It has been 20 years since Britain spawned the pallet exchange network concept, an idea that has slashed industry’s distribution costs and improved the environment. But only in the last year or two has the concept moved offshore to mainland Europe and only recently have large blue chip companies begun to use the networks. If pallet exchange networks were to migrate to the rest of the developed world the savings in transport costs could run into billions of pounds.

The simple but effective idea behind the networks is that their independent member companies, typically a hundred or so, will collect up to six pallet loads, or so, from each client in their home locations and deliver into a central hub, where loads are decanted for loading into other vehicles for the second half of the journey. In return, incoming hauliers load up for the return loads to their local areas, and so it becomes a slick cross-docking operation. This, therefore, eliminates most of the empty return running common to most hauliers before they joined a network.

Compared with previous road distribution,  big retailers like ASDA and their suppliers have lopped hundreds of thousands of road miles off journeys and saved many thousands of pounds. It also reduces congestion at distribution centres and so it becomes a win-win situation for transport service buyers and suppliers.

According to the Association of Pallet Networks, more than 15.3 million pallet loads were handled by their members in 2011, 7.3% up on 2010, despite difficult economic conditions. Next-day delivery services now account for more than 63% of volume and the largest growth has been in the quarter pallet market, up 24.2% since 2009.

While substantial costs savings is the prime reason for the pallet exchange networks growth, advances in cargo tracking and security have also helped, and some members offer more services, like recycling of waste. All of this has not gone unnoticed on mainland Europe, where Pall-Ex, in particular, is growing its business to span the Continent. Already in Italy, Iberia and Romania, Pall-Ex, expect to launch a French network, with its hub in the country’s centre, by the end of this year. The company believes the new network will mean much lower national distribution costs for French manufacturers, importers and distributors, as their goods will not require dedicated transport for each area. Anand Assi, the project director in charge of Pall-Ex’s European expansion, says: “This is an extremely exciting development, not only for logistics in France but also for the industry in Europe as a whole.” With their French partners, Pall-Ex can organise the part load distribution offering in France and encourage the participation and contribution of small-medium sized hauliers. “We see this as being the future of transport activities in France,” he adds. Pall-Ex is also seeking partners in Germany, Poland and Scandinavia.

While pallet exchange networks have so far proved their environmental credentials through much lower empty running, they may still have to go further because the carbon challenges will undoubtedly drive warehousing’s future., in which, it seems, rail transport will play a growing role. Phil Harrison, director of LCP Consulting, for example, believes that by 2050 the road share of foreign tonne/km will fall from 64% to 50%. Already future structures are emerging to support his view. These include rail-embedded centres to manage in-bound flows and port centric locations. Future pallet exchange networks hubs may have to abandon the ‘golden triangle’ national distribution model in favour of port centric logistics. There is also increasing interest from retailers and manufacturers for rail-connected sites.

What seems reasonably certain is that the logistics map of Britain will change almost beyond recognition, driven by the carbon challenge. The pallet exchange networks may have to change, too.

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