From a standing start, the operation in Latvia set up nine months ago by Rosyth-based pallets giant Scott Timber Group (STG) is already achieving an annualised turnover of around £15m. And according to managing director John Scott, this initiative has not only eased supply difficulties but has also added a greater measure of stability to the group’s timber costs.
The result of a £2.5m investment, the company base in the port of Riga accommodates kilning, cross-cutting and block-cutting facilities, as well as administration, purchasing, human resources and quality control staff. Currently handling upwards of 17,000m3 of timber each month, this new venture is shipping to the UK every second day; three vessels are dedicated almost exclusively to carrying STG’s timber to Rosyth, Hull, Liverpool and Barry in South Wales, as well as to ports in south-east England. “We are now one of the UK’s largest importers of pallet material,” said Mr Scott.
STG decided to establish a presence in Latvia after encountering a constant barrage of supply issues. At the time its suppliers among the Latvian mills were struggling and some of them were closing down. Scott decided that dealing with them direct would help secure their margins and also guarantee its supplies. The group uses some agents and sources UK-grown timber, but the biggest proportion of its supplies now comes through the Riga facility where the timber stockpile is currently around 20,000m3.
Smoothing price peaks
The new venture has helped STG to “take the peaks out” of its timber costs, Mr Scott continued. “Before last year, every time we placed an order the price was going up. Supply is more managed than it was before.” In addition, the facility provides a single point of delivery for all STG’s timber coming out of Latvia. “We produce to around 3,000 different specifications and deal with some 250 sawmills in Latvia,” said Mr Scott. “We can communicate to our suppliers exactly what is needed and our staff can constantly check the timber as it comes through. So we are now getting good supply at the right quality.”
Furthermore, the initiative has yielded benefits for STG’s customers in the UK, not least in terms of easing supply worries. “They can see that we have more control over our supply and that the stocks in Riga are for them,” said Mr Scott. “We can also respond much more quickly to customer demand peaks.”
STG’s managing director makes no secret of the fact that setting up the Riga facility represented a huge commitment in terms of finance and also management man hours. Over the course of a number of months, Mr Scott spent several days a week in Latvia to help lay the groundwork for the new operation. “There was a lot of work involved,” he said. “It needed time to build confidence in the supply chain. I went round a lot of the sawmills to communicate the specifications we require and to make clear that we wanted to be a fair partner.” The aim from the outset has been to create “flexible” working relationships to ensure that STG satisfied its timber needs while providing the various suppliers with the scope to develop their own businesses, he added.
Manufacturing
The commitment of management time to the project is ongoing. Mr Scott’s brother Norman, STG’s purchasing director, is now spending time in the Baltics to continue the development process and to assess ways of taking the initiative forward. The group is not ruling out the possibility at some point of manufacturing pallets at the Riga facility, although John Scott stressed that any such production would be destined almost certainly for markets in mainland Europe rather than in the UK.
Through this expansion into the Baltics, STG has now easily surpassed the £50m annual turnover target set several years ago. The group, whose interests extend beyond pallets to packaging and crates, was formed in 1987 and currently turns over £60m per year. John Scott said: “We are looking seriously at packaging and at adding new products. We still see massive potential to grow in the UK.”
