Coming of age – Palletline feature

The idea sounds so good, simple and obvious, it is odd that no-one thought of it before. Yet until ten years ago the overnight palletised goods networks did not exist. Now the networks are some of the fastest growing parts of the haulage market, and the daddy of them all, Palletline, Is celebrating its 10th birthday.
It was on February 1,1992 that the first 51 pallets took to the road and were distributed to the Initial 19 members. The company has now grown so much that it notched a record night on December13 when 6,500 pallets were moved through the system.
The legend is that at the end of a long and very enjoyable RHA evening, a group of like-minded operators found themselves saying ‘what are we going to do’, says Steve Hayward, Palletline managing director. The group were faced with the severe recession together with the demands of customers for national distribution of small quantities of goods that could not be economically handled by local hauliers.
Customers were saying ‘I need a pallet moved from say Bristol to the other end of the country and I need it there by lOam tomorrow, but I am not ~re~ared to pa~1 for a lorry to go there with just one pallet aboard’,says Hayward. The local hauliers had to find a way to compete.

HUB AND SPOKE

The group included Bob Russett, now RHA national chairman and chairman of Palletline, Cohn Sturgess of Collins Road Services,
Uxbridge, and John Watt of Kenny Transport,Peterborough.
The answer they came up with was to follow the parcels companies, and use a hub and spoke system but for pallets. To begin with it did not even have its own hub, but used a West Midlands haulier’s dock.

PROFITS

It started as a defence system with the hauliers using it as almost a dumping ground for freight they did not want to carry. The idea was that Palletline would break even and add an extra service to its member’s customers. Very quickly, however, it grew into a very important part of the member’s businesses and a source of profits in its own right.
In many ways the idea was really a shared-user network. Ten years ago many of the big logistics companies ran their own shared-user systems. Now the majority use companies such as Palletline. “We have freight from Wincanton, we have freight from Exel. For them it has become a peripheral part of their business but for us it is our core business,” says Hayward.
Salvesen is one of the few among the majors to retain its successful shared-user network.
After Palletline came a number of other pallet networks and the number is still growing. Each, however, is run in a slightly different way. Palletline, for example, is owned by its members. Each must have at least a thousand share~ in Palletline plc but they can have up to 20,000. “There are a number of companies with the maximum, a lot with 2% to 25% and a number at the smaller end,” says Hayward.
In December 2000 Palletline plc paid its first dividend (for the financial year 1999/2000). Until then profits had been retained within the company to build what is still a young business. “Because of its success in the year to the end of June 2001, there is another divided to be paid — this one 66% up on the first one,” says Hayward.
While dividends are useful, the main benefit to members is in the operation of the system.

NETWORKS

There is an agreed rate structure within the network, based on post codes. This means that when one member has freight to be delivered, he pays a fee directly to the member who is delivering the goods. The sending member also pays a handling fee to the hub. So the member who originates the movement knows from the rate structure and the hub charge, exactly how much it will cost to send the pallet to the customer.

ENTREPRENEURS

That member is then free to charge whatever rate he wishes to the customer. Palletline does not dictate how much the customer is charged. “You can get some quite dramatic regional variances,” says Hayward. “We think individual entrepreneurs should be responsible for their own revenue, and they have their own payment terms and contractual arrangements.”
Neither does Palletline get involved with the payments between the sending and the delivering member.
Each member has to send at least one livened trailer to the hub each night and they must have a livened distribution vehicle for every 20 pallets they deliver on average each day.
The only complication to this is that Palletline also centrally has a number of big customers. “These tend to be shippers of larger volumes. If you have a customer who has two to three full trailer loads a day, it makes more sense for them to feed it directly into the distribution centre,” says Hayward.
In these cases Palletline is the customer and it charges itself for use of the hub. “That gives us a very useful insight We have a customer services department here which acts as a facilitator for depot-to-depot enquiries, and it is useful if we are also shipping freight into the system every day.
“We quickly pick up the nuances of whether the depots are up to the standard we want them to be,” says Hayward.
Checking each member is important From September Palletline has had a senior quality manager for the network to ensure that all is well. Accounts of potential members are checked, customer references taken up, and 0-licence and maintenance records gone through. They also look at the quality of the fleet and how well the vehicles are looked after.
Since the launch many other companies have moved into the pallet networks market, includinq Palletways, Pall-Ex, Hellmann, Fortec and last year Palletforce. Palletline reckons it is market leader in terms of the number of pallets it moves, although this Is difficult to judge as each company keeps its figures confidential.
It is true that Palletline with 45 members Is smaller than Palletways or Pall-Ex each with around 70. “I believe our ownership structure drives a different philosophy. If their key personnel are at the centre, then they may be more volume driven than an organisation whose members are the owners.

VOLUME HUNGRY

“That is not to say our members are not volume hungry but not volume hungry at any price,” says Hayward.
He firmly believes that its members can properly cover the country. When necessary it does divide up areas, bringing in new members or assigning new areas to existing members some five new members have joined in the past three years including companies such as
Andrew Wishart & Sans of Kirkcaidy. Same of the Palletline companies are very substantial. They include Gregory Distribution, the Stiller Group, Europa at Erith, and Roadferry, part of the Mersey Docks and Harbour group. But the more typical Palletline member has a turnover of between £25 to £5m. Of this, on average, between 40% to
50% comes through Palletline work. Same, such as Pennine Parcels in Halifax. are almost entirely doing Palletline work.
If you visit a pallet hub don’t expect to see the sophisticated conveyor belts and computer systems of the parcels companies. A pallet hub is often a large covered area into which the trucks can drive, an area to place the pallets, and lots of fork lift trucks to move them to the right vehicle.
But there is investment into the business. Two new hubs opened last year — one in Reading and one in Preston — to cope with the extra business. A full time finance director joined, as well as the quality manager.
In some ways imitation is a compliment, and the number of
companies that have followed Pallet line shows the original idea was outstanding. It has achieved far more than it originally set out to do, and together the networks have opened up new business for local hauliers.
“I don’t think we are nearing saturation,” says Hayward. He argues that an economic downturn might be as good as
an upturn for it as companies send smaller loads and look how to send goods more efficiently. He also reckons that the Working Time Directive could be good as more goods will have to be delivered by networks.
But he also points out: “We have no divine right to any business. Like a shopkeeper, when we open on a Monday
morning we have no business, no guarantee.
“Customers trading through the Palletline system are not or long-term contracts. There are lots of comparisons with the parcels sector. That has moved significantly from being service led with people saying we are best for service, to a commodity mindset among customers where buyers, sometimes significant shippers would say, take 50 off and I will come to you.”
That is a battle for the future In February Palletline celebrates both its first ten years and the remarkable achievement of opening up an entirely new sector in the industry.