As businesses mature, lethargy and declining innovation often set in unless new markets can be developed. But if a specific industry has a compelling business model then market expansion is almost certain to follow more easily. A prime example of this is pallet exchange networks, which Britain pioneered some 22 years ago with stunning success, despite many government handicaps.
The concept behind the networks is a simple one but highly effective. It allows hauliers to club together to provide a national network based on the hub and spoke principle. A local haulier will transport his full lorry load usually to a centrally-located hub for decanting all his pallets and collect another load for the return journey, thus often running in both directions with up to an 85% fill rate, as previously opposed to an empty return journey. It is a win-win scenario. Hauliers can benefit from more loads carried and their customers from lower charges in the 1-6 pallet load consignments. The environment also benefits owing to lower fuel emissions.
Given, however, that the networks have matured over 22 years where can further expansion arise? The answer lies abroad, and there is no reason to believe that the British-led concept rolling out across Europe over the last four years will not expand into Asia. A key ingredient in this expansion will be a robust IT system able to deliver quotes quickly and simplify administration.
Anand Assi, project director at Pall-Ex, which has a firm footing in eastern Europe, is currently eyeing Turkey for a principal partner. “A pallet network here,” he explains, “would operate as a gateway between mainland Europe and Asia, offering even greater opportunity for expansion.”
There are other reasons why the pan-European networks should grow within and beyond the Continent’s borders. The sluggish European economies are driving businesses to reduce supply chain costs and the pallet networks have proved that they can do that. A further boost would come from re-shoring of outsourced manufacturing from the Far East, driven by a host of reasons, back to mainland Europe. Albeit only a trickle now, if that re-shoring becomes a flood, it will present substantial business opportunities for all those British networks which have European-wide interests.
Plans for expansion, however, carry risks and the more countries involved in a stretched network the higher the risks. In Britain the risks have been and remain, largely government-inspired. Fuel duties are so high relative to the Continent that they present an uneven playing field, something the EU was formed to eradicate. “We are over-taxed and receive a lack of appropriate legislation from the Government,” says Palletline’s MD, Kevin Buchanan. He also adds that the demographics of the sector are the biggest threat, with an ageing population and an acute shortage of drivers, made worse by recent regulations that are driving many of its older drivers to leave the sector.
Governments across Europe also need to clean up there lack of good governance in economics. Back in January 2007 this journal warned about the looming banking crisis before it broke. If it was clear to this journal’s writer it was clear to governments whose irresponsible insouciance beggars belief. What businesses need most of all is a settled economic environment and that demands steadfast financial discipline.