Over the last 22 years the pallet exchange networks concept born in Britain has proved so successful that within the last five years it has been enthusiastically replicated across Europe. The reason for its success is the obvious one – sharply reduced distribution costs for network member hauliers and their customers. There are also other boons that deliver cost savings for nations as a whole. These are environmental in nature in that they sharply reduce the number of vehicle movements, reduce traffic congestion and cut accidents. This is because the networks’ hub and spoke model allows haulier members to run their vehicles in both directions typically between 70% and 90% full as opposed to empty running in one direction before the networks’ advent.
Given the UK Government’s obstacles for road haulage generally, mainly through higher fuel costs than abroad, the pallet networks have been driven to innovate their service offering and widen their markets to take in Continental business. An example of the former is Pall-Ex’s Eco-Drive, a service which sees its members collecting waste packaging for recycling while at the same time as delivering palletised goods. To make themselves even more attractive the networks have moved on from typically handling 1-6 full pallet loads to carrying half and quarter pallet loads and even ‘micro’ pallet loads. Their success has also helped them to muscle in on services like storage, pick and pack and order fulfilment, typically the preserve of 3PLs. Pall-Ex also offers home deliveries for its corporate clients. Heavy investment in IT, like track and trace, and electronic signatures at POD has not only eliminated vast amounts of paperwork but also boosted confidence in the networks’ ability to handle high value items securely.
The last of these innovations, home deliveries, could perhaps offer a big new opportunity for them at the expense of parcel delivery companies, who can expect boom times owing to the relentless rise in online shopping, which looks set for another step change development from a relatively new entrant to online retailing – Alibaba. Born in China, this company is raising $20 billion on the New York Stock Exchange in a bid to offer the world’s first, truly global online marketplace where anyone can buy anything under the sun, from a life size Vladimir Putin wax figure to an MRI scanner, with food, clothing and furniture in between, from any country directly.
Such a development threatens disintermediation of high street retailers and wholesalers but for those serving the online market it will mean some changes in the hub and spoke distribution centres, or at least at the members’ depots, like more investment in vans for last-mile deliveries and more appropriate loading bay equipment to service these vans. SMEs’ in particular, will find this Alibaba sales portal using a virtual shopping mall called Tmall, a cheap way into export markets by cutting out all the middle-men operations and need to invest in sales outlets in each export market. Presently, Alibaba’s competitors like Amazon are just like any other intermediary that runs its own warehouses and therefore adds a layer of cost that product manufacturers can avoid by selling directly to the buyers. The networks, therefore, may also have to consider casting their nets beyond European shores to forge new partnerships.
The current American and Euro-wide economic conditions that have lasted seven years have seen real incomes decline for the majority and this, too, will force changes by restructuring the conventional retail model of huge shops trying to sell everything under one roof. Product price is now king and that will favour the strong rise of the smaller discounters whose much lower but fast-moving product range places the retail giants at a disadvantage for logistics reasons. Such a trend could open up new markets for pallet exchange networks as more consumers eschew big supermarkets for online buying of non-food items directly from the manufacturers. Interesting times lie ahead for the big retailers.
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