that could work to the disadvantage of network members as non member hauliers undercut members’ prices.
Another issue of concern is over maximum tail lift load limits, which the RHA (Road Haulage Association) has been pressing the HSE for maximum weights in order to level the playing field. Load restraint is yet another vexing issue because there are not many effective or acceptable ways to secure pallets on the top deck of a double-deck trailer. Despite these problems, if an industry like the pallet networks can thrive through one of the longest, post war recessions then it should rise to the occasion, and removal of Government impediments would help.
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