DHL Company Profile
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Private Company Incorporated: 1969 Employees: 50,000 Sales: $4 billion (1996 est.) SICs: 4513 Air Courier Services Principal Subsidiaries: DHL International Ltd.; DHL Airways, Inc.
DHL Worldwide Express, a privately held worldwide delivery service comprised of DHL Airways and DHL International, is the world's oldest and largest international air-express company. Since 1969 when it began as an air-courier service from California to Hawaii, the firm has grown phenomenally and dominates the global express marketplace, delivering to over 70,000 destinations in 227 countries. DHL delivers both small and heavyweight parcels to destinations from the Middle East and Pacific Rim countries to throughout Europe and the United States. DHL's ever-expanding international presence prompted such stateside competitors as Federal Express and United Parcel Service, as well as the United States Postal Service, to join the fray of global express delivery.
Three Men and a Purpose, 1969-79
DHL was founded by three young shipping executives-- Adrian Dalsey, Larry Hillblom, and Robert Lynn-- who were figuring out a way to increase turnaround speed for ships at ports. They reasoned that if the shipping documents could be flown from port to port, they could be examined and processed before the ships arrived, and speeding up the process would decrease port costs for shippers. With this in mind, they combined the first letters of their last names to form the acronym DHL, thus beginning an air-courier company that revolutionized the delivery industry. DHL rapidly developed into an express delivery service between California and Hawaii, and then quickly expanded to points east. The company's primary customer was the Bank of America, which needed a single company to carry its letters of credit and other documents. DHL branched into the international market in the early 1970s when it began flying routes to the Far East. In addition, while competitor Federal Express was developing its domestic overnight delivery network, DHL focused on further developing its international service. In 1972, the three original investors recruited Po Chung, a Hong Kong entrepreneur, to help them build a global network. Chung started DHL's sister company, DHL International Ltd., headquartered in Brussels, Belgium. Since that date DHL Worldwide has functioned as two separate companies, DHL Airways, Inc. based in Redwood City, California, and DHL International. While each company acted as the exclusive agent for the other, by 1983 DHL International had grown to be five times larger than its domestic counterpart. DHL International's rapid expansion continued throughout the 1970s, adding destinations in Europe in 1974, the Middle East in 1976, Latin America in 1977, and Africa in 1978.
FedEx and UPS Up the Ante, 1980-88
The 1980s would bring the firm increased growth as well as greater competition. During this time DHL continued to expand, by turns cooperating with competitors and warring with
them. The company also sought new outlets for service, working out an arrangement with Hilton International Co. in 1980, agreeing to provide daily pickup of documents at 49 Hilton Hotels, arranging for international delivery--its couriers moving the packages through customs--then delivering them locally. It was a win-win situation as Hilton was able to offer its patrons a high-class delivery service and DHL was guaranteed new outlets for its business. The next year, 1981, DHL flew 10 million shipments between 268 cities and had approximately $100 million in sales. The following year, Lawrence Roberts, who had founded Telenet Communications Corp. and headed GTE, joined DHL Corp. as president. Although DHL had a strong international presence, business was occasionally made difficult because it was necessary for the company to negotiate with foreign governments. In 1982, for example, the French post office sought to reassert a monopoly dating back to the 15th century, and DHL--possessing 80 percent of the French market--was ordered to halt operations outside Paris. What could have been a potential crisis for the company was, however, favorably resolved. DHL continued to expand its horizons, though, adding Eastern bloc nations in 1983. Prior to 1983, DHL had not pursued much business in the United States, leaving the field to Federal Express and United Parcel Service (UPS). Despite counting 97 percent of the nation's 500 largest companies among its customers, DHL still held only a minuscule share of the overall domestic market. To bolster its share of the American market, DHL installed two major hubs at airports in