Pall-Ex MD Mark Steel on 2022 logistics challenges & UK’s sustainable transport plans

A year after we last spoke to Pall-EX Managing Director Mark Steel, we sat down again to discuss a number of press matters in the industry - including the move towards sustainable transport, high fuel prices, HGV driver training, as well as the company's expansion plans.

Pall-Ex MD Mark Steel on 2022 logistics challenges & UK’s sustainable transport plans

When we last caught up with the Pall-Ex Group, the company and its International MD Mark Steel had just announced big plans for the Polish market. Fast forward a year, and the pallet network has opened its central hub in Łódź and even has its eyes on a number of potential expansions in Europe and further afield.

Despite this, it is fair to say that things are far from plain sailing in the road transport market. On top of more Brexit red-tape and the ongoing pandemic, hauliers also now have to deal with Russia’s invasion of Ukraine and its knock-on effects, namely high fuel prices. If that weren’t enough, the push to decarbonise is also accelerating.

In order to learn how Pall-Ex is grappling with these challenges and intends to grow its business in the future, we sat down again with Mark for a chat about a number of pressing issues facing the industry.

Thanks for speaking to us again Mark. Firstly, Pall-Ex is one of many companies in the logistics industry helping with the transport and distribution of vital aid for those affected by Russia’s invasion of Ukraine. However, with so many parties involved, there is a concern the aid may not necessarily get to those that need it. Kevin Buchanan, CEO, Pall-Ex Group, recently said that his Polish colleagues had told him the aid efforts „have been somewhat disjointed”. What do you think could be done to achieve a higher level of coordination here?

We’re living in massively unprecedented times; there’s no way on earth you could have predicted what’s happened to the world in the last two years.

We have been in touch with the APN [the Association of Pallet Networks]. I think it’s been really difficult to consolidate efforts with the other pallet networks, because everybody sort of did their own thing really early.

It’s a bit unfortunate but we’ve still extended our offer of help to any of the pallet networks, but with certain criteria, because as you know, we are on the ground in Poland – we have a depot about 100 kilometres away [from the border] in Rzeszów.

Unfortunately, there’s been uncoordinated efforts and some of the aid that’s getting to the border, or where they think the border is, is resulting in quite a lot of wasted effort. For example, at the minute people don’t want clothes, yet second-hand clothes are still being sent.

We’ve basically said that we’ll help anybody out. We have got a line haul arrangement with our partners, PKS. Once they get up to our central hub in Łódź in the centre of the country, then we will run that to the border via our own depot in Rzeszów

What we have to do, though, is to make sure that the aid is being delivered to a registered charity, and that there’s one commodity code pallet and so on.

We’ve been quite prescriptive, because we don’t want donations from a normal person on the street that could be a mixed pallet, because it’s so difficult to control. The issue is to try to get aid to the correct people at the correct time, and I must admit it is challenging.

Pall-Ex Poland has stated its intention to become the leading pallet network in Poland with its new hub and investment. How does the company intend to go about achieving this aim?

Growth in the market is not that easy. However, we launched our new software system a week on Monday; it’s only a week old in Poland now. We also have plans to release a new application for drivers that will give customers a level of final mile visibility that they just don’t get from the other providers.

There’s not too much in the way of pallet networks, but you do have the established big players there. You know, you’ve got the Rabens of this world who cover the country. DSV has a big presence as well. There’s lots of competition.

On the other hand, the main pallet network, a business called PSD, is run and owned in a very different way to Pall-Ex. Pall-Ex is probably the only genuine pallet network in the country that’s a collaboration of small businesses that are allowed to compete with the global and domestic big boys.

So we see the tech piece being really key to growth, as well as the partnership with Uniq Logistic being key also. If people are using our system, they are happy with the visibility. We are ultra competitive because that’s how the model works.

We see that will enable us to recruit more members, possibly from competitors or small hauliers who have never really considered public networks, because it’s lucrative to them and the customers want it.

The challenge is not something that we’re taking lightly. We have got some big plans, particularly for the next three to five years.

You recently opened your new hub in Łódź, which one would presume is a key milestone in your development in Poland. There are nonetheless around a dozen European countries you operate it in. Do you have any plans for further growth or investment in those markets?

We see Łódź as an up-and-coming city, but we didn’t really choose the location because of what’s going to happen. For us, we needed a key strategic location. Łódź is bang in the middle of the country and it’s also really close to the motorway infrastructure. So we chose it for that reason really. The hub is only 75 kilometres away from where we already were, but that location was in the countryside and the road infrastructure was far from ideal.

Now we’re literally two minutes off the main A1 motorway. It’s a fantastic location, and you know you’re in the right place, when you’ve got all the global big hitters within the same square mile or so. There’s a lot of logistics activity there.

As for other countries, the last year has been quite a successful year for us because we have recruited two new master licensees covering three different countries. We’ve signed with a business in the Czech Republic and Slovakia, who will start a network in September. That’s really quite exciting for us. We’ve also recently signed a deal with a company in Ireland to start Pall-Ex Ireland.

