Year: 2003

The first palletised distribution networks appeared nearly ten years ago. Today, the market is worth an estimated £2Bn a year and is rapidly becoming a major force to be reckoned with Companies such as Sainsbury’s, B&Q and Debenhams already use the networks, and even the Government is researching the sector. We take a cursory look at why the networks are in such high demand.

No matter who you talk to among the pallet distribution networks, the saying is the same – “We don’t want to be the biggest, but the best”. Modest words from an industry that is currently in great demand and clearly has something to offer the supply chains that third-party logistics providers (3PLs) are either unable or loathe to do.

The pallet distribution business is estimated to be worth a potential £2Bn a year. It comprises at least eight “pure” networks – Fortec (part of Geodis), Pall-Ex, PalletFORCE, Palletline, Palletways, The Pallet Network, the United Pallet Network and Weaver, which has recently been bought by parcels company Business Post. Between them, they handle about 30,000 pallets a night in a market that is claimed to be growing by at least 25-30% year-on-year in terms of volumes.

Reduced congestion

B&Q Logistics has five distribution centres (DCs) around the UK and is now using Pall-Ex to collect products from its ten or 12 suppliers. Glen Goswell, of B&Q Logistics, says Pall-Ex takes the suppliers’ products, consolidates them and then delivers them to the DCs. The benefit to DIY retailer B&Q in using a pallet network, says Goswell, is that congestion at the DCs has been reduced. Instead of receiving deliveries from ten or 12 vehicles there is now just one, he adds. In addition to B&Q, Pall-Ex also has a contract with high street retailer Debenhams, which it has held for two years.

Palletline has just become the nominated carrier to handle single pallet deliveries from suppliers to Sainsbury’s. A spokeswoman for the supermarket chain says Palletline is one of several companies used and “came on board” at the request of the suppliers.

So what is the attraction?

If you talk to the networks, teamwork, quality, cost-effectiveness and efficiency are the key words. For the end user, on the other hand, a major advantage of using a pallet network is that less congestion is created at distribution centres as fewer lorries are needed.

Hilary Devey, founder and managing director of Pall-Ex, believes shared-resources and greater flexibility with peaks and troughs are also major advantages that the networks can offer compared with 3PLs. Cost reductions can also arise through consolidating loads as DCs can reduce labour and the number of days the DC is working. Savings of 30% are feasible, says Devey.

Julian Maturi, managing director of Palletways, says his company and Palletline (the two oldest networks) recognised there was a gap in the market. “What has happened over the past three or four years is recognition that we’re not now a fledgling industry. It’s matured as an industry and we’ve got credibility.”

He continues: “We’re quite happy to put our IT against some of the major 3PLs and say ‘have you got something as good as this?’. It’s a niche market, and a growing niche market. It’s significantly outstripping the logistics market place.”

Fortec director Rod Abrahams offers another theory – security. He explains: “You can shrink-wrap 20 boxes on to a pallet and straightaway, you’ve got a security element. Also there is reduced damage because of less handling; split consignments are more or less eliminated; and there will also be cost savings.”

Abrahams believes that even the logistics companies are now seeing the benefits of pallet networks, and Fortec is targeting such companies in terms of providing quality. “We’re not just after volume.”

Incentives

It is thought among the pallet networks that “the Exels and the like of this world should be able to run rings round us”. But that is not happenin