As a business model, the pallet exchange networks that sprang up in Britain 18 years ago have proved their worth so much that the recession has had little effect on the industry. One leading player, Pall-Ex, says: “So far all networks have proved to be remarkably resilient.” It is not hard to see why. David Brown, director of United Pallet Networks, (UPN) believes that in monetary terms it is at least 50% cheaper to send one pallet load long distance than it was 18 years ago before the networks began, and much cheaper still in real terms.
Such remarkable savings can be made in the 1 to 6 pallet consignment market because these shared networks services, typically comprising 50 to 100 independent hauliers trunking to one central hub, can expect to run almost full in both directions, not only earning more in the process but promoting green issues. UPN, for example, believes its new Fradley Park hub opened in August will cut annual mileage by 180,000 miles. Even the third party logistics (3PLs) companies are getting into bed with the networks for delivering pallets for the last mile.
The estimated 12.5 million pallet movements undertaken by the networks in 2009, however, shows that there is still vast, latent growth and that some force is holding back its inevitable development. It seems that force is ignorance among business leaders who do not understand or know, according to a leading service provider, about the benefits of shared pallet network freight distribution. The problem seems to be a lack of identity, so much so that businesses often mistake such operations for pallet manufacturers! A more intelligently honed and robust marketing exercise nationally may be needed to breakdown the ignorance barrier. The current recession, however, may give a push in the right direction as it is making businesses focus more on their supply chain costs and there is a growing realization that pallet networks offer a viable alternative to in-house, dedicated solutions.
There is clearly much to go for still, even in recessionary times. An idea of the transport costs and waste involved can be gauged from a survey carried out by the Institute of Logistics in 1995 into logistics costs in western Europe, which in percentage terms is unlikely to have changed much since then. These showed that logistics costs were 6% of sales revenue, within which transport soaked up 1.75% in the UK, but for France it was 3.5%, or 4.5% for small to medium-sized businesses. This partly explains why companies like Pall-Ex are keen to export their model to the Continent, and have already signed up deals. UPN’s David Brown, however, does not think the model can be replicated in all European countries at present.
Good prospects alone, however, will not guarantee survival in the competitive pallet exchange network market and there may still be some consolidation among the smaller players. Pall-Ex believes that delivering maximum value within the network to its members and high quality performance from both its hub and its members is an essential ingredient for success. This requires constant re-investment to ensure high standards and a broadened product offering. “Our IT provision in particular has been extensively reviewed and developed,” says Pall-Ex, “and we are launching the market leading IT service later in October.” UPN has also taken IT to its heart, with a move towards a paperless operation that now delivers on-time results of 99.9%. Its heavy investment in CCTV and barcode scanning in and out also gives comfort to those consignors with high value loads.
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