With a 90-year history behind it, Knowles looks to a bright future

Primarily servicing the food, drink and food packaging sectors, the company operates more than 2m sq ft of warehousing and provides contract logistics, full- and part-load transport, retailer consolidation, pallet network distribution, dedicated fleet management and contract packing.

Over the past seven years the business has more than doubled its revenues and now employs 650 people running a fleet of 150 trucks and 220 trailers.

MD Alex Knowles is the third generation to run the family firm which was founded in 1932 with one Model T Ford and incorporated in 1947.

“My grandfather Gerald Knowles left school at 14 and started hauling sugar beet into the factories,” he says. “Sugar beet is the one bulker job we still do. My father [Tony] and uncle [Gerald] helped my grandfather and my father took over in 1988.

“He’s more of a haulage than a warehousing man. But he could see the return on investment in warehousing which is how it all started.”

Knowles joined the business in 2011, building his experience by working in a variety of operational roles including working in the traffic office before focusing on the commercial side.

“My early days in Knowles were invaluable in teaching me the ropes and helping me to understand how the business worked. However sales and business development was where I wanted to be,” he says. “I then took on the MD role five years ago.”

Most of the firm’s work is in palletised foodstuffs and packaging, though it has kept a bulker fleet of 20 for sugar beet and aggregate work.

“Predominantly we’re going in to the retailers,” he goes on. “We’re doing groupage and full loads, mostly food and drink, and packaging.

“We have 150-odd trucks, 2m sq ft of warehousing, and going in the right direction with a lot of growth over the last few years.”

After joining Palletforce in 2015, Knowles was named the network’s 2023 Depot of the. Year.

In 2022, turnover grew 30% to £50m, pushing the company from 69 to 58 in the 2023 Motor Transport Top 100. This growth is largely being fuelled by winning new business as Knowles says existing volumes are “pretty flat”.

“We will add another 20% in 2023 and 15% in 2024,” he says. “That’s off the back of mostly new contract wins, including a significant win with an existing customer where we took over from a competitor. We had to TUPE across 180 staff in May which was a big jump for us, pushing us up to the 650 staff we employ now.

“To put it in context, 10 years ago we had 150 staff so the business is materially different from what it was then . We are contract logistics not a general haulier. We’ve got contracted business with food manufacturers and retailers and we try and offer them a competitive advantage whereby if they can’t achieve full loads we can consolidate with other customers.

“I think we’re a good size at the moment in terms of we’re not too corporate, we still offer total flexibility and the customers still know who I am, but we can provide the same sort of scope and scale services as the big boys if not better in a most cases.

“I don’t have a number that I want to get to, we don’t grow it like that. It’s as and when things come along and if it’s a good fit for us and the customer. There’s good strong demand for our services at the moment and I think we can offer something different.”

Knowles, pictured, admits it can be hard to define what that “something different” is other than top service at the right price.

“We offer the 80,000sq ft of BRC-accredited warehousing with robotic capabilities and the zero emission solutions on the transport,” says Knowles. “We offer all the stuff the big boys do it in a less bullshitty way with greater agility and directness in getting results.

“We can make decisions quickly because we don’t have to have to wait around and get sign-off from multiple layers of executive directors and vice presidents. Customers like that. A lot of our customers are big themselves and they necessarily can’t turn quickly but it’s nice to have a logistics provider who can and many of them leverage this for their benefit.”

An example of this ability to react was during the driver shortage, when Knowles was able to adjust driver rates quickly to make sure the wheels kept turning.

“Depending on location, we were analysing the local driver market every week and and were able to make changes immediately, just to make sure we had enough drivers to fulfill our contracted customers,” he says. “The big 3PLs can’t do that and our service levels throughout that period were consistently very high.”

The price of growth is however losing an element of control over the day to day running of the business – and that requires a top management team.

“You can’t grow a business without good people,” acknowledges Knowles. “That was the hard part - my dad got it to a level where he could still stay in touch but he didn’t want to let go any more so he wouldn’t grow it any more.”

Knowles is honest enough to admit that he takes a lot of good managers from larger 3PLs as the business has grown.

“I think we offer something a little bit different,” he says. “Some of the big firms offer decent management development programmes but they get to a level where they can’t go any further. We offer a slightly different proposition - top managers don’t like red tape and here they can make decisions quickly and see action quickly.

“We give them a lot more autonomy than they would have in some of these other organisations. I would like a few more of our top managers in the future to be homegrown, and we’re working on that.”

So far Knowles has had no difficulty recruiting managers or drivers so while he is looking at clawing back some of his Apprenticeship Levy to train up some of his “younger leaders who are coming through” he does not believe apprenticeships are right for training drivers.

