Hub of the matter

As there is more and more demand to reduce road miles, it may be some comfort to know that every UK business is within six miles of a pallet network member company. That's the average figure quoted by the Association of Pallet Networks, which represents the leading pallet network organisations in the UK. Twenty years ago, there wasn't a single pallet network business on the logistics landscape, let alone an association to represent them. This is a high growth sector that began in 1992, when Palletline claims to have been the first pallet network to be established: "The Palletline concept is the blueprint from which the majority of pallet networks were born," says the company. The claim of Palletline and other networks like it – Palletways, Pall-Ex and Palletforce among them – is that the hub and spoke structure enables a highly reliable, economical and 'green' method of transport. It's a claim backed up by many manufacturers who use these services. Suncrest Drinks is one: the Hayes, Middlesex-based premium juice manufacturer uses the Palletways network to distribute its products to retailers and wholesalers in the UK and Europe. Suncrest wanted a local distribution company that could offer the flexibility it sought – it chose Palletways London, the site of one of three UK hubs for Palletways which also operates as a service provider in the local area. Palletways London collects goods from Suncrest and transports them to the London or Lichfield hub, depending on final destination. Goods are sorted and distributed to Suncrest's customers by the Palletways members covering those areas. Key for Suncrest was the ability to monitor all consignments throughout the delivery process, with barcoding and web-based tracking information. Proof of delivery information is available online the day after delivery has taken place. Suncrest's Neelameham Nishankan says: "It's vital to the success of our company that we have a reliable pallet network to deliver goods to our customers. Using a pallet network is the most cost-effective way of fulfilling orders and ensuring our product remains competitive." Wider offer Despite the boom in pallet network operators, not every pallet, of course, is moved by this type of organisation. There are other logistics service providers for whom palletised distribution is just one string to their bow. Norbert Dentressangle Transport Services (NDTS), for example, moves around 10,000 pallets per day in its shared user network which has 11 UK locations, 450 vehicles and 1,500 people. Shared user differs hugely from shared owner, says managing director Mike Bridges: "We do have a shared user capability and it runs along similar lines to the pallet networks – like them, we have a number of depots but ours are all wholly owned assets so they are our own sites, running our own vehicles with our own drivers. That gives us a level of consistency that's not there with a pallet network." The consistency point is a good one. Most pallet networks have several layers and the network itself is at the centre – the hub – but it is not customer facing, either at pick up or delivery point. Instead it relies on a team of hauliers to represent the brand and network – all of whom must be carefully selected and monitored. Bridges argues, however, that this could compromise service quality when compared with logistics businesses, which can offer the full gamut of distribution services. "That's our key differentiator from the pallet networks," he says. "We can offer a full suite of services. If a client has sufficient volumes to justify some dedicated transport, we can do that and we can do it in their colours if they wish. Plus we can use our shared user network to support that arrangement in outlying areas and to cope with volume peaks. It enables the client to minimise fixed costs and optimise variable costs." NDTS's ownership of its shared user network also means that each spoke of the wheel uses the same system to capture data on health and safety performance, environmental monitoring, and so on. "We do have some partners in certain geographic areas... but 90% of our UK palletised business is collected and delivered on our red vehicles and that's important. The image at delivery point does matter to manufacturers – it's ultimately part of the service they offer to their clients. To have a good vehicle with a driver who is trained in customer-facing issues and who wears a uniform, that makes a difference." NDTS also services the automotive sector with overnight (pre-8am) delivery of aftermarket parts for the likes of Ford and Saab. Bridges says the business is looking to expand that overnight offer to other sectors. Manufacturers already using its daytime palletised delivery offer include radiator manufacturer Rettig, window maker Velux, Comma Oils and several in the chemicals sector including US-owned Scott Bader. NDTS has also established pallet collection for some clients – Rettig is one – if they use bespoke pallets. "The challenge with pallet returns is to do it cost effectively," says Bridges. "It has to be possible to do at or below the cost of a new or refurbished pallet. Rettig has several sized pallets which are bespoke for them and obviously more expensive to replace, so we manage the return of those pallets through our network." NDTS also works with CHEP and its pallet pooling system (see box overleaf, p46). Palletised distribution is a tough, price-driven business, admits Bridges, but one in which NDTS is winning. "We have to be competitive, obviously, but people choose us for overall service, for supply chain visibility and our ability to be a true logistics partner rather than a pallet carrier." Some new business is won from pallet networks; other wins come from converting in-house operations to a mixture of dedicated