Brexit has given us that opportunity and we’ve embraced it. We’ve partnered with a business called Ace Express Freight just outside Dublin and they have taken that master licence on.

We are looking for partners throughout Europe, there are a few locations which are key to us. We are in advanced talks with a business in Germany about a possible joint venture because that market is saturated, and you couldn’t start from scratch there.

There are nonetheless places where you could start from scratch, particularly the former Yugoslavia. Scandinavia is a place where we would consider a joint venture, and then you’ve got Austria and Switzerland, which would not be especially difficult to bolt on.

But if I’m honest, where we’re going next is probably not Europe. We saw most success in Europe 15-20 years ago. There are places which are still emerging. So we see the opportunity now in the Middle East, Southeast Asia, Australia and the US. Globally, we do have plans and the strategy is to stretch our legs.

Pall-Ex has initiated a number of schemes to help train staff and fill shortages, notably to add to the number of HGV drivers on its books. How helpful have these schemes been, and are they alone a solution to the shortage of drivers and other key roles in logistics operations?

Absolutely, we publicised our recruitment quite well. I would say that historically, HGV driving has not been an attractive job, especially for young people. The average age of drivers went up and up, and we saw a lot of drivers leave the profession as they didn’t really want to put themselves through the CPC process. Then, when you’re cut off from your supply line of drivers from Eastern Europe, it does create a problem.

We’ve introduced our ‘warehouse to wheels’ campaign, as we’ve got a great bunch of forklift talent working in warehouses across the group. The project allowed warehouse operatives to train to become HGV drivers and it has been phenomenally successful for us. We plan to continue with that venture and even push it a bit further afield.

As for apprenticeships, there isn’t enough good funding for training good young people. But we’ve managed to do a lot with our positions for school leavers. In situations where possibly we would only have brought in one person to do a job, we would probably bring in two or three people so that we share the burden and the operations are much more efficient and give us headroom for growth.

In addition to the apprenticeships, we also have a programme for junior managers in which we’ve partnered up with a university to put candidates through a chartered management degree.

Around 15 of our best junior managers, who we see as essential for succession planning, are going through this degree course. Some of those are almost 12 months into that course now.

The message to the staff is, we are investing in them and there is progression here at Pall-Ex. We see the attitude of our staff is absolutely first rate because of these initiatives.

There has been a noticeable amount of criticism in the haulage industry regarding the government’s response to the driver shortage crisis, be it the unpopular visa scheme or the much-talked-about cabotage relaxation. On the other hand, the situation appears to have stabilised somewhat due to the focus on training. Given that Europe is now encountering a shortage due to Ukrainian drivers leaving the workforce, perhaps it wasn’t a bad thing to go down this route?

Well, you bring up a few good points there. One in particular is the government’s response.

I think I speak for many leaders in the industry when I say that I don’t think the government did anywhere near enough.

They were offering temporary visas, and it wasn’t attractive to a lot of drivers to entice them to come back. There were a few that came back, but in essence, it wasn’t a good enough response.

I think most companies or most quality logistics providers in the UK and in Europe, have chosen to train and invest in driving staff themselves. Early in the crisis there was a lot of money being thrown around, and I think we did have to bridge the disparity in driver wages initially. It was the right thing to do.

However, I think there was a panic around the industry about having to pay a lot of money for drivers when the reality is, if you had a sustainable model, you didn’t really need to raise wages artificially high until the panic set into the market.

It seemed that everybody ended up paying more and we gave our drivers around a 17% pay rise, which was a really big jump for us. We’ve also invested in training and in facilities, because we want to be the employer of choice.

We don’t necessarily want to be the highest payer as we don’t want to have just one USP. We want people to join us and stay for a long time because they genuinely love working here. That’s our mantra that very much flows down from our CEO, Kevin Buchanan. One of our key strategic initiatives is to be ambitious and the employer of choice. And we’re working really hard to make sure this is the case.

Haulage associations across Europe are crying out for state intervention to address ever-rising fuel and energy costs. In some cases at least, governments have cut fuel duty or introduced price caps. What would you like to see done in the UK to alleviate the problem?

Again, this is prime UK Government at the minute. They are making very large tax returns due to the fuel price. At least they have now temporarily dropped the rate of tax applied to fuel duty.

They need to reduce the VAT and duty applied to fuel – not just for road haulage association members and road transport as a whole, but for the average motorist on the street. There also needs to be a focus on the fuel companies that don’t pass on the drop in wholesale oil prices straight away at the pump.

Some people can’t can’t afford to put diesel in their cars, which is absolutely outrageous. The fuel bill for every haulage company in the UK has gone through the roof. They’re applying fuel surcharges to their customers, which drives up the customer prices. What you’ll get if the government aren’t careful, is hyperinflation. They can stop this, but they need to do something pretty quickly.

