The Fortec Way to better profitability

A year after taking on the role of commercial director at pallet network Fortec, after 13 years looking after the finances, Marcus Fischer reflects: "It’s been an interesting 12 months. We have taken the next big step in Fortec’s evolution. Our MD Neil Hodgson and I spent 2012 refining the network and creating a solid business. My new role helps take Fortec on the next stage of its journey."

As an important part of this process, Fischer spent lots of time last year on the road talking to many of Fortec’s partner members, finding out in which direction they wanted to go.

"I said a year ago that we are a big family and, whatever we do, we do it for our partner members with consultation," he says.

One result of this new culture shift has been the replacement of some members with new partner members who share Fortec’s values.

"We have let some members go to ensure a consistent approach," says Fischer. "We had some very amicable exits and they were replaced with people who embrace our vision."

The Fortec Way

Fischer is clear about what that vision is - to build a culture that promotes ‘the Fortec Way’.

"We have to continue to define our product differentiation and monopolise on our niche," he says. "Fortec and our partner members need this ammunition to sell a good product and we need to do it together. We need to be totally consistent in what we do."

Despite the fact that the recession has taken its toll on traditional family hauliers, Fischer says there are still good quality operators out there, some of whom are only now coming to a pallet network for the first time.

"There are not the people out there that there used to be, but there are still a lot of operators that have never been in networks," he says. "Probably three quarters of the partner members we have taken on have never been in a network before. We have worked with them to successfully integrate their businesses."

Fischer explains why new partner members joining the Fortec network can expect to experience a relationship that is unique in the pallet sector. "If you join Fortec you are joining a network where we promote ourselves in focused vertical markets," he says. "Products carried are high value and tend to be time sensitive. Our average pallet weight is just under 300kg, lighter than other networks. We work closely with our partner members giving them a platform to sell on and keep margins where they need to be."

High value

Working in high value product sectors means service is more important than price.

"If we are carrying pallets of goods worth hundreds of thousands of pounds, the transport element of that is small, so while price is an issue it is a lot easier to negotiate. We aim to steer clear of those markets where the transport element is the difference between profit and loss. Then price is the whole determining factor of whether you get that work," says Fischer. "If you are carrying laptops, pharmaceuticals or fine wine, first class service will be paid for. We are putting ourselves in a position where the members can keep selling in our niche."

Selling used to be something Fortec’s partner members were not expert at, but this has been changing for some time. Here too head office is continuing to support the membership.

"We help some of our partner members with sales and customer service training," says Fischer. "We ran sales courses last year and will run further sales courses in 2014. In addition customer services courses are planned.

"We have also created assisted sales within Fortec to support partner members’ sales efforts. We have partner members who are involved in our internal telesales support function."

While most business is generated by the membership, Fortec launched a corporate division in 2012 to attract national blue-chip customers to the network.

"We have a number of accounts that are managed centrally, mainly national businesses who wanted to deal with Fortec direct," explains Fischer, adding "it will not compromise our partner members. We had one main account come to me to see if we would do the part of his work that another of his partners does – desktop deliveries. I said no because it isn’t core business."

"The issue wasn’t price," he continues. "The issue was that our network does not do that. We do not take pallets upstairs, decant them or take rubbish away. We do kerbside drops, shop deliveries, B2B – and we do that exceptionally well. I don’t want to embark on something that we will not be successful at, adversely affecting efficiency and profitability."

Online shopping

Fischer stresses that Fortec is not turning its back on the B2C online shopping boom and will embrace the opportunities that fit the Fortec profile.

"Nobody can ignore online retail business - it’s the future," he says. "We will operate it in the same niche we do with B2B. I don’t want our members carrying 1t bags of cement or stone to drop on people’s driveways. That’s what some other networks do and good luck to them. But their members will require additional resource over and above normal pallet work and we won’t do that. We have made a conscious effort not to go into any low margin market.

"Lots of people work or run small businesses from home so it isn’t really B2C in the true sense of the word. We have to get our network to embrace the future and one of the major areas where we have responded to that is our new online signature capture. When goods are signed for they are visible within an average of six seconds of signature on our system. That embraces the online business which is B2C but is really B2B. We have to give people tools to sell and sell profitably. The customer wants to see the signature for goods delivered on time and undamaged."

Tracking pallets through the network is a key element of Fortec’s quality service that Fischer says customers will pay more for.

"If you look at how we record shipments through the network, the full life of that pallet is tracked all the time," he says. "It is very visible – there is no hiding. If we said it would arrive at 9.25 and it wasn’t there at 9.25 that will show up. Failures do happen but the worst thing for a partner member is when the first thing they know about it is when the customer calls them. If there is an issue we will get on the phone to the customer and explain what has happened."

Enough to go round

Turning to the industry in general, some observers have been surprised that all the UK’s pallet networks have survived the recession, but Fischer believes there is enough volume in the market to go around.

"I think there is room for nine networks in the UK," he says. "It is said that the network model flourishes in a recession and when the economy rises out of recession it will go the other way. But even as the economy stabilises there will still be cash restraints within the industry. There are lots of views on lending – there is a limited amount of cash to fund expansion and people have learnt bitter lessons, so it won’t go back to the old ways. The pallet networks have matured and have become a cost effective force – I can’t see that going backwards."

This, he says, is partly because pallet networks are especially cost effective for small, frequent shipments, and even though the recession may be over retailers are unlikely to want to go back to bigger, less frequent deliveries.

"Smaller consignments delivered more often is the pallet network model," says Fischer. "The main reason one of our corporate accounts came to us was because their previous supplier was delivering into the high street and its customers were saying ‘we can’t have you coming once or twice a week, we need you every day’. That is where the networks are cost effective - stock is dead money – so over the last couple of years it has changed to more frequent deliveries."

With an eye to the future, Fischer adds: "We are on the cusp of possibly the most exciting period ever for Fortec. We believe we now have our branding right with a new livery and new website so our corporate image is now consistent across everything we do, commensurate with the quality and efficiency of the operation.

"We are also convinced we now have the highest quality partner members we have ever had in the history of the Fortec network.

"However our journey continues. Our aim is to double our market share but it will be in a sustained and efficient manner, maximising the opportunities we are now creating in the niche we have developed in the pallet sector."