As if pallet exchange networks hadn’t enough external problems to worry about it seems that the biggest one is an own-goal problem – the unsustainable, low prices charged by networks, which in one case, at least, has not seen a price change in 10 years. This is a reflection of too many players chasing too little business, even though business for pallet networks has grown significantly through the recession. In such circumstances it is hardly surprising that one player, the UK Mail Group, decided last winter to call time on its UK pallet business, which saw rising costs slash its profits by 60%. Kevin Buchanan, MD of Pall-Ex, admitted: “Customers are not paying enough,” in a cutthroat palletised distribution sector, while the MD of one Pall-Ex member said rates must increase 10-15% to prevent further casualties. One network, Pallet-Track, has done just that, with 80% of its haulier members agreeing to raise the internal rate paid for within the network.
For an industry that has done so much to cut end customers’ distribution costs and CO2 emissions for small pallet consignments of up to six pallets, now is not the time to be squeamish over raising rates because otherwise the external problems they face will only get worse. One of those is driver recruitment which is at an all-time low while orders are increasing. According to the Road Haulage Association, recent statistics show the average age of an HGV driver is 53 and less than 5% are aged 25 or under. Figures from the National Benefits office also suggest that currently there are only enough workers searching for employment to fill one in five driver jobs being advertised. Not helping this situation, it seems, is the Government’s introduction of the driver CPC.
Nigel Parkes, MD of Pallet-Track, said it is no longer sustainable to keep operating at the same prices as back in 2004. “Put simply,” he said “to fill up positions and continue to offer the same levels of high service that our customers have come to expect we need to increase drivers’ salaries and this can only be done by enforcing a nominal rate increase across the network.” He urged drivers and the wider road transport sector not to shy away from making the case for their worth. “The industry cannot be driven on the downward pressure on price. The maths is the same for all the networks. Although price increases may not be palatable in the short term, without them there has to be an industry-wide impact on the quality of service,” said Parkes.
So far slim margins have not deterred the industry from pursuing new opportunities in Europe which, volume-wise, seem to be paying off. Within days of its partnership with Hellmann Worldwide Logistics, Pallet-Track raised pallet throughputs at its Wolverhampton hub to over 10,000 per night.
Palletline now offers an import/export service to 29 countries, while Palletforce membership of the Allnet pan European partnership covers 42 countries. Palletways Deutschland is investing in a bigger hub which should be fully operational this Autumn. The company will be introducing new weights and pallet sizes tailored specifically to the German market, which will open up further opportunities.
If all this investment is to be protected and properly rewarded, however, then the returns must be adequate. The slump in oil prices has undoubtedly given the networks a fillip but that cannot be relied on indefinitely. Charges must go up and there may need to be a two-tier charge – one for deliveries to commercial sites and one for private addresses, as the latter may mean new investment in smaller but properly-equipped vans to cope with surging demand. Maximum tail lift load limits may also be needed to level the playing field.