The issue of significant downward rate-pressure remains the elephant in the room despite continued volume growth in the pallet sector, according to network heads.
Speaking after the Association of Pallet Networks revealed its members had experienced volume growth of more than 4% in the first half of the year (compared to 7.9% in 2011), Adam Leonard, MD of The Pallet Network , said the sector was at risk of repeating the mistakes previously made in the independent parcels sector.
"There’s been a sea change since the recession in regards how customers view rates," said Leonard, who remembers the unsustainable rates that took hold of the independent parcels sector in the 1980/90s and led to massive consolidation.
"While they’d pay extra for better customer service before, pressure from their customer base means it's increasingly about the rate," he said.
Leonard cautioned that without the regional hauliers that form the membership of the UK’s nine networks, which have little fat left on their bones to protect them form unforeseen shocks, TPN and its peers simply haven’t got a business model. "We are our own worse enemies sometimes. The current situation with rates can’t continue."
Kevin Buchanan, MD of Palletline, said that while the business had seen a real ramping up of pallet volumes in the past few months, undercutting within the sector and wider industry remains its Achilles’ heel.
"We’ve managed to find a niche for ourselves and attract people that are willing to pay more to have things done properly," said Buchanan. "The recession has thrown up opportunities for us and other networks. However, there is a lot of work out there that is simply priced to death."
Martyn Young, MD of Palletways UK, said margins have undoubtedly been squeezed. "Our role is to assist members in running as efficiently as possible via upgrades to hub scanning, regional hubs and the like."
