Building on Success

Jun 13, 2023

Waqas Qureshi catches up with businesses in the pallets and logistics sector. Firms are trading well but having to cope with the fallout from Brexit.

How has trading been this year?

Nick James, Schoeller Allibert: 2022 has been another year of good performance as we continue building year on year growth. Returnable transit packaging is a vital part of so many sustainable supply chains, and we were very fortunate during the pandemic that the channels where spending declined were more than balanced by other channels where demand increased exponentially to deal with the new challenges the pandemic brought. In the post-pandemic period, demand has shifted again as the new normal becomes our new standard, and we have seen amazing examples of innovation in the channels we support as they come back to the market with new offers and processes.

Jim Hardisty, Goplasticpallets.com: Over the past few years, we have enjoyed a period of sustained growth. The last 12 months was no different and we exceeded our forecasts, which is testament to the hard work and dedication of our talented team. During the pandemic, we increased our supplies to the pharmaceutical sector. This included working closely with partners of AstraZeneca at five locations across the world.Oliver Giles, Lindum Packaging: We have continued to make our mark in this sector as we have developed capabilities in pallet stability testing and movement in transport solutions.

David Nicklin, Nicklin Transit Packaging: Volumes remained strong in the first half of 2022 and we delivered an exceptional set of financial results. We have continued to hit forecasts, however, this shouldn’t mask the reality that trading over the past few months has been incredibly challenging. While we have seen post-pandemic demand surpass pre-pandemic levels, we have had to manage substantial inflationary pressures on costs such as wages, transport, energy and raw materials, this has been exacerbated by the Russian invasion of Ukraine. Issues in the timber market have been driven by a delay in implementing sanctions against Russia and Belarus whilst other countries increased the production of wood in Europe against a significant reduction in demand due to the prevailing economic conditions in the UK and beyond. This has been the most fluid period I have experienced in 30 years with commodity prices moving monthly.

Iain Hulmes, Pallite Group: Trading at the start of 2022 was steady but during the year we have seen confidence come back into the market post-pandemic and year-on-year growth has been strong across the full product range. That said, we are still in very challenging times with several headwinds on the supply side that have regrettably forced us to raise prices. However, as we look forward to 2023, we are seeing some signs of much needed stability in raw materials and other input costs.

Paul Martin, Charles Kendall Freight: Trading this year has been strong in all our service sectors globally. All our global regions have continuously posted above budget results and have bucked some of the negative trends seen in the wider market. We have seen the demand for our UK warehousing and storage services increase with retailers looking for cost-effective ways to ensure that they deliver last mile consistency and efficiency to their end users.

Describe the status of supply chains.

Nick James: There is a very focused drive in the industry right now around sustainability, as companies start to move their products around the world again. This drive comes from two sources: firstly, the want for all businesses and industries to find more responsible ways to trade; and secondly, the appreciation that there can be considerable cost savings and value benefits to taking a more sustainable view of the supply chain and how it is managed.

Jim Hardisty: Supply chains have been severely impacted in recent times. Not just by the pandemic, but by a multitude of different factors primarily caused by Brexit. This includes driver shortages, a reduction in European transport companies operating in the UK, a huge increase in container shipping prices from Asia, to name but a few. Furthermore, we have also witnessed soaring fuel prices and the cost-of-living crisis. I firmly believe that employees should be recompensed appropriately, especially when you consider the excellent job they delivered throughout multiple lockdowns.

Oliver Giles: Due to Covid and the effects of the pandemic, there are on-going challenges which are compounded by war and inflationary pressures.

David Nicklin: The packaging sector rose to the challenge in Covid and adapted and adjusted, not just survive but to contribute to keeping the economy moving during those unprecedented times. The wooden pallet and packaging sector was given critical worker status during the pandemic, recognising the importance of the sector in the movement of goods.

Iain Hulmes: Trading at the start of 2022 was steady but during the year we have seen confidence come back into the market post-pandemic and year-on-year growth has been strong across the full product range. That said, we are still in very challenging times with several headwinds on the supply side that have regrettably forced us to raise prices. However, as we look forward to 2023, we are seeing some signs of much needed stability in raw materials and other input costs.