Cincinnati and Salt Lake City, and added nine mini-hubs in major cities across the country. The company also bought three Boeing 727s and seven Learjets, as well as new sorting equipment. In addition, in 1983 DHL Worldwide started using helicopters in New York and Houston to expedite documents during rush hour and the following year initiated helicopter service in Los Angeles as well. Once the hubs had been installed, DHL Airways began offering point-to-point overnight service between 126 American cities. Still, for the year ending in 1983, DHL reached only two or three percent of the domestic market--yet had more than 5,000 employees with 400 offices in over 90 countries. As in its earliest days, banks accounted for a large portion of its business; other common shipments consisted of computer tapes, spare parts, and shipping papers. That year, DHL estimated it carried 80 percent of the bank material traveling by courier from Europe to the U.S. and revenues were approximated at $600 million. In 1984, as former courier-driver Joseph Waechter became president of DHL Airways, DHL provided service to more than 125 countries, and its 500 stations were handling 15 million international and domestic shipments annually. But just as DHL was looking to cut into the business of its domestic competitors, those same companies were aiming to siphon off portions of DHL's international business. In 1985 both Federal Express and UPS entered the international express market. As competition became more intense, DHL increasingly began to cooperate with businesses in similar areas. The company teamed up with Western Union to deliver documents generated on Western Union's EasyLink electronic mails, allowing people to send documents via courier without having to hand-deliver material to the courier's office. The next year, 1986, as DHL International formed its first joint venture with the People's Republic of China, known as DHL Sinotrans, Charles A. Lynch was named chairman and chief executive of DHL Airways, replacing Roberts. Lynch remained with the company just two years and was replaced by Patrick Foley, the former chairman of Hyatt Hotels. Meanwhile, FedEx and UPS were eroding DHL's market share, which fell from 54 percent in 1985 to 50 percent in 1987. However, an important competitive battleground existed in Japan, and while FedEx and UPS gained footholds in that country in the 1980s, by 1988 DHL still controlled 80 percent of the Japanese overseas market.
As the world economy boomed in the 1980s, DHL followed suit, even breaking new ground in the Communist-bloc countries. The company had first cracked the eastern bloc in 1983, when it began delivering packages to Hungary, East Germany, and several other countries. DHL Airways was not slouching either, reporting that between 1986 and 1987 alone, its volume rose 34 percent; in 1987 it was the 318th largest private company in the United States, with 5,000 employees and estimated sales of $375 million. Revenues for the entire DHL network, in 1988, were calculated to be between $1.2 and $1.5 billion, helped in part by another joint venture with a Hungarian company to create DHL Budapest Ltd. That year, DHL controlled 91 percent of the packages bound for Eastern Europe from the West and 98 percent of all outbound shipments.
Holding and Increasing Market Share, 1989-93
In 1989, DHL Worldwide was the 84th largest company in the United States with 18,000 employees, more than 50 million shipments, and service to 184 countries. However, though DHL's international success was becoming firmly established, the company was not making the headway it had planned in the United States. As of 1989, DHL had only five percent of the domestic market. To bolster its name recognition in the United States, the company turned to innovative advertising techniques, including the use of humor. Cartoonist Gary Larson, creator of the wildly popular comic "The Far Side," was employed to draw cartoons for use in DHL advertising, and in 1990 the company introduced a campaign featuring flying DHL vans whizzing past competitors' planes. DHL also took an unusual approach to air delivery. Although the company used its own fleet of planes within Europe and on some major routes, DHL often used scheduled airlines to carry its shipments. Federal Express, in contrast, maintained its own fleet and seldom used other airlines. Rather than purchase its own planes, DHL chose instead to invest its capital in technology and ground-handling equipment, spending some $250 million on those areas in 1990 and 1991 alone. In 1990, in order to infuse the company with fresh capital and take advantage of the resources of larger airlines, DHL