Britain’s pallet exchange networks had a good year in 2014, accounting for over 20 million pallet load movements, and the auguries suggest they will have a better one this year but that does not mean that the industry is problem-free, solutions to which should involve an industry-wide approach. One of the leading problems is the acute shortage of lorry drivers, worsened by the recent introduction of the driver certificate of professional competence (CPC) which may have driven up to 20% of drivers to throw in the towel. To counter this, the original founder of the pallet exchange concept, Palletline, has introduced a drivers academy programme, being piloted in London, to ensure they train the next generation of drivers and relieve the growing pressure on volumes, working hours and profit margins. Other networks should consider doing likewise.

chazMuch of last year’s growth in the network business can be ascribed to the relentless rise in e-commerce, a recovering economy and the clear business advantages of the pallet exchange concept, which relies on the hub and spoke principle to ensure more or less full lorry loads in both directions for all a network’s member hauliers. As a by product of that cooperation, the environment benefits substantially, owing to the sharp falls in mileage, which can be improved even further when a network establishes regional hubs. This is what happened last year when Palletline opened two more regional hubs, one in Rugby and one in Rutland, which saw a network reduction of 1.4 million trunking miles.

The networks are also driving new business by extending their service offering. During the past 12 months, for example, Palletline launched PLUS logistics, which offers contract logistics, warehousing and storage, pick and pack, reverse logistics, click and collect and through-the-night services. Most networks are also involved in the European markets where the likes of Pall-Ex are pressing ahead to link up with partners in the Czech Republic and Slovakia, while plans are progressing for the launch of Pall-Ex Benelux this year.

To keep ahead of the game, however, the networks will need to think harder on how the changing e-commerce scene will impact their businesses, while at the same time keeping up the pressure on Government over issues like the high fuel duty that sees UK hauliers at a disadvantage with their European counterparts. While the current sharp falls in oil prices are a great relief they cannot be relied on for long, given the industry’s notorious volatility, though a return to $100-plus oil is unlikely any time soon. The greatest threat arguably will not come from volatile oil prices but the unpreparedness of some networks to cope with shoppers’ changing habits and retailers adopting bargain, one-day multi-channel offers. Such retailer ploys have overwhelmed the courier-haulier business, leading to much delayed deliveries. If retailers continue to make a habit of such ploys then they should check that their logistics partners have the infrastructure to cope, and that must include automated materials handling, especially very fast sortation conveyors and picking systems.

The record so far in that respect has not been exemplary. Last year insolvencies among couriers and hauliers jumped 20% to a record 221, suggesting that the current logistics model may be unsustainable, and this surge came despite e-commerce sales soaring 14% to record levels of £104 billion last year. While it is true that these rising insolvencies are a function of overcapacity in the business, driving prices down to unsustainable levels, even when equilibrium is restored after the culling, the pallet networks, in particular, will still need to invest in appropriate software and hardware to cope with the seismic shock from changing shopping habits, or else lose out to competitors. The same could be said for traditional bricks and mortar shops. Those shops which offer multi-channel routes to their customers, like on-line home deliveries and click and collect, could see a reprieve with help from new e-commerce facilitators that could undermine Amazon, Ebay and Alibaba. One such threat is the American launch of Jet.com, which will only make money from an annual subscription of $49.99, so unlike its competitors there will be no transaction charges, and they claim to be able to undercut their competitors by 10-15%. Part of that advantage will come by offering buyers the best deals in cities or localities near them to minimise shipping costs, helped by a choice of delivery times.

One aspect of all this seems assured. Demand for small and medium delivery vans will continue to grow, and loading bays must adjust accordingly.

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