Pallet network Fortec, owned by French logistics giant Geodis, has undergone a change in its management structure following the departure of MD Neil Hodgson and commercial director Marcus Fischer.
In October last year, Dave Spong, general manager commercial and Adrian Bradley, general manager operations, took over from Niel Hodgson and Marcus Fischer.
Spong (pictured, left) has been with Fortec for four years and Bradley five, but both have extensive experience with network carriers and major 3PLs.
“We have always worked closely as a team. We complement each other and are always bouncing ideas off one another,” says Spong. “So when the opportunity arose for Adrian and me to take the reins it was an ideal scenario.
“We recognised it was a fantastic opportunity, particularly at a time when there is so much going on in the pallet network marketplace. We are in exciting times and are looking forward to working with Geodis to maximise the opportunities that lie ahead.”
Despite rumours that Fortec was for sale, Spong says its parent remains totally committed to the network and the brand. “We have considerable autonomy in what we do, we also have a close working relationship with Geodis,” he says. “Geodis has been very supportive of this business and everyone here since January when we took over the management of the business.”
Joint agreement
Bradley says he and Spong have a “clear vision of what we want to do with Fortec”. “We’ve come to a joint agreement on the commercial and operational aspects,” he says. “The vision aligns to what Geodis wants to do. We always get the support of the parent company. It’s good having that infrastructure there as well.”
The strategy the pair have adopted did not only come from their own experience. “We decided to set up discussion groups because as much as we and the people here have knowledge, there’s a huge amount of untapped knowledge among members,” says Spong. “Some of the things we were making decisions on, some of the particularly big items, they could vote on.”
Bradley adds: “We’ve really come to accept, probably more than before, that the success of our members and the success of their customers is what can drive Fortec to a different level.”
The previous management team set out a clear strategy to position Fortec at the high-value end of the pallet network market, rather than chasing high-volume, low-value work.
“We can shape the business in terms of the direction we want it to go,” says Spong. “You can say that we’re going to do certain things within that business, but saying we’re going to target certain market sectors is not what we really want to do for the members.
“One of the failings of networks, perhaps, is that they over-promise and under-deliver. We want to deliver what we say. Over the past four years I’ve worked here, the Achilles heel of every network is high membership turnover. There’s a huge cost to that. So how do we stop that happening? What can we do to make that more sustainable?
“Also, a lot of networks tend to focus on the input growth. It doesn’t actually focus on the effects of the outward growth. For example, your business could be running a 10% growth, but that can translate into 35% to 40% growth into certain postcodes. The imbalance is going to be worse and worse. If we’re only going to be a selfish monster that’s going to keep looking to expand our business, it will come to a point where it’s not sustainable for members anymore.”
That means no further central accounts – managed by Fortec from the centre.
“We took a decision to say no more,” says Spong. “We don’t want to be that network that encourages corporate growth. We’d like to be able to say we can control B2C, which is a difficult beast to control, but you can at least control it through steering away from corporate growth because that’s where the growth is.
“We don’t want to impose on members this spike in volumes that is generated from the B2C. All we would do is make that worse.
“We’re not telling members not to boost their B2C volume, but we know by not going out seeking the huge customers’ direct volume into the centre we will at least keep it at a level.”
New members
Membership stood at 74 earlier this year and Bradley says that Fortec is successfully recruiting new members – six were due to join in June at the time of writing. But he and Spong are carefully selecting the type of input they will bring to the network. “It’s about knowing what that business wants to do at the point that they enter our business,” Bradley says. “If we’ve got a member that’s coming on and, at the moment, they’re trading 50 pallets, but their vision is to attack the B2C market and to expand that business 10-fold, then they probably aren’t the right fit for us.
“You have to think of each member as an extension of your business because they are a delivery partner. Through rate reviews, we wanted to reward the people in the areas that we feel are exposed, especially in the South East.”
Bradley says that Fortec’s volume growth is still “double digit” – with the peak night so far in 2015 about 20% above last year’s peak – but not as high as some in the sector, which have been seeing 25% to 30% annual growth.