International sold parts of its business to three companies. Japan Air Lines and the German airline Lufthansa each purchased five percent, while Nissho Iwai, a Japanese trading company, purchased 2.5 percent. Each firm also had the option of buying greater shares. In addition, the three companies also own a combined stake of 2.5 percent in the U.S-based DHL Airways. The sale of these closely held interests brought $500 million in capital into the firm. The same year, despite a 60 percent share of the international overnight delivery market, the company began to expand into new areas of business. To keep up in an increasingly competitive industry, DHL Worldwide entered the freight services industry and began carrying heavier cargo. In the company's 20-year history of carrying small packages-generally under 70 pounds--this was DHL's first major departure from its core business. In 1991, DHL Worldwide had revenues of $2.3 billion, and was the 59th largest private company in the U.S., its 21,000 employees handling more than 80 million shipments. In June 1992, all three of DHL's major shareholders exercised their option to increase their shares in DHL International; Japan Air Lines and Lufthansa each increased their stake to 25 percent, while Nissho Iwai's holdings grew to 7.5 percent. This was also the year DHL began service to Albania, Estonia, Latvia, and Greenland, and reestablished ties with Kuwait. In addition, in an unusual move DHL signed an agreement to share transatlantic and European aircraft operations with one of its competitors, Emery Worldwide. The economic recession and an overcrowded North Atlantic airway were cited as the reasons behind these cooperative measures, which would allow greater operating efficiency and expanded service. The arrangement represented the first of several alliances between integrated carriers, due to increasing pressure from other competitors, including Airborne Express and TNT. In 1993 as revenues hit $3 billion, DHL commenced a four-year $1.25 billion capital spending program to step up its technological capabilities, automation, and communications.
Towards a New Century, 1994 Onward
By 1994, DHL Worldwide's 25-year anniversary, the company controlled 52 percent of the Asian express shipment marketplace, with FedEx and UPS garnering a 24 percent slice each. The next year, DHL poured over $700 million into expansion of its Pacific Rim operations. DHL was not only shoring up facilities in Hong Kong and Australia, but venturing into 16 new cities in China, India, and Vietnam. A new $60 million hub at Manila's Ninoy Aquino International Airport was scheduled to open in late 1995, with additional facilities slated for Bangkok, Tokyo, Auckland, and Sydney. In the midst of its ambitious expansion, DHL was rocked by the news of founder and majority shareholder Larry Lee Hillblom's death. Known as an avid though reckless pilot (he had survived a previous crash and had his pilot's license suspended), Hillblom, who had withdrawn from DHL's daily operations in 1980, was killed in a seaplane accident near Saipan where he lived. The management at DHL was soon embroiled in an ugly controversy after Hillblom's 1982 will was released, as a spate of paternity claims and lawsuits were filed. Lurid details of Hillblom's penchant for young island girls reached the press, including an in-depth exposé in the generally staid Wall Street Journal. Since Hillblom had retained a mighty 60 percent of DHL Airways and 23 percent of DHL International (valued conservatively at the time at around $300 million), the company's officers scrambled to exercise an option to repurchase his shares. Yet financing and a host of complications held up the buyback and soon the entire estate was a miasma of lawsuits, bad judgement calls, and island politics. Yet 1995 was still a good year for DHL Worldwide, as the company debuted its web site (www.dhl.com) and experienced an overall 23 percent growth in revenue to $3.8 billion, with an incredible 40 percent surge in volume in its Middle East operations. In response to the encouraging numbers, DHL broke ground on a new $4 million state-of-the-art express facility at the Dubai International Airport in the United Arab Emirates in 1996. The new 42,000square-foot hub was to complement DHL's existing facilities in Bahrain. Over on the Asian continent, DHL broke with its longstanding tradition of leasing planes to buy its own cargo fleet. Though DHL International's previous strategy of leasing out cargo space had proved both successful and prudent, Chairman and CEO Foley told the San Francisco Business Times the company needed to control its own destiny, and having its own