and shared user services. "That's becoming more common... when the financial crisis hit, people realised they had lot of fixed costs in their supply chain and they wanted more flexibility and a better pricing model. That's our bread and butter, managing volume variations for clients." Comparing like with like If you think that pallet networks are a commodity offer, then think again. Worksop-based Robinson Healthcare found that pallet networks are certainly not all alike when it evaluated several offers as part of its logistics operation review. Robinson's Worksop site employs 160 and makes more than 600 products, from professional medical items such as single-use stainless steel instruments, cotton wool-based products for personal healthcare, to bandages and dressings for animal healthcare. As an ISO9001-certified business in the healthcare market, precision and traceability are crucial to its success. When Steve Braisby joined the business as warehouse manager two years ago, his task was to review and rationalise the existing transport arrangements. Within six months, he had reviewed site traffic and reduced four hauliers to three, but he wanted a single supplier and put the business out to tender in December 2009. He chose United Pallet Networks (UPN) via haulier DBL Logistics. Typically, 100 pallets a day leave the site. Of that, says Braisby, 70 are sent via DBL and the remainder go out on backhaul for a major retail customer. As well as retailers, the pallets are sent the length and breadth of the UK to hospitals, primary care trusts and wholesalers. "The varied customer base means very different demands," says Braisby. "We deal with three of the major supermarket retailers who buy about six product lines each, mostly cotton wool products. They order by the pallet load and order today for delivery tomorrow. Most of our other business is ordered for a 48-hour delivery." When he evaluated the tenders, Braisby said the DBL/UPN offer not only improved service levels but cost less, too. At the time, Robinson Healthcare was still operating two of its own vehicles which were nearing the end of their lease. "At first, we used our own trucks in parallel with the new arrangement, but during that period our trucks were used less and less because we couldn't match the service from DBL/UPN. It became less cost effective, so in March this year DBL took on the rest of the traffic from those two vehicles." Financially, it was a no brainer, he says: "When we put costs into a matrix and worked through DBL's offer, it saved us £25,000 a year by binning our own vehicles." Eliminating the headache of route planning was also a major advantage, says Braisby: "There were only two 7.5 tonne vehicles, carrying 16 pallets each usually, but we had one lady who spent much of the day working out routes. What's more, we couldn't offer customers flexible delivery options with these vehicles. Now, however, it's a much more adaptable way of working and customers can have deliveries when they want them." DBL provides Robinson Healthcare with a stand trailer and half an hour before it is full, someone calls the logistics firm to come and take it and leave another stand trailer. "It's much more efficient and means we can load all day. With our own vehicles, we had to wait until they reappeared before loading. That could have been at 7pm, so the dock was full of goods for the whole day. This is a much more efficient method." Did Robinson Healthcare buy into the offer of the customer-facing business – DBL Logistics – or that of the pallet network it represents? Braisby says both. "We talked to about 10 hauliers at first. We met a few and eventually shortlisted two based on price and how comfortable we felt with the people we'd be dealing with. "We liked both shortlisted hauliers and asked them to take us to visit their respective pallet network operator. When we visited UPN, it was immediately apparent that their business ethics mirrored our own – they were very customer oriented. We felt confident they would listen to us and take us seriously. With the other pallet network, it was all about numbers. We've chosen a very good haulier and a very good pallet network – it's not a faceless organisation where you are just one of a number." pallet pooling The Commonwealth Handling Equipment Pool (CHEP) is a global pallet and container pooling service. The business evolved from an organisation developed by the Australian government to handle defence supplies during the second World War. It was privatised in 1958 and sold to Brambles, which still owns the business today. Its aim is to ensure continual circulation of pallets throughout the supply chain. CHEP pallets can last up to 10 years, so providing greater environmental and cost benefits than traditional non-sustainable timber or disposable alternatives. It has service centres where waste wood is turned into chips for boilers. Clients are typically in the FMCG sector, though it also is expanding into other sectors. Customers include Heinz, Premier Foods, Diageo and British Sugar, with its automotive container pooling offer used by Jaguar Land Rover and Ford. Discovery Foods, for example, has been using CHEP's equipment management service since July 2009. The agreed priorities were to reduce pallet losses and to cut costs. After 12 months, pallet losses had reduced to zero and the business was able to hold less stock, giving a saving of £102,000 on the previous year. Not surprisingly, therefore, Discovery Foods renewed the contract: "The main reason we re-appointed CHEP Equipment Management is they are pallet experts while we are not. The benefits achieved during the first year clearly show that appointing them was the right move and I pay full tribute to the team at CHEP," said Discovery Foods' supply chain manager Claire Lambert.