Pallet-Track CEO: "Sales up but high cost base will hit profits"

Caroline Green joined Pallet-Track as chief financial officer a year ago and replaced Nigel Parkes as chief executive on 1 April. She began her career with Xerox and joined Pallet-Track from e-commerce specialist ReBound Returns, where she was chief operating and finance officer. MT finds out how the new job is going and gets her views on the challenges facing the wider sector...

Q&A

Pallet-Track profits were up 57% last year. Do you expect that trend to continue?

Yes and no. All the pallet networks are seeing really strong volume growth but we’re seeing the cost base go up. Everyone is seeing driver wage inflation of 15-20%. We see that here across all our staff. It’s a post-Covid phenomenon. Our sales will be up significantly but it won’t flow through to profit because of the increased cost base.

Are we over the worst with Covid?

I would like to hope the government aren’t going to take knee-jerk reactions in terms of more lockdowns and closures. In recent weeks we’ve seen an uptick in cases across the network but it’s an awful lot lower than it was previously. The reality is people might be off sick with Covid but it’s a bit of a new normal. It’s not life threatening post double jab etc. I’m not sure watching the daily number of cases is particularly helpful or instructive.

Sadly I have no faith at all in what the government will or won’t do. So you just have to make business decisions based on common sense and hope some will prevail overall. People haven’t been ill with colds and flu for 18 months. It will be interesting to see what the sickness level is like over this next period because of people’s immunity not being potentially what it would normally be. Encouraging people to get their flu jabs and keeping social distancing will remain important.

You took on the role in April. How are you finding it so far?

Literally the day after Nigel left it went crazy. It was over the easter weekend and volumes have gone through the roof ever since.

Is that necessarily a good thing?

On one hand, when you’re sitting here with no pallets coming through, the stress level of dealing with that is high pressure. The other side is we’re dealing with really high volumes where we have finite capacity in the hubs to process the pallets and my members have finite capacity to check those pallets in the first place, and finite capacity to deliver them.

You can’t get drivers and if you get a driver you can’t get a vehicle so it’s a real bottleneck. Other supply chains are struggling for the same reasons and therefore turning to pallet networks to put their freight through as a cost effective method - except there’s a capacity constraint. There’s a constant battle with the lack of resources – either floor space, lorry space or drivers – on any given day.

How are things going for outgoing chief executive Nigel Parkes?

He came in for a couple of hours last week. He’s had a couple of holidays recently and looks really well. He’s still a minority stakeholder and on the board of the parent company, Palman, so I see him every other month anyway.

What are your main targets and objectives from here?

All networks work on the hub and spoke model and there’s huge tension at the moment for the reasons I’ve described. We have 89 shareholder members. Each of those have tensions dealing with driver and vehicle shortages and more space. So working with them to make sure they’re in a good place is probably the number one priority.

The network is as good as the network works, if that makes sense. You have to have hold of the entire network. Certain areas have struggled since the spring, the south coast being a particular problem across all the networks, largely because of the staycation. Volumes have gone through the roof so it’s about helping support them to get products out.

Has the pandemic seen your members switch focus?

Our 89 hauliers are all very different. Packaging is huge because as e-commerce kicks off everyone needs boxes to put their stuff in. We do a lot of work with them. Domestic deliveries have increased - pre pandemic about 11% of our pallets would be to domestic addresses but now it’s about 20%. There’s been a massive shift because of Covid - bathrooms, garden products, all manner of stuff. It’s everything from drinks - with the hospitality sector opening up - to pumpkins for Halloween, festive stuff… As always the networks get such a broad spectrum.

How much impact has the lorry driver shortage had on your members? 

It’s a problem for our network. Over the last couple of months we’ve done surveys and we’re running at about a 20% shortage of drivers. That figure has dropped down the last few weeks, post summer holidays. But three things are going to happen – firstly people will take normal holidays having had a rush. Secondly, we’re running at a peak so there’s going to be higher demand than ever. And thirdly, Covid is going to come and bite us in the bum at some point. My concern, like many people, is that there are lots of programmes to get more people trained but that takes quite a long time.

How encouraged are you by proposals to allow new HGV drivers to be allowed to go straight to an artic test from November?

It will take time to work through and my concern would be long term for the sector. If you’ve got your Class 2 and then everyone goes to Class 1 then I’ve got a Class 2 shortage. So actually having a career progression where you do Class 2 and get miles under your belt and then go to Class 1 sounds like a healthier approach. My concern is that rushing through a change might precipitate a future issue.