fleet would help alleviate the space limitations and scheduling snafus of commercial flights. In 1996, DHL was looking to the future again by announcing plans for a $100 million hub in the Midwest to carry the company through the next two decades. While its Cincinnati "superhub" handled around 45 incoming flights every night, and sorted over 135,000 pieces at a rate of 60,000 per hour--DHL believed its growth would soon outpace the facility. The same was true for the San Francisco area, where Silicon Valley shipments represented 40 percent of DHL Airways' business in the Bay Area. Internationally, DHL was still growing at the speed of sound with expansion in the former Soviet Union to 37 branches, a new facility at Ferihegy Airport in Budapest, and the acquisition of Shigur Express in Israel. Though DHL had worked with Shigur for years, the $3.5 million purchase gave DHL a firmer presence in the country's emerging market. By 1998, DHL served 227 countries with 2,381 stations in cities from Paris and Prague to Bombay and Bangkok with over 53,200 employees. Stateside, however, DHL Airways still represented less than two percent of the market, though the California-based company got a boost from the Teamsters' strike against UPS. As the 1990s came to a close, DHL International announced its intention to sell a 22.5 percent stake in the company to Deutsche Post AG, for an infusion of funds and to strengthen its presence in Germany. With the air cargo industry projected to grow at an annual rate of 6.7 percent for the next dozen or so years, DHL International continued to stave off competitors and dominated global express shipments with over 40 percent of the market. Its
U.S.-based sibling, DHL Airways, maintained a healthy bottom line and was positioned to carve away at the market share of FedEx and UPS.
Mergers and Acquisitions by Deutsche Post/ DHL
All US domestic flights were handled by DHL Airways, Inc. which in 2003 was renamed ASTAR Air Cargo. DHL's first airline still remains with over 550 pilots in service, as of October 2008.
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2001: Deutsche Post acquired a majority (51%) of DHL's shares, and the remaining 49% in 2002. The new DHL was launched by merging the old DHL, Danzas and Securicor Omega Euro Express. 2001: The Packstation, an automated delivery booth, is introduced as a pilot project in Dortmund and Mainz. August 2003: Deutsche Post acquires Airborne Express, and begins to integrate it into DHL. The Airborne Express Airline named ABX Air is to provide contract ACMI service until 2011. September 2004: a planned expansion by DHL at Brussels International Airport created a political crisis in Belgium. 21 October 2004: DHL Express announced that it would move its European hub from Brussels to Leipzig, Germany (Vatry, France was considered and rejected). DHL's unions call a strike in response, paralyzing work for a day. 8 November 2004: DHL Express invests €120 million in Indian domestic courier Blue Dart and becomes the majority shareholder in the company. September 2005: Deutsche Post made an offer to buy contract logistics company Exel plc, which had just acquired Tibbett & Britten Group. On December 14, 2005, Deutsche Post announced the completion of the acquisition of Exel plc. When integrating Exel into its Logistics division, it added its well-known DHL brand acquired with the purchase of DHL Express to form the name DHL Exel Supply Chain. Following the latest deal, DHL have a global workforce of 285,000 people (500,000 people including DPWN and other sister companies) and roughly $65 billion in annual sales. September 2006: DHL wins ten year contract worth £1.6 billion, to run the NHS Supply Chain (part of the UK's National Health Service). DHL will be responsible for providing logistics services for over 500,000 products to support 600 hospitals and other health providers in England. As part of this new contract, in 2008 DHL will open a new 250,000 sq ft (23,000 m2) distribution centre to act as a stock holding hub for food and other products, with another distribution centre opening in 2012. The two new distribution centres will create around 1,000 new jobs. September 2007: DHL Express co-founds new cargo airline AeroLogic, based at Leipzig/Halle Airport, in a 50:50 joint venture with Lufthansa Cargo. The carrier will operate up to 11 Boeing 777Fs by 2012. December 2007: DHL becomes the first ever carrier to transport cargo via wind powered ships flying MS Beluga Skysails kites. May 2008: DHL Aviation moved their central depot to Leipzig; Germany, resulting in a significant positioning for improved service and timeliness to the European Union.