I commend that the Republic of Ireland moved earlier than us. Poland and Sweden too, at least these countries are doing something to react. We, as you correctly stated, had one of the highest fuel prices in Europe even before the war. Now, we’ve got the highest by far. The oil companies are still making more money, and we always see the price go up very quickly and come down very slowly.

We saw Sunak [the Chancellor of the Exchequer] implement the 5p duty cut but I fear it will nothing will follow. We all know the hole in the country’s finances post COVID. They may see this as a licence to print a bit of money. But if they don’t do anything further, I think it won’t be long before you see the country react. And that won’t be positive.

A number of low emission zones or clean air zones have been delayed of late after small companies just outside the zones claimed they couldn’t obtain the funds to upgrade their vehicles. What needs to be done to help the private sector purchase more environmentally-friendly commercial vehicles?

This is a big subject. In particular, when you talk about commercial vehicles, you know the government timetable to stop the production of internal combustion engines in this country for both commercial vehicles and public cars is unrealistic. You only have to look at the infrastructure for EV charging once away from your own home.

I don’t think there is one single commercial vehicle charger anywhere on any motorway in this country as yet. So we’ve got to go from that to substantial coverage for charging commercial vehicles in around eight years, when it won’t be possible to buy a new lorry with an internal combustion engine after 2030.

I’ve a few friends who own EVs, but they also have something like a diesel people carrier or an SUV, because EVs will typically not do anything over 250 miles. Then, to try and charge it when you’re out is incredibly difficult. I just think the government needs to be a bit more realistic with the deadline.

If you want people or businesses to buy electric vehicles, what are you going to do to make it attractive? You can’t just have a situation where you can’t buy anything else. Where are we going to charge these vehicles? I don’t think the strategy has been thought through.

The technology in the vehicles needs to improve for a start. Now they need to be looking at initiatives like the German government have been looking at, such as electrified highways. I haven’t seen anything of a similar nature from the UK Government as yet.

The government say things for the right reason, we saw that at COP26, but nothing was really agreed, and what came out of it was relatively worthless.

Perhaps a national approach is required rather than an extension of clean air zones and local subsidy schemes?

I couldn’t agree with you more. That is the only way to go is a national ruleset. We’ve got different rules in London, Birmingham and Manchester. The subsidies are different everywhere in the country. I think we saw similar with the decision-making in the devolved governments regarding COVID. We need something simple and nationwide.

A bit of clarity about how the taxation of electric vehicles will look would be welcome as well. We all know what happened with diesel vehicles back in the day. We were encouraged to buy a diesel vehicle, and then told to buy petrol again and then hybrid vehicles. As of yet, nobody has said anything about taxation on electric vehicles. What will happen?

If they don’t tax EVs, as they become more and more common and internal combustion engines are taken off the road, there’ll be no investment in infrastructure. People want to know what it’s going to cost them.

I think that will have a big say on the uptake of EVs in the future. We all know it’s coming, so let’s have a bit of clarity about the governments intentions. Of course this wont happen as it will further slow the take up of EV’s when people know they will be taxed more heavily on them soon.

Following last autumn’s supply crisis and the fallout that coincided with it, the RHA is now turning towards a new future under new leadership. As an RHA member, what do you wish to see from the organisation in 2022 and beyond?

I actually think the RHA is a very well-intended organization – they try to do the right thing.

I think where they need to improve is they need to be a more successful lobbying organization than they have been. They don’t seem to carry enough weight.

I doubt that Grant Shapps actually listens to the RHA, or if he does, he doesn’t seem to react to them. I think the RHA does need to get some credibility back and with a few quick wins or low hanging fruit like a permanent reduction in fuel duty for example. Then they’ll start to claw back some of that credibility.

We have got to move forward, but I don’t think the RHA is dead. There are some great members of the RHA. There are some great individuals that work and lobby the government on behalf of the RHA.

Elsewhere, there’s people like Paul Sanders of the APN, who almost seem to carry as much weight. The Association of Pallet Networks in the UK is a great organization in my book. Paul, and the other members who sit on the APN seem to have quite a bit of success. We get as much information through the APN as we do the RHA, and you would expect it to be the other way around.

Even so, the RHA are not dead in the water, they just need to re-establish some credibility.

Finally, I’ve seen that motorsport is something Pall-Ex are also involved in, including you personally. Could you tell us a little bit about this?

Yes, we do support motorsport and one team in particular, Toro Verde GT, which is owned by one of our founder members, Dave Fairbrother from ADD Express in Rochdale. ADD Express also operate the Pall-Ex UK northern hub.

The guys at Toro Verde GT have four cars running in the Porsche Carrera Cup GB this year. We’ve moved away from the European GT2 series, as we didn’t really get the exposure that we were after as the series failed to take off due to covid travel restrictions.

I also race a bit myself – I’m racing in the Ginetta GT Academy this year with Toro Verde GT. So, we do like a bit of motorsport. Toro Verde cars are running on the British Touring Car Series, and the British GT support series. So we’re quite active in that department this year – our logo must be on at least five cars!

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