News

I have been reading articles that claim there is room in the pallet network sector for an additional network. On one hand I find these claims somewhat amusing but on the other I have a real concern that they could potentially be misleading transport companies considering entering the market. It has been a while since the last network failed - shortly after its launch - so I have no desire to see the same thing happen again because it causes damage and embarrassment to the sector as a whole.

The main factor that controls the number of successful member depot pallet networks in the UK is simply the number of quality independent transport companies operating in this sector. There are currently nine pallet networks operating in the UK sector with the mature networks operating an average 90 depots each. This equates to a total sector requirement of around 800 transport companies - if all of the current networks survive and the smaller, weaker networks are able to develop fully over the next three years.

The fact is, that there is an estimated shortfall of 150 transport companies within the existing networks. At least three of the smaller networks, to my knowledge, already have to share depots in difficult areas. Therefore, in the current climate, it is quite likely that at least one of the weakest networks will eventually fail to maintain coverage and collapse so where is the room for another such network?

It is easy for a wannabe hub operator to get confused  about the market. It sees pallet volumes continue to increase and the established networks flourish. Sector growth has been reported as 25% over the past 12 months, although I think you can halve this figure to get a true picture.

However, in reality these high volumes create a further barrier for a potential new pallet network to overcome and one that should not be underestimated. As a direct result of these high volumes, members belonging to the larger networks have been able to increase their local vehicle productivity/revenue as the travel time between drops has been reduced.

In a highly competitive market it should not come as any great surprise that end user rates have subsequently hardened over the past ten years. Transport companies that are seriously considering joining a new network should be made aware that their travel time/distance between drops could be up to 15 to 20 times higher than their local competitors. Members that belong to the smaller networks frequently change networks for this reason so a new network will also find it difficult to hold onto their better depots.

I have some clear advice to transport companies that are considering entering the market: be extremely diligent and approach all of the well-established networks before making any decisions.

Talk to as many quality transport companies as you can that belong to different networks (especially if they have changed networks) and ask the hub operators to back up claims with proof don't just believe everything you are told.

Find out why your postcode area is available and make enquiries to establish if the network is experiencing any degree of member depot churn. Make sure that you understand the real "cost per pallet" of operating the trunking as well as operating the local deliveries and collections.

Joining a pallet network is a great opportunity to develop your business providing you fully understand the commitment, join the right network for your company and take your time before putting pen to paper.