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28 May 2008: DHL Express announced the restructuring plans for its United States network, including terminating its business relationship with ABX Airand entering into a contract with competitor UPS for air freight operations. Its cargo hub would shift from Wilmington to Louisville. The Air Line Pilots Association, International protests. 10 November 2008: DHL announces that it is cutting 9,500 jobs as it discontinues domestic air and ground operations within the United States to deal with economic uncertainty. It is retaining international services, and is still in talks with UPS to transport DHL packages between U.S. airports. N785AX, a Boeing 767-200 with DHL livery, operated by ABX Air, departs Portland International (KPDX) runway 28R. A Tupolev Tu-204C operated for DHL byAviastar-TU at Sheremetyevo International Airport in Moscow, Russia. 30 January 2009 DHL ends domestic pick up and delivery service in the United States, effectively leaving UPS and FedEx as the two major express parcel delivery companies in the United States Limited domestic service is still available from DHL, provided that the packages are tendered to USPS for local delivery. NewEgg is one such company that uses this option as of May 10, 2011. April 2009: UPS announced that DHL and UPS have ended negotiations for an agreement for UPS to provide airlift for DHL packages between airports in North America. DHL said in a statement, "We have not been able to come to a conclusive agreement that is acceptable to both parties." DHL will continue to use its current air cargo providers, ASTAR Air Cargo and ABX Air for now.
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Mission and Vision Statement
Mission:
“DHL enhances the business of our customers by offering highest quality express and logistics solutions based on strong local expertise combined with the most extensive global network presence. Customers trust DHL as the preferred global express and logistics partner, leading the industry in terms of quality, profitability and market share.”
Vision:
“DHL is a Deutsche Post DHL brand with a vision to become “The logistics company for the world”. Our promise to customers is to provide simplifying services and sustainable solutions, and to always demonstrate respect without compromising on results.” DHL’s mission is to be first choice worldwide by making the most scale and experience and the passion. Its vision is the transform the logistic industry and to deliver beyond customers experience for the future. DHL’s vision is
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To intensify customer focus. To deliver consistence service excellence. To extend capabilities (creating local strength and driving practical innovation) To attract, develop and retain talents. To relentless drive efficiency. To be proactive in social.
With using the vision and mission statement, DHL’s core organizational values can be increased by examining its weakness, threats, strength and opportunities.
SWOT Analysis
Company Strength
• Strong brand image- In 1997, DHL became the global express transportation company simultaneous system-wide ISO 9001 certificate in international quality standards.
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Globalism- DHL operate mare than 220 countries over the world on a global scale. E services and technology- it uses and search for a new technology. Product can be tracked, queried, and ordered online.
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Corporate symbiosis— it helps to encompass the empowerment of its personnel at a local level.
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Smart-truck projects— it allows DHL to deliver faster.
COMPANY WEAKNESS
• • • High prices—prices above their rival company. Mistakes in market share estimate—it it’s the biggest weakness of DHL. Weak visibility—in the community compared with its potential.
COMPANY OPPORTUNITY
• • • • Expansion globally—it can expand globally including other companies under DHL. Joint venture—DHL can form joint venture integrating their customer bases. Expansion of ecommerce—it serves with shipping online. DHL can enjoy both profit and brand name recognition form this kind of expansion. Increased in the number of manufactured goods—manufactured goods will increased exponentially as a report given be WTO.
COMPANY THREATS: • • • •
Relations with foreign countries— in every country, DHL subjects to laws and order which hinders their operation and efficiency. Economic and political condition— as a global company they are subjects to more risks than other domestic companies. Restrictions— some restrictions like to prevent from china are big problems in the logistic sector. Economic slow down— it decrease the number of products they produced.
