Spreading The Word

Advances and challenges in palletised distribution

Palletised distribution has evolved, developed and grown since the subject was last discussed in Eureka. Networks have extended to span whole continents, technology has advanced to speed the flow and visibility of goods, and much-improved road networks have elevated it to the first choice of many supply chain managers. Ruari McCallion returns with a full load.

When we last looked at palletised distribution in Eureka magazine – 15 years ago, in 2009 – the concept, which was cheaper, faster, more flexible and convenient than full-load or parcel transportation, had already taken off in the UK. It was growing in acceptance across Continental Europe, too.

Palletways now operates over 400 depots and 17 hubs across 20 countries; in 2009, it had around 250 – and that was significantly up from its total of 120 at the beginning of the century. Palletline has also grown beyond its UK origins and now shifts five million pallets a year across Europe.

Back then, we were already seeing signs of consolidation in the market. Big players were moving in, taking over regional and even national outfits and building pan-European networks. Palletforce, based in Burton-on-Trent in the English Midlands, is now part of EV Cargo, for example.

Hong Kong headquartered EV Cargo operates in 150 countries and is a USD1.5bn company. Its UK operation handles over 100,000 domestic pallets a week and has a particular presence in the SME sector.

Technology for improved visibility

The fact that Palletforce is now part of a global organisation underlines the point that palletised distribution has become worldwide. A common factor in the growth of networks in Europe, North America, Asia, Australia and elsewhere is technology. IT companies like Oracle offer real-time tracking of RFID-equipped supply chains across the world.

The Cloud means that transport and tracking data can be accessed anywhere, any time. But all of that would count for little if different legislation and standards at each international border brought trucks juddering to a halt.

The move to cross-border standardisation in Europe got solidly under way with the establishment of the European Pallet Association in 1991. The Europallet, EUR 1 or EPAL pallet, is taken for granted, now, but it took a while for the size (1,200 mm by 800 mm) to become the common standard – in the EU; UK pallets may be EUR 2 standard, which is 1,000 mm by 1,200 mm and is also the more common size in Asia. North America’s pallets are slightly different, but very close to EUR 2. Australia’s are square, measuring 1,165 mm x 1,165 mm.

Thank goodness for fork positioners!

Reducing legislative hurdles

The USA and Canada have had integrated transport infrastructure since the Second World War; their freight networks cover the entire continent, north of Mexico. In Europe, the harmonisation of regulations has cut down the number of different types of pallets that have to be used. However, that is far from the only reason for the growth of Europe-wide networks.

Initiatives like the EU Customs Union, Schengen Agreement, single market and single window for customs allow for smoother cross-border operation and the digital exchange of essential trade information. Risk-based controls enable resources, including border checks, to be focused on high-risk shipments, which means that lower-risk consignments can be moved more quickly. The EU’s Customs Cooperation Network enables exchange of information in real time and, at least in theory, facilitates faster responses to actual and potential compliance issues. The EU also offers regular training and compliance programmes[1].

Bigger players want bigger loads

The nature of palletised distribution networks has evolved. For a long time, a primary attraction of the hub-and-spoke distribution model, with local operators collecting small consignments from diverse businesses that were consolidated into truckloads in regional and national hubs, was that it was seen as a flexible, agile and adaptable, convenient offer to SMEs. These make up the majority of businesses in supply chains across all industries and countries. That model persists, but larger organisations, including automotive Tier One and OEM companies, also take full truckloads.

The model works fine so why change it? It does up to a point. Just-in-time (JIT) lineside deliveries tend to rely on more frequent but smaller deliveries. However, if you take a step back and look again at lean manufacturing paradigms, the warehouse becomes a wasteful enemy of Lean only when it isn’t efficiently managed, when a series of buffers add up to a supply chain ‘pregnant with inventory’.

In The Machine that Changed the World, by James P Womack, Daniel T Jones and Daniel Roos, the Tier One and OEM level organisations supplied JIT to lineside from a supermarket – a warehouse, but a very efficiently managed one, where supplies were called off from the line and delivered to lineside as and when needed. In that situation, the mixed consignment being trucked into the OEM is a mixture of components all intended for the same place, rather than different items for different customers. The pallet loads may be time-scheduled for final delivery to a particular line as a particular model comes down, but the concept of consolidating mixtures of products in single truckloads remains the operational basis.

The Brexit effect

Just as things were going swimmingly and increasingly smoothly, along came Brexit to put a bug in the ointment. Undeniably, it has led to more paperwork, customs declarations and increased administrative workload, and costs have undoubtedly risen because of customs checks and the need for customs brokers. (An upcoming Eureka article on cross-border checks will look at this topic in more detail.)

Shelley Pierre, Commercial Director of international pallet pooling company IPP, which is part of the Faber Group, estimates the additional costs at around £200 million (€237 million). Mixed consignments could be particularly awkward, especially if they contain different types of higher-risk products from different producers. At first glance, it could be the death of palletised distribution for farm produce distributors.

Or maybe not.

Wyke Farms, a dairy producer in Somerset, England, has established a new logistics consolidation centre that helps mitigate delays and increased paperwork by collaborating with other producers, including competitors, and consolidating shipments into fewer, larger loads. By pooling resources, Wyke Farms and its competitors can share the costs.They use advanced logistics software to manage and track shipments, ensuring that all parties have real-time visibility into the status of their goods. Successful collaboration requires a high level of trust and transparency, but they also sign non-disclosure agreements and use encrypted communications to keep sensitive information confidential.

Wyke Farms still operates primarily from its Somerset home, but Hampstead Tea Company has relocated a stock warehouse to northern Europe. This has enabled them to build a direct-to-consumer business in the EU. The bug in the ointment may be more like the grit in the oyster: the irritant that produces a pearl of better location, increased cooperation and improved efficiency.

The needs have changed but the palletised model continues to demonstrate its agility and adaptability.

[1] Driving Cross-Border Trade Compliance: Europe’s Strategic Approach – International Trade Council.