“Obviously the economy is roaring again and business is good,” he says. “We’re probably not ever going to be the biggest network in this marketplace. If we promise to deliver XYZ, then that’s what we want to deliver. That’s really important to us.”
Spong continues: “We put some huge increases on the time element of the business. We want to deliver superb service and not start trying to complicate it too much. It’s designed to be an overnight network and deliver a good service. Over the years, it’s developed into something else. We’re saying it’s timed delivery. For a member to put on that vehicle and deliver a 9am or a 10am overnight pallet consignment, they need to be rewarded. If you want a 9am, not a problem, but expect to pay for it.
“What we also want to say is you can put multi-pallet consignments through, but this is the cost. So we removed the multi-pallet discount. We have a one to four and that’s it. That’s what is going to come into effect in October. Yes, you can do it, but you’re going to have to reward the member for doing it.
“The effect is that members should become more nimble and productive. We want them to do more drops in a smaller area. We want them to be making more revenue. We want them to see that actually from a delivery proposition it’s not so bad.”
These are fairly major changes for the network to absorb, but Bradley says management has given members enough time to communicate with customers.
“The responsibility is theirs, it is their customer base,” he says “This is something that, through discussion groups, we have been talking about since the beginning of this year.”
The volumes of goods sucked in by the South East causes imbalance problems for all networks, and Fortec has sought to address through sales development to increase outbound volumes and add members. “If you look at the South East, it is increasing,” says Bradley. “When you’ve got 30% growth into an area, we try and support that member to boost sales as quickly as the delivery volumes to give them that balance in their trunking.”
Spong adds: “In the South East, we had one member two years ago. We have four now, one in each county.”
Delivering service
Fortec tends to have smaller members that focus on the pallet network business rather than large hauliers, for whom Fortec is just a small part of their income. “We probably have the highest ratio of members to our pallet movements,” says Bradley. “We go back to the strategy where we brought members on who are smaller businesses taking a smaller territory with growth that aligns with us.
“We’ve gone increasingly towards members that have the time and the ability to focus on delivering service for Fortec, rather than take on these huge companies where we are 5% of their business.”
Sharing hauliers by pallet networks is a thorny issue that will have to be addressed as the eight surviving networks compete for the best members, especially in remote parts of the UK. “We don’t want to do that,” says Spong. “But it would be foolish not to think in some critical areas that you might have to look to have that sort of arrangement. The new rate review hopefully puts us in a position where we wouldn’t need to do that.”
After consulting the APN, Fortec is going to introduce a 750kg weight limit of tail-lift deliveries in October. “Reducing that weight to 750kg means we can deliver what we say we’re going to – and safely,” says Bradley. “You hear horror stories of 1,200kg, 2,000kg on a pallet. We’re putting drivers first. Forget about everything else. There is a small threat to revenue, but this is about health and safety.”
Service levels, measured in on-time, in full deliveries, are in “the very high 90s”, says Bradley, including all reasons for a late delivery. Spong says: “We’re saying a failure is a failure from the customer experience point of view. If it’s a traffic jam or ice on the road, it’s still a failure.”
Bradley says the key is to work with the membership to keep driving service levels up. “We’re communicating to the members at least weekly,” he says. “So everybody every week knows exactly where they stand. Our bottom 10 every week are disclosed one to one. Hopefully it’s not the same bottom 10, but if it improves even a tenth of a percentage every week, it helps.
“We have an extremely stable network at the moment. We’re in a very good position in that we’ve not got areas of poor service because we’ve got full coverage.”
Bradley sees major opportunities in future by linking Fortec members with the Geodis continental pallet network, enabling UK members to offer an export service to UK customers and deliver imported goods.
“A member can collect a pallet from a customer and bring it into the hub and it will connect to the European network,” he says. “It’s an excellent service. We want to simplify the costing options, not predominantly to bring the cost down, but to simplify how our customer could interact with his customer.”
Spong believes there is enough profitable business to sustain the remaining eight pallet networks. “The volume is good,” he says. “There is enough volume to support all the pallet networks that are there now.
“We will have different strategies and different ways that we operate. Our philosophy is to be able to interact with members, listen to what they want and to expand at a rate that we can service. Our belief is that we will have sustainable growth for a long future if we do that.”