Implementation of the Group strategy
Presented by CEO Frank Appel in the spring of this year is progressing according to plan. Deutsche Post DHL presented DHL Solutions & Innovation (DSI), its newly launched business unit at the 26th German Logistics Congress in Berlin. As a motor of innovation and a cross-cutting function of DHL it pools and drives technological development within the Group. Headed by Petra Kiwitt, it reports directly to CEO Frank Appel. "Logistics is becoming a sector for trendsetters and setting standards not only with respect to technological development. Petra Kiwitt and her team will contribute to ensuring that our Group remains one of these trendsetters and helps to secure the economic success of our customers by offering future-oriented logistics solutions," said Frank Appel. The
newly created organizational unit consolidates the innovation activities of the individual branches of DHL. Based on the results of market studies, analyses of sector strategies and intensive customer surveys, DHL Solutions & Innovation lays the groundwork for futureoriented and standardized logistics solutions that are becoming applicable across sectors. "Our customers expect sustainable solutions, understandable services that are easy to use and uncomplicated access to their service provider. We are achieving this among other things by enhancing connections between the various DHL Units dealing with research and development. This is a way to tap the full creative potential of our staff," Petra Kiwitt stressed. Right from the start, DHL Solutions & Innovations has been able to benefit from successful platform approaches, such as the Control Tower Concept. Used for several customers, this concept enables a strategic transport management through modern IT solutions which provide a permanently updated access to all details of the supply chain. The experience and innovative strength of the DHL Innovation Centre, which opened in 2007, is another asset. This is where ground breaking logistics solutions such as the parcel robot, the carbon offsetting procedure and the smart truck originated. DSI also proves that the Group Strategy presented in March 2009, which is aimed at strengthening Deutsche Post DHL's leading role in the international logistics market, is being implemented. The strategy is aimed at leveraging the full potential of the world's leading logistics provider and increasing the profitability of DHL by improving cooperation as "One DHL" and increasingly dovetailing operations with DHL Global Customer Solutions (GCS). The needs in particular of the 100 biggest customers handled by GCS are valuable indicators, which are now being fed into development processes at an early stage. DHL Solutions & Innovations is also the result of the study "Delivering Tomorrow - Customer Expectations in 2020 and Beyond" that was recently presented by Deutsche Post DHL. "Our study shows that the omnipresence of the Internet, sustainable resource management and climate change are issues of relevance to society. The logistics sector too must respond to these challenges," stated Frank Appel. "DHL Solutions & Innovation is another building block that will help Deutsche Post DHL turn these challenges into opportunities."
Strategy 2015:
The Strategy 2015, which CEO Frank Appel announced on March 11, 2009, is based on two pillars: The first is a strong mail business that is clearly committed to carrying out the universal service obligation of Deutsche Post and that plans to add new value-added electronic services to its range of offerings. The second is an integrated international logistics business that vigorously focuses on quality and customers. The core aim of this strategic shift is to unleash the company's unexploited potential following the aggressive phase of expansion pursued in recent years. The objective is to achieve growth in all divisions that exceeds market performance by 1 to 2 percentage points. At the same time, the Group is committed to ensuring that these growth targets are reached in accord with its responsibility for the environment and society. At DHL, the individual divisions in the future will work even more closely together in order to better address customer needs and to improve profitability of the entire business. The Group has also introduced a new guiding principle for employees with the aim of increasing employee involvement and commitment and of ensuring swift implementation of
the Strategy 2015. The strengthening of the First Choice customer initiative will also contribute to this end.