Paul Martin: There can be no doubt that two years of Covid caused the international supply chain to collapse in a fashion that could not have been reasonably predicted prior. In the UK this shock was accentuated as the country was still adjusting to the changes delivered by Brexit. During Covid, many suppliers were looking for ‘thinking outside the box’ and were looking for imaginative solutions that would mitigate the negative effects of this melt down. The global supply chain still lacks resilience. With disruption still likely, businesses will still be asked to navigate financial and operational challenges.

Does e-commerce continue to have a significant influence on the logistics sector?

Nick James: The recent boom in e-commerce due to lockdown and changing customer behaviours has had a widespread impact on how companies think about logistics. For example, consumers vote with their feet and expectations around fulfilment is becoming more and more challenging. To stay ahead of the competition many companies will need to increase investment in logistics and warehouse automation, from fast and efficient storage and retrieval systems to robot picking and vehicle unloading.

Jim Hardisty: Of course. The pandemic rapidly increased online demand across all sectors, and it acted as a catalyst for more businesses to sacrifice expensive bricks and mortar stores to expand their online proposition. It’s fair to say that e-commerce has jumped forward five years due to the pandemic. Remote working has also caused a shift in buying habits, whilst we have also seen a massive increase in warehouse space and automation.

David Nicklin: When the major global e-commerce businesses crack the whip, the impact is felt throughout the supply chain with extended lead-times and surges in demand across our product range. The pandemic saw a huge increase in e-commerce and the demand for corrugated cardboard packaging. This has plateaued, but volumes will continue to grow.

Paul Martin: Charles Kendall’s e-commerce order volumes continue to increase against a background of e-commerce organisations demanding greater added value. However the cost-of-living crisis combined with low consumer confidence, will likely mean that this sector is likely to become increasingly competitive. Although the economic outlook for 2023 is mixed, we anticipate that our e-commerce order volume and new customer acquisition will continue but with an accent on delivering great efficiencies and delivering greater added-value.

What’s the strategy for the coming months?

Nick James: Optimising our supply chains and our total product offering is another area of focus, as is technological development. New investments in machinery, automation and tooling are always critical to our business and these continue to support the overall strategy of helping our customers to find more sustainable ways to move their products around their supply chains.

Jim Hardisty: We have enjoyed over recent years, and we have ambitious plans in place for 2023. We have just appointed a finance director, added two new starters to our sales team, and we are expanding our own warehouse space at our headquarters in Eastbourne.

Oliver Giles: We continue to invest in product and service innovations as we respond to market demands for better value, more sustainable products and higher performance. New innovations include systems to help our clients measure, reduce and monitor plastic usage as well as helping clients transition to recycled materials.

David Nicklin: We recently invested more than £1m in a new biomass plant and dust extraction and we have further developments planned in automation, IT and warehousing. Labour remains a key challenge and we are increasing our focus on developing skills internally. We have a new warehouse manager and we have increased our investment in sales and marketing. Over the longer term we aim to explore new markets and territory and will continue to target market consolidation.

Iain Hulmes: We are very positive about 2023 for the reasons given above but also because of early success with our international expansion plans. At he end of 2021 we set up a manufacturing operation in Milwaukee in the US mid-west using our specialist production machinery supplied from the UK. After a number of weeks commissioning and training by the UK team we shipped our first products in April, and we have since increased output six times over. We have just moved to new premises and installed some additional machinery to ensure we can keep up with demand. We are now actively researching additional manufacturing sites in two other regions outside of the UK and expect both to come on stream in the next 6-9 months.

Paul Martin: As part of our medium-long term strategy we have this year made a significant investment with the recent acquisition of a new ‘state-of-the-art’ 100,000 sq ft warehouse in Coalville, Leicestershire. This facility will provide another 11,000 racked pallet positions. To widen its appeal, this site is in the process of being a BRCGS Food Safety accredited site and a Customs (ETSF) approved site.

What are the concerns/developments around sustainability in the pallets and distribution sector?

Nick James: Availability of materials is the biggest constraint we have seen in the post Covid period. The introduction of the UK Plastics Packaging Tax has been a welcome incentive to minimise the over reliance on virgin plastics, but the recycled material supply chain is not yet strong enough to fully support it. However, necessity is the mother of all invention, and we expect this area to rapidly develop over the next 12 months. With the introduction of vastly improved tracking systems for packaging using IoT technology, we will see further improvements in asset utilisation, and deliver the benefits the sector is looking for in reducing costs and being more efficient with capital investment projects.