“It’s not something that’s on the agenda at the moment because quite frankly there’s no need,” he says. “We’ve got multiple driver trainers here but that’s more for inductions and ensuring our current drivers are up to speed on compliance and things like that.

“We’ve done a warehouse to wheels programme but warehouse staff are certainly not on minimum wage any more. Last year was tough for those in transport and warehousing because it was the year that all the warehouse wages went up.”

Rising costs and flat volumes have seen a record number of failures in the transport sector and Knowles doesn’t expect life to get any easier soon.

“Some people have been building their business on undercutting the market and funding the growth with leverage,” he says. “It’s not a bad thing when they go under but I do feel bad for the staff.”

All the recent growth has come without straying too far from the firm’s base in Wimblington, about 20 miles east of Peterborough.

“We have seven sites all within a 45-mile radius,” says Knowles. “It is mainly ambient with a little bit temperature-controlled here for a confectionery job that we picked up a couple of years ago. It needs to kept between 12 deg C and 18 deg C. We turn the coolers on in the summer and we run some fridges in the summer for that job but that’s a tough game to get into.”

He is confident the firm can keep growing without expanding its geographic footprint.

“There’s certainly still business here because we’re in a good location,” he argues. “A lot of our customers are importers so they’re bringing it in through Felixstowe. We’re on the way through to the rest of the country so it’s not too much of a dog-leg coming via us. I’ve got no great ambitions to go and buy a warehouse next to Felixstowe.

“There’s also a lot of food manufacturing still done around here. I’d probably say 50% of our business is imports with the rest from food manufacturers. I think we’ll probably get to a stage within the next five to 10 years where we might have exhausted everything in terms of the sort of customers we want.”

The company made its first acquisition last year, local haulier and warehouse operator, Masters Logistical, which went well (see panel).

“We know the acquisition game now and that might be a route we look at to get to the rest of the country,” says Knowles. “Around here, I’ve got a competitive advantage we are a major employer and have a critical mass of customers and that contribute towards our consolidation services.

“What is my competitive advantage if I just go and open a depot in the north west? I don’t really have one. I would look for an acquisition where I could buy that.”

Knowles Logistics has been a long-term Volvo operator and has purchased its first Volvo FE electric vehicles (see panel).

At the moment Knowles says he “can’t see a time without diesel trucks” and his current weapon of choice is the Volvo FH 460 with the I-Save package and turbo-compound engine. “It’s a good truck,” he says simply.

Knowles prefers to buy the vehicles, with contract hire only used for the three battery-electric Volvo FMs he acquired for a specific contract “because what do you write them down by? It’s a lot of depreciation, to be honest”.

The firm runs the trucks for five to six years, with the first five years covered by an R&M contract. “If we decide to run them for a sixth year, we’ll do them in-house,” says Knowles. “All the trailers we do in-house.”

Knowles says he gets great service from his local Volvo dealer, the Cambridge branch of OEM-owned Volvo Truck and Bus Centre South & East.

“Spares availability is good, and new truck lead times are now back to where they should be, around four to five months, whereas it was 18 months, which was ridiculous,” he says. “Truck price inflation over the last couple of years has also been ridiculous but things are calming down again. I think truck manufacturers have to be a little bit more competitive with their pricing, shall we say.”

Naturally the company gets “a lot of manufacturers knocking on our door” and while Knowles says “loyalty is important” he goes on “at the same time, we’re here to get the best deal on the best truck for the operation”.

Many people now regard Renault as a rebadged Volvo and Knowles has owned a few of the French trucks. But the Renault dealer network is still said to be poor compared with its parent Volvo.

“We haven’t got enough of them for me to make an honest assessment on that,” Knowles says. “I wouldn’t have enough confidence at the moment to go and place a 50-truck order but maybe I need to try a few more.”

Both manufacturers are now using the latest Volvo turbo-compound engine, which Knowles says was a big step forward in terms of fuel efficiency.

“We were one of the first to have it and it was a significant jump,” he says. “It caught them up with Scania and without the turbo-compound, the Volvos weren’t getting the fuel for us. It was getting to the stage where either they came in and did something or we might have had to look elsewhere.

“Now it’s a leader on fuel.”

At present all Knowles’ trucks are on the standard six-weekly periodic maintenance intervals (PMIs) but he argues that they could safely be extended to at least eight weeks.

“I want us to look at the frequency and maybe push it out a bit because we are running brand new trucks serviced by Volvo,” he says. “It’s just additional cost.”

It isn’t just the cost of the inspection – with most trucks now double-shifted having them off the road costs even more.

“We’re trying to do containers at night and customer deliveries in the day,” says Knowles. “We can do two containers in a night from Felixstowe to here.

“We get forecasts from our customers, so we know what’s coming. Everything is so finely tuned, if one thing gets in the way we run very low on stock, as we’ve realised over the last couple of years.