Challenges 2009:
The world's economy has been experiencing a tailspin of historic proportions since the fourth quarter of 2008. Throughout all regions and sectors, many customers of Deutsche Post DHL are seeing unparalleled decreases in demand, which then result in lower shipping volume. In the United States, the restructuring of the Express business continues to make good progress. The termination of the entire domestic business was carried out on schedule at the end of January. The remaining international express cargo will be shipped by DHL's current carriers ABX Air and ASTAR Air Cargo. The talks between UPS and DHL about a potential airlift agreement have been terminated. Despite having to master major economic challenges this year, the Group will remain fully committed to its responsibility for the environment and society. As presented in its Sustainability Report 2009, the Group has introduced various initiatives in all Corporate Divisions covering the areas of fleet, buildings, innovative technologies and employee motivation to help improve carbon efficiency. Deutsche Post DHL a year ago launched its Go Green climate protection program aimed at improving carbon efficiency by 10% through 2012 and by 30% through 2020.
Financial improvements:
In terms of costs, DPWN expects to see overall profits for DHL Express US improve by $1 billion in 2011, with expected losses of $1.8 billion in 2008, $900 million in 2009, $500 million in 2010, and $300 million in 2011. Although this restructuring is expected to have a significant material impact on DHL’s cost base and overall infrastructure, it is expected to have a smaller impact on customers, said DHL Express CEO John Mullen. DPWN said it expects to spend up to $2 billion to finance the restructuring plan, which will go towards termination costs, leases, severance, aviation assets, and pickup and delivery optimization. And DPWN noted that it anticipates these restructuring efforts will result in annual savings of $1 billion per year (in earnings before taxes), with key changes expected to be completed by the end of 2009 and full plan implementation taking hold by 2010. “As a result of this, we will have a less complicated ground and air network than we had before, which should deliver more reliability across the whole platform of our combined operations,” said Mullen. “Most importantly, we believe this plan will protect our international network franchise and our global coverage, which is critical to a global player such as us. It is essential that we have a continuing presence in the U.S.” Industry analysts suggest that there are pros and cons in terms of the type of impact today’s news may have for shippers.
“DHL has stated in the past that its customers pay less than its competitors on many occasions,” said Doug Caldwell, executive vice president of ParcelPool, a small parcel delivery consultancy and services provider. “So now you have a situation where current DHL shippers with good rates can think this is a positive, because it says DHL is clearly staying in the U.S. and they don’t have to worry about DHL shipments down the line.” But shippers will want to see a smooth transition for DHL’s U.S. restructuring, noted Caldwell, and he said they don’t necessarily need to be exploring other options. Instead, shippers using DHL should be looking to hold onto those rates for as long as they can for two reasons: one being that DHL’s rates are by and large better than what the competition offers, and the second point being the reliability of UPS airlift. “Why would a shipper want to switch from DHL to UPS, when UPS is already handling the line haul for airfreight on shipments right now? Also, UPS operationally is second to none line haul with very few service failures. This is a plus for DHL shippers, except for those with a lot of rural shipments, and for those in rural areas normally have a different service expectation.” While Parcel Pool’s Caldwell, said that DHL’s probable agreement with UPS is largely favourable for shippers, Jerry Hempstead, president of Hempstead Consulting in Orlando, Fla., said that today’s announcement overlooks some important points for shippers. One point being that this deal with UPS leaves DHL bound to the UPS flight schedule. DHL, said Hempstead, has a large number of shippers that use DHL, because it has been flexible over the years with its flight scheduling to accommodate the special needs of specific shippers. As an example, he said DHL has a special flight into Memphis that allows it to deliver as early as 4 a.m. to a company that repairs laptops. This gives the laptop repair company the ability to extend its repair window so that laptops can be turned in the same day and shipped out to the customer. He also pointed out that other businesses have special flights into certain cities via these specific DHL flights. Its infrastructure network and in aviation with a restructuring plan that focuses on three main elements: • Reducing infrastructure network capacity by approximately 30% through the following detailed measures: ? Consolidating and closing smaller sorting facilities into modernized, larger stations, resulting in reductions of approximately 34%
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Rationalizing pickup and delivery routes by 17%, including new courier routing plans to enable better route planning and avoiding peaks in the operation, as well as making changes to staffing plans
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Ground linehaul network rationalized by 18% through improved capacity utilization and footprint reductions in some remote areas.