Where does the blame lie for the HGV driver shortage?

It would be harsh to blame the government. It’s been coming a long time. Getting the average age to 55 has taken a couple of decades but it’s an economic problem isn’t it? The big tier 1 car producers and the supermarkets have pinched costs out into their suppliers for so long that we’ve been underpaying various people in the supply chain, and not just drivers. Add to that Covid and the change in consumer buying behaviour and it’s a perfect storm. You can’t blame the government for all that but you can blame them in that we’ve been talking about it a long time. All of a sudden the tide’s gone out and we’ve got nothing left.

Europa chief executive Andrew Baxter has accused the RHA of leaking information from government meetings, failing to prepare hauliers for Brexit and “substantially” causing the fuel crisis. What’s your take on it?

Will we ever know who leaked what and where? It’s not particularly helpful. I’d rather look forward than backward.

As someone fairly new to the sector, what’s your view of the RHA?

I’m not sure I’m qualified to respond to that [laughs]. As someone who is an industry outsider, we have a number of bodies like Driver Require and Logistics UK and we need to work together with a single voice so that we can change things rather than being disparate. People talk about having a year of logistics – let’s all get behind it rather than the RHA talking about a National Lorry Week and things like that.

I’ve just read the latest report from Driver Require [The Answer to the UK's HGV Driver Shortage] and it’s the sort of really informative corralling of the critical data that’s really helpful. It’s then how the industry uses that data together.

A seminar panel at the Multimodal Exhibition last week concluded that the future of the sector would hinge on data, technology and collaboration. Do you agree?

Yes, we all have the same problems and they all have the same causes. Collaboration is an important part of solving this, not being seen as different voices. That doesn’t help find a solution. I think data is an exciting opportunity for us all to work better and smarter.

In what ways?

The technology to coral data has advanced very quickly in the last decade or so and hasn’t been embraced as much as it could be by the sector. We have a lot of data and not a lot of information. It’s how I use that data to help me run this business better and help our members run their businesses better.

What kind of data are you talking about?

Everything. I know which customers put in what freight to which haulier under what sort of services. So how do I translate that data into information that helps that haulier maybe market differently or approach that customer differently? How do I use data better to forecast what my peak flows of volume are? How do I use dashboarding to alert me to problems before they happen? So it’s definitely an area of massive focus for us as well.

Will advances in technology bring increased automation?

In terms of technology, people would say the pallet networks are usually a bit behind the parcel networks who’ve been a bit more forward focused on the tech. What we need to do now is get on the front foot and be a leader not a follower in terms of that technology.

Where are you looking to invest? Where are the big opportunities?

The data piece is really exciting. That’s about moving faster and being proactive. I’m looking at that dynamic of tension across the hub and spoke model because of the constraints – fantastic volume balanced with not enough people and resources. I can’t see that tension dissipating for some time. The HGV driver shortage isn’t going to go away just like that, and even if it did you still can’t get vehicles until next summer anyway. So really managing that tension has to be the priority for the medium term.

Are you optimistic for the year ahead?

I would love to say yes. We are in peak and it’s just going to get busier. I’ve got to balance that in the context of not having enough drivers and will Amazon and the supermarkets steal even more of them with more golden handshakes? That just empties out our driver pool. To be optimistic is too optimistic! It’s really about holding steady and working together across the networks to do the best job we can do with the resource constraints we’ve got.

What’s your take on the sector’s transition to zero carbon?

I haven’t heard a single one of our haulage firms talk about going into electric. Some of our London guys are dabbling with it but for trunking are you going to run an electric vehicle from Glasgow? The technology isn’t there. The dynamics of our members are very different. Those that are inside the M25 may be doing runs that absolutely support the use of electric vehicles. But you go up to the North East where it’s 55 miles to the nearest drop off point and it isn’t going to work. So it’ll end up being postcode specific if that makes sense.

So most HGV fleet managers have got too much on their plate to worry about the shift to electric?

Many people in the industry are trying to work out where they’re going to get their next vehicle from at all, let alone whether it’s electric or diesel. Even forklift truck availability is a problem, everything’s a bloody problem! Everyone wants new gear, there aren’t enough new chips in the world and so the lead times on vehicles means people aren’t as focused on going green as they might otherwise be.

At the end of the day, nobody’s going to throw out their current trucks so it’s going to be a long curve of adoption. But it will interesting to see when we get our first electric trunk in there - that will be quite fascinating.