“I think we’re starting to move back towards more just-in-time to save on inventory costs. Then we’ll probably catch a cold again and go back to holding more stock but obviously holding more stock is more money. But then again if you can supply at that time when everyone else is struggling, you can make decent money.”

The post-Brexit and to an extent Covid-19 related shortages of storage space led to a boom in speculative development of large sheds especially alongside the M1 and M40.

“There’s too much space building on that golden triangle,” says Knowles, “and I think they’re already starting to catch a cold.”

That chill hasn’t affected Knowles’ 2m sq ft of space around Peterborough however.

“We’re in a good spot and the fact that we own all our warehouses means we’re not having to pay £10 a sq ft in leases,” he says. “They have to pay for the warehouses and they have to be charging £10 a sq ft plus business rates, utilities and margin on top.”

The company has warehouses from 100,000sq ft to a “monster” 750,000sq ft and Knowles says the “sweet spot” is around 300,000sq ft, which can hold between 35,000 and 45,000 pallets for two or three multi-user customers.

“We do dedicated solutions like that big one, but multi-user is where we can add a lot of value to the customers,” he explains. “We can combine those customers’ part loads together and there is loads of added value to go at.”

Although Knowles Logistics’ roots were very much in transport, the current MD says the trucks and sheds complement each other.

“The warehousing makes good money, the transport makes good money if you do it well, but you’ve got to have both,” he says. “I wouldn’t want one without the other. I certainly wouldn’t want to be a warehouse keeper without transport because you’re just not in control. It’s very difficult to plan the labour cycles in your warehouse.”

The firm funds all its acquisitions by reinvesting profits rather than by huge borrowing relative to earnings or from private equity.

“Everything’s reinvested in the business,” says Knowles. “We’re not one of these companies that gets all their money from external sources, like a larger subsidiary in a completely unrelated sector or private equity.

“If we want to go make an acquisition or buy some kit, it’s from self-generated organic funds.”

The company does use small amounts of finance to fund the acquisition of new trucks so it is not completely immune from rising interest rates.

“We do use finance from time to time,” says Knowles. “There’s no way that you can grow to the extent that we have over the last couple of years without using some finance.

“We’ve managed to do quite a bit of the finance for the trucks at good rates because it’s been quite cheap. High interest rates are generally bad for business but we’re not massively over-leveraged, so it doesn’t concern me as much as it would others in the sector.”

Knowles is still only 33 so does not need to worry about a succession plan just yet.

“I’ve got a sister, but she’s not interested in this,” he says. “I’ve got a little girl – but she’s only one year old. Give it a couple of years and I’ll start thinking about succession.”

While logistics is hard work, Knowles has known no other job. “A well-run logistics company is a very good business,” he says. “It can add a lot of value to customers. That’s what drives us.

“It’s a competitive marketplace, but I quite like competition to be honest. When I stop enjoying it I’ll pass it on.”

One thing Knowles does not see replacing him or his management team any time soon is AI, though he does see a role for it.

“I think there’s a lot of scope for AI in transport management systems,” he says. “A large proportion of traffic office tasks could be undertaken by AI, certainly anything repetitive. I’m not going as far as saying a dark traffic office because someone’s going to need to hand the keys out.

“A system can know everything now. All the drivers’ hours information is digitised, so that could be known. Routing and scheduling is pretty standard. A lot of these tasks in the traffic office now can be done by AI, but there’s not a system out there that can tie it all together at the moment.”

First steps to a carbon-free future

Knowles is taking the first steps towards decarbonising its operations, with solar panel fitted to all its warehouses, a 100% battery-operated forklift fleet and the acquisition of the first of four battery electric Volvo trucks.

This is partly because some of his larger customers are starting to ask what the company is doing to help them reduce Scope 3 carbon emissions from their supply chains.

But Knowles says: “There’s a fine balance in terms of cost because cost is such an important factor, particularly at the moment.”

There is also an element of preparing the business for the inevitable carbon-free future.

“The reason we got the FE 19-tonne electric rigid is because we wanted to test the technology, to get ahead of the curve, and learn the nuances around electric trucks,” he says. “I think 26-tonne and below will be electric.

“It’s not a six-month demonstrator. It is in our colours on seven-year contract hire with Volvo Finance because I can’t take the risk on the residual value. I have no idea what it’s going to be worth in five years or seven years. We will let Volvo sort that out.”

Knowles says he “got a good deal” on the contract hire rate.

“Volvo wanted Knowles to have one, all done up in Knowles colours, because other smaller and similar sized firms look at Knowles and think ‘if it works for Knowles, then there might be something in it for us’,” he says, “whereas if DHL go and order 100 of them, it’s not relatable to the normal haulier.

“In terms of the other three that are coming, they are on a local shunt operation, so we know exactly where and when they will charge up.

“It’s a proper test of the battery technology. They’re electric Volvo FM 42 tonners. We’ll lose one pallet which is 1 tonne on the payload. It will be very interesting to see how that goes. I think electric is definitely a solution for that sort of short operation.”

The trucks will be charged with two 150kW chargers, which cost the not inconsiderable of £40,000 each. But at least the electricity supply did not need upgrading.

“Fortunately, that site which they’re going on has got a good power supply anyway,” says Knowles. “On this site [Wimblington] we’ve got a 150kW charger as well and we did spend about £80,000 to upgrade it.

“It was at the same time we were putting in some temperature-controlled warehousing so we were going to have to do it anyway. That will charge the electric FE up in less than an hour and 20 minutes. That’s not bad.”

In fact the existing 50,000sq ft of solar panels at the Wimblington site can generate up to 350kW which “pretty much sorts this site out from a power perspective”, says Knowles. Except when the weather is, like on the day of MT’s visit, cloudy and drizzly.

“It’s all on the National Grid today!” laughs Knowles.

Knowles had a look at Volvo’s gas-powered tractors but now says: “I’m glad we didn’t buy any after the gas price rises in the last couple of years. I hear a lot of operators have been parking them up.

“And it’s not zero tailpipe emissions either. It’s only a transition.”

And unlike some hauliers who are going for a transitional low carbon drop-in replacement for diesel such as hydrotreated vegetable oil (HVO) Knowles considered then rejected this option.

“HVO is too expensive,” he says. “It’s 40ppl more than diesel. You’ve got to have a customer who really wants it, and will back you on it, or it’s too expensive. Especially as it’s not 100% tailpipe emissions-free.

“It’s a great transition - if you make it cheaper, by taking off the duty, for example.”

While electric trucks are expensive Knowles points to the security of knowing the operating costs.

“One of the great things about electric which hasn’t really been talked about is the fact that if you do charge up here, you know what your fuel price is for the next two years - if you do a two-year deal with your electricity provider,” he says. “I haven’t got the variability so I haven’t got any fuel surcharge mechanisms in play. Customers do like that part as it makes it easy to budget.”

Electric trucks also have far fewer moving parts than a diesel so should cost less to maintain.

“That’s a good discussion,” laughs Knowles. “I enjoyed having it with the truck manufacturers, to be honest. A lot of them say, ‘oh, it’s about the same as diesel’ which I think is absolute bollocks. It should be lower.”

But depending on the price of DERV Knowles reckons the total cost of ownership of the electric trucks over seven years “won’t be far off” his diesel equivalents.

“Diesel has gone back up again,” he says. “We were buying at £1.08 in late July and we’re now buying at £1.14. I think the days of under £1 are gone.”

Knowles also points to another anomaly – all trucks over 12 tonnes GVW must pay the HGV road user levy of between £150 and £576 as part of their annual VED once they are three years old even if they are zero emissions.

“You get a reduction on a Euro-6 versus a Euro-5, but no exemption if you’re zero emissions,” he complains.

Knowles is walking the walk on EVs and drives a fully-electric Audi.

“It’s quite nice just driving into London and not paying anything,” he says. “It’s just a pain in the ass as the range reduces by 20% in the winter. I can’t take it any further than 100 miles if I want to get home on a single charge. I’ll just take the wife’s car for that day.”

Knowles’ first acquisition benefiting from big investment

Knowles Logistics acquired Ely-based distribution firm Masters Logistical in September 2022 has invested £1m into the business to drive growth.

Palletline member Masters is seeing a series of IT system upgrades as well as getting five new rigid trucks and 10 new fork lifts as a part of their fleet replacement programmes.

Masters has acquired three 26-tonne Volvo FE 320 and two 18-tonne Volvo FE 320 rigid trucks. All are fitted with Lawrence David bodies featuring aerodynamic roofs for improved fuel efficiency and will operate on Palletline collections and deliveries in the Cambridgeshire and Huntingdon area.

One of the new systems is Solo Plan – Carlo, which enables the business to plan collections and deliveries for customers and maximise utilisation of the vehicle fleet. This not only gives Masters’ customers real-time ETAs and PoDs but will also help halve its carbon emissions by 2035.

Masters MD Mark Stoodley said: “In order to build for the future, Masters Logistical is delighted to announce that it has committed £1m in capital investment in order to facilitate growth, improve our infrastructure as well as enabling us to work more closely with Knowles Logistics.

“Our new suite of system upgrades will essentially underpin every facet of the business by streamlining our warehousing operations, financial operations, and transport solutions. As a business, we are committed to reducing emissions and in turn creating a sustainable and economical business that can cater to the needs and requirements of its customers, so we took the strategic view to invest in systems that will provide such solutions, without compromising on growth and customer service.”