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A proposed contract between DHL and UPS whereby UPS will provide air uplift for DHL Express U.S. domestic and international shipments within North America.
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Reduction in overhead and other administrative costs. DHL's strategic priorities in the U.S. will be to continue to provide record service reliability, and accelerating growth in more profitable segments of the market through leveraging innovative sales channel strategies like the recently announced Walgreens partnership.
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To drive the implementation of the restructuring plan, DHL recently announced the appointment of long-time DHL senior executive, Ken Allen, as CEO of DHL Express U.S. Allen has extensive experience executing restructuring plans within DHL. In his previous role as CEO of DHL Express Eastern Europe, Middle East and Africa (EEMEA), Allen has doubled revenue growth and margin within two years. In addition, his experience as CEO of DHL Express Canada resulted in turning many years of negative performance into what is now positive financial development for the company.
Key Competitors
Company Express Logistics Telecomm Aviation Shippin g Stude nt Servic e Import s/ Export s Cargo Event Services
DHL TCS OCS FedEx Leopards
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IFE MATRIX for DHL
Strength Weight Rating Weighted
(1-4) 1. Strong Brand Image 2. Globalism 3. Good Reputation
4.
Score .24 .27 .14 .24 .24 .14 .24 .14 .21 .07 Weighted Score .14 .14 .06 .07 2.28
.08 .09 .07 .08 .08 .07 .06 .07 .07 .07 Weight .07 .07 .06 .07 1.0
3 3 2 3 3 2 3 2 3 1 Rating 2 2 1 1
eServices and technology
5. Kept in same strategies for years
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DP adjust structure for PostBank Contract
7. President and VP have significant experience and skills of management 8. eBusiness 9. DP investing in mail business 10.Creativity and innovations for improving effectiveness Weakness 1. High Prices 2. Mistakes in market-share estimate 3. Weak visibility 4. Loyalty problems on consumer behaviour Total
Porter five forces model Threat of New
Bargaining powers of suppliers
Rivalry
Bargaining power of buyers
Threat of substitute product or
BCG Analysis
DHL logistics + Inbound Services
DHL domestic services
Prioritize
Divest
Invest
KiLL
Bibliography
• DHL press release
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http://www.dhl.com/publish/g0/en/press/release/2004/081104.high.html http://www.dhl.co.uk/publish/gb/en/press/release/2006/dhl_wins_contract.high .html
http://www.dhl-usa.com/about/pr/PRDetail.asp? nav=PressRoom/PressReleases&year=2008&seq=1246 http://www.samples-help.org.uk/mission-statements/dhl-mission-statement.htm
doc_422614424.docx
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Private Company Incorporated: 1969 Employees: 50,000 Sales: $4 billion (1996 est.) SICs: 4513 Air Courier Services Principal Subsidiaries: DHL International Ltd.; DHL Airways, Inc.
DHL Worldwide Express, a privately held worldwide delivery service comprised of DHL Airways and DHL International, is the world's oldest and largest international air-express company. Since 1969 when it began as an air-courier service from California to Hawaii, the firm has grown phenomenally and dominates the global express marketplace, delivering to over 70,000 destinations in 227 countries. DHL delivers both small and heavyweight parcels to destinations from the Middle East and Pacific Rim countries to throughout Europe and the United States. DHL's ever-expanding international presence prompted such stateside competitors as Federal Express and United Parcel Service, as well as the United States Postal Service, to join the fray of global express delivery.
Three Men and a Purpose, 1969-79
DHL was founded by three young shipping executives-- Adrian Dalsey, Larry Hillblom, and Robert Lynn-- who were figuring out a way to increase turnaround speed for ships at ports. They reasoned that if the shipping documents could be flown from port to port, they could be examined and processed before the ships arrived, and speeding up the process would decrease port costs for shippers. With this in mind, they combined the first letters of their last names to form