Not just a pallet network – the pallet network

From inauspicious beginnings in Bawtry, The Pallet Network has graduated to a modern transhipment centre at Rugby, and looks a convincing contender. Peter Rowlands went to see it in action

You probably wouldn't expect one of the most recent arrivals on the pallet network scene to have one of the most impressive hubs. But The Pallet Network, or TPN, would argue that this is just one feature that differentiates it from the crowd.

The company's new base at Rugby, which was given a formal opening this spring, is in a sparkling modern 240,000 sq ft warehouse at Central Park, not far from the M6 motorway. The sleek, metallic structure on its modest eminence is a far cry from the ageing factory units and barn-like warehouses that sometimes characterise new (and even not-so-new) arrivals in this surprisingly crowded market.

Chairman Richard Eldred readily admits the building is actually bigger than the company wanted at this stage in its development. The head office staff have more than enough room to spread themselves out in the capacious office area, and the four potential traffic lanes inside the warehouse provide almost unparalleled marshalling and loading access.

'We were looking for something of around 160,000 sq ft,' Eldred says, 'but when we found that this place was available, it was too good to pass up.' He adds that it's better to have space in which to grow than to run out of capacity too soon.

TPN has not always been able to boast such state-of-the-art resources. When it was launched in 1999, it operated from a relatively modest base at Bawtry, near Doncaster. 'Bawtry was the wrong place,' Eldred says. 'Everyone told us.' He adds wryly: 'The Scots loved it, anyway.'

He says they knew they had to be in the Midlands – and in due course they moved into a 45,000 sq ft warehouse on a former GEC site in Rugby. 'We thought we'd be there for years, but we outgrew it remarkably quickly.' They then moved to Leicester, where they took a former Dalgety warehouse at Wigston. 'But pretty soon we had to add capacity to that. We even took on extra premises down the road.'

By November 2003 the directors knew they needed something altogether bigger, and investigated building a base from scratch. Then they happened on the Rugby site, and the rest is history.

All this movement implies some fairly robust growth, and the figures bear that out. Currently TPN claims to be handling over 20,000 pallets a week – not a vast figure by industry standards, but more than big enough to put the company firmly in contention with the longer-established networks.

There are around 70 member-companies, who among them cover the whole of Britain. The organisation offers next-day delivery to all of England and Wales, plus most of Scotland and the area around Belfast. Three-day delivery is offered nationwide.

The two founders, Richard Eldred and Jim Scanlan (who has since moved on), both had connections with another of the newer networks, Fortec, during the late 1990s. Eldred came from a Yorkshire-based transport family, which operated as the Eldred Group and ran various subsidiaries in areas such as transport and potato storage.

'Around about 1997 I read an article about pallet networks, and approached Fortec to see if we could get involved.' One of the group companies headed by Richard, TGS Freight, was duly awarded a franchise area, and ran it for the network for a couple of years. During that time Eldred got to know Scanlan, who was then managing director of Fortec, and in due course the two left their existing jobs, and went on to launch TPN.

'We struggled for a couple of years,' Eldred admits now. 'The Bawtry location wasn't ideal, and we avoided taking on any Fortec members, so we had to recruit our network from scratch.'

However, he says there was no shortage of applicants. 'We were inundated with applications, and had one hundred per cent coverage right from day one. We soon had to tell people there was no more room at the inn.' But he accepts that building a network so quickly involved 'a huge cost'.

'We didn't charge any membership fee in the early days. We probably undervalued what we had. Hindsight is a marvellous thing.'

Eldred says it was the arrival of a new managing director, Adam Leonard, that proved the catalyst for change. He helped drive through the move to bigger premises, and get the systems side organised. 'Suddenly it didn't seem difficult,' Eldred says.

Adam Leonard had spent many years in the pallet and parcels industry. He was at Nightfreight for most of the 1980s, and then formed his own transport company and joined the Pall-Ex network. He joined TPN in 2003.

There are now four shareholders, among whom Jim Scanlan is still one. Richard Eldred has the largest holding. 'Members sometimes ask if they will ever get the opportunity to be stakeholders,' Eldred says. When we visited the company he told us it was exploring ways of responding to this. 'It might not make any difference operationally, but it could enhance the members' perception of the business – give them more of a sense of stability, of having an influence.'

Since then, in response to feedback from the membership, TPN has announced plans to offer them all shares in the business. Eldred says the company has taken account of how other networks operate. 'It is a model that has worked well for some of our competitors, and we feel it can be good for us,' he says, adding that the move 'is as much an emotional decision to strengthen their relationship with TPN as a financial one.'

Historically, members have paid an annual fee, which covers everything from physical handling services to IT support. As for the accounting, it's very simple. 'Receivers of consignments get one invoice, senders get one invoice. You either pay or get fees.'

Marketing is currently decentralised. 'We don't have any direct sales,' Eldred explains, 'and we never dictate how members should use the network. Some rely on it one hundred per cent for their business, others don't. We never set targets.'

What is clear, according to Eldred, is that pallet networks are currently the place to be. 'After having to keep the brakes on last year, we're on the eve of a great opportunity. Interest among prospective members is enormous.'

He thinks this is partly because customers are becoming more accustomed to the underlying concept of pallet networks. 'Sometimes they actually target hauliers who are known to be part of a specific network.'

This is one reason why TPN takes pains to select and vet its members carefully. 'We're quite rigorous. We don't tolerate prima donnas. It's no good if a haulier is just a big inputter – members have to embrace the culture as well.'

He says one of the keys to TPN's success has been the fact that it is driven by service, not volume. 'We're democratic. We would never sack a member just to take on a bigger one.'

Although the pallet network business has been buoyant in recent years, Eldred is uneasy about being wholly reliant on domestic traffic. 'Eventually we'll need to look beyond the UK,' he believes. Already TPN has a presence in Ireland, and offers next-day delivery to some near-continental destinations such as Amsterdam and Rotterdam, and a three-day service to Belgium, Luxembourg and Holland.

Eldred would like to build further on these beginnings, and put down some stronger roots on the mainland, but points out that the Continent has few pallet networks of the kind we know in the UK. 'No one in this market has yet found the perfect network model for foreign expansion.'

One of the changes brought in following the arrival of Adam Leonard was the introduction of a computer package from ZipZAP, which he got to know in a previous company under the name ParcelTrak. 'It's a long-established system, and it works.' He points out: 'Having real-time information isn't really relevant in this business. Failure is the exception, not the norm, so that's what we need to report on.'

All TPN members now use the ZipZAP system. Data is passed round the network by FTP (file transport protocol), and features include an online proof-of-delivery system using scanned documentation. The system takes care of all the obvious functions like manifesting, 'and there's depth if it's required,' Leonard says.

As with most pallet networks, TPN likes members to operate at least some of their vehicles in its corporate livery, which has recently been updated. 'Some make strong play of the branding, others don't,' Eldred says. 'It's their choice.'

He is also highly enthused by the image presented by the new hub. 'We're massively proud of it. We want very single customer to come and see it.'

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