Thursday, 10 June 2010

Palletised Networks Could Save Billions

Logistics costs in Western Europe roughly accounted for 6% of sales in 1995*, and is unlikely to have changed much since then, yet means that exist to cut those costs sharply are still largely ignored or misunderstood. A glaring example is the pallet exchange shared network, a concept exploited in Britain for the last 18 years. Within the logistics sector, transport soaked up 1.75% of sales but for France, a relatively large country with a scattered population, it was 3.5%. Revealingly, however, for medium-sized firms it was 4.5% and 2.75% for small firms. This shows how much scope there is for cuts when SMEs, in particular, switch over to shared pallet networks.

In the early stages, the hub and spoke principle behind this shared network concept was confined to 1-6 pallet loads per consignment, which network member hauliers would deliver to a central hub for decanting and reloading onto other member companies' vehicles to trunk back to their regional depots. The great advantage was that vehicles could make outward and return journeys fully loaded, rather than run empty one way. This greatly impacts costs, the environment and even safety. So why is it then that, according to Palletforce, a major network player, that there are still many business leaders who do not understand or know about the benefits of shared network, palletised freight distribution, which last year accounted for only 10.5 million pallet movements in the UK?

The answer seems to be a lack of identity, so much so that businesses often mistake such operations for pallet manufacturers! A more intelligently-honed and robust marketing exercise nationally may be needed to break down the ignorance barrier. The current recession, however, may give a push in the right direction as it is making businesses focus more on their supply chain costs and there is a growing realization that pallet networks offer a viable alternative to inhouse/dedicated solutions, says Pall-Ex, another major network player.

Since the early days, the palletised shared network has branched out in may directions and invested heavily in IT systems to make operations slicker and more profitable and, unwittingly, perhaps, much safer in ways that the industry little imagines. Today, the networks offer full, half, quarter, micro pallet distribution and even ugly pallet loads that do not fit in with the rest of the load. Delivery service choices vary from express next day to 2-3 days.

Security investments, like CCTV and product tracking throughout, are also widening the market, believes Fortec Pallet, so that high value goods, for example, hitherto considered unsuitable for pallet networks, can move with owners' full confidence.

Many network users also look for green initiatives and so Pall-Ex developed Eco-Drive, which uses in-bound vehicles to take back recyclable waste rather than using a skip and separate waste vehicle. At the hub, the waste is baled and Pall-Ex's partner in the scheme, The Green House, collects them once there is a full load for recycling, thus avoiding landfill sites.

The networks have also taken on the big third party logistics (3PLs) companies by offering much more than a mere haulage operation. This includes storage, re-packaging, order picking, sorting, direct line side deliveries on trolleys or in roll cages and overseas haulage.

This British pallet network model is undoubtedly exportable, which can be refined to reflect individual national conditions, believes Pall-Ex. Already Pall-Ex has tied up with an Italian partner, Alberti e Santi, and has now decided to take its model to the Iberian peninsula, Poland and the Benelux countries. Extensive market research confirms that similar supply chain demands exist at different stages of evolution in other European economies.

Pall-Ex believes that the green issues will convince responsibly-minded corporations that pan-European pallet networks are the answer to reducing the carbon footprint of the logistics industry on a national scale.

Other companies, like Palletforce, are using IT investment harnessed to forklifts not only to improve efficiencies but also safety on roads and sea. One innovative example is a new scanning and dynamic axle weighing solution, claimed to be the first in Britain. This allows every pallet to be tracked and traced from the moment it enters the hub. When a forklift touches a pallet, a laser beam reads its barcode to transfer the information to the IT server, including the weight, performed by the forklift's weigher. The server then instructs the forklift driver to go to an appropriate outbound loading bay --a good example of cross-docking. As the pallet weight is known, the forklift driver can load it correctly onto the top and bottom decks of the outbound lorry. This maximises the weight that can be safety loaded and so eliminates issues of overloaded vehicles.

There is, however, a potentially far more important safety issue, given the development of integrated European-wide pallet networks using sea-borne containers or trailers. For many years, container stuffers/consignors have deliberately under declared their container payloads to swindle shipping lines and governments out of billions of pounds every year. When the MSC Napoli container ship was beached on a Devon coast several years ago it was found that 20% of the above deck containers were at least 3 tonnes heavier than was declared and in one case, 20 tonnes. This has grave consequences for ships' safety, given the need to avoid adverse stability and hull stress issues, and was a major factor in the Napoli's foundering.

Container shippers know that they can get away with overloading so easily because there is, as yet, no requirement in European ports to weigh containers. Instead, ports take on trust the shippers' payload declarations. Mandatory weighing will come at ports but meanwhile Palletforce customers shipping trailer loads overseas can do so knowing that they are complying with the law and safety issues. When such port weighing is mandatory it would make sense for container stuffers to use their own forklift-fitted weighers, rather than wait for a port operator to 'phone them to sort out their overloaded containers, which could mean missing sailing times.

Most, if not all, pallet network members now use double deck vehicles, a still, as yet, underused way of transporting goods efficiently. These vehicles can carry 67% more goods than single deckers and so cut down the carbon footprint and wasted money. UK road congestion alone is estimated to cost £25 billion a year. They do, however, require special handling equipment at depots, usually scissor lift deck pods at loading bay doors, as ordinary dock-levellers could not cope.

The good news with double deckers is that there seems to be, at last, a sharply rising uptake of their palpable advantages. How much longer it will take for Europe to realize the huge benefits of palletised exchange networks is anybody's guess, but the longer it takes the more billions of pounds will be lost annually.
*European Logistics Comparative Costs and Practice 1995. Institute of Logistics, Corby, UK