Jim Hardisty: I firmly believe that the use of plastic pallets and returnable plastic transit packaging will continue to grow – driven by an overarching commitment to preserving the environment. There is a growing desire to seek greener solutions, driven by Plastic Packaging Tax (PPT) and the forthcoming Extended Producer Responsibility (EPR), and businesses will proactively move to reduce and eliminate the use of one trip plastic in favour of returnable solutions.

Oliver Giles: The market continues to be driven ‘cost’ and often this masks the true value in more effective methods and more sustainable packaging. Every year presents new challenges, 2023 will not be any different, but…every cloud has a silver lining.

David Nicklin: In terms of our supply chain, we are committed to responsible sourcing of raw materials and operationally we are continuing to innovate and invest to lower our own emissions through initiatives such as the new biomass plant and electric vehicles. We also utilise packaging design software which enables us to optimise the material content in our products.

Iain Hulmes: During the year we have seen a real increase in enquiries from companies looking to act more sustainably with their logistics and packaging choices. Positive sentiment is now becoming a reality as firms look to implement their often quite ambitious sustainability goals. Pallite offer solutions that help cut CO2 emissions and remove the use of materials such as single use plastic that are now considered detrimental to our environment.

Paul Martin: The logistics sector is set to become the highest carbon-emitting sector in the economy by 2050. As well as enhanced transport planning and assessment of most efficient routes can be deployed to help reduce GHG emissions. The supply chain cost pressures related to wooden pallets and packaging remain. Although the costs of raw materials may have dropped, the high cost of energy and fuel continue to drive up logistics costs. With the introduction of Plastic Packaging Tax, brands and retailers will be trying to move packaging lines over to recyclable solutions. This will present a significant challenge to incorporate PCR content into packaging material. Heading into the new year, the logistics industry will need to manage labour costs amidst shortages of staff in some sectors but also keep an eye on the negative effect that inflation may have on overall operating expenses.

What is your message to your industry peers?

Nick James: This is a great time to be involved in sustainable packaging. There has never been a better time to shout from the rooftops about the benefits of using innovative, feature driven packaging, and the role that it has in delivering towards your end clients’ key targets.

Jim Hardisty: I want to highlight the importance of looking after your team. It has been a difficult few years for everybody and we are now facing a period of significant economic uncertainty. Make sure you check in with your employees and take the time to listen to them. Leave your office door open and be approachable.

Oliver Giles: Collaboration and education will play a significant part in this sector becoming more sustainable.

David Nicklin: I think that the trading environment is going to remain very challenging for 2023 with the economic headwinds, high inflation and the ongoing uncertainty in Ukraine. My message to my peers would be to promote long term collaboration throughout the supply chain. Get closer to your customers and your suppliers – business continuity is paramount to ensuring long term success.

Iain Hulmes: Growing a business rapidly brings plenty of challenges, and my advice is not to stretch talented teams too thinly. Recruitment should therefore be a priority.

Paul Martin: By adopting and following best practice recommendations, by delivering value added solutions that deliver innovation and through cost optimisation, you can drive success and profitable growth.

THIS MONTH’S INDUSTRY EXPERTS

Jim Hardisty is managing director of Goplasticpallets.com, the East Sussex pallets specialists. The £18m business works across a variety of sectors, including automotive, drinks, construction, food, pharmaceutical, print media and waste management.

Oliver Giles is pallet stability consultant at Lindum Packaging, which works with food and beverage manufacturers and FMCG companies. The company works to improve sustainability in palletised logistics, and addresses poor pallet stability and goods damaged in transit.

David Nicklin is chief executive of Nicklin Transit Packaging, the Wednesbury, West Midland based business. The £16m firm supplies timber pallets and cases, corrugated cardboard packaging and ancillary packaging.

Iain Hulmes is chief executive of Pallite Group, the pallets and honeycomb paper cardboard products specialist. The company supplies logistics, packaging and warehousing services, and also includes shipping crates, protective packaging, layer pads and storage.

Paul Martin is product manager – logistics, at Charles Kendall Freight, the supply chain and logistics specialists. With warehouses located in Manchester, Southampton, Ipswich and Coalville, the businesses aims to offer a tailored service and handles procurement, shipping and customs.

Nick James is sales director at Schoeller Allibert. With 2,000 employees and operations in the UK and worldwide, the firm has grown to become the European market leader through a combination of organic growth and the acquisition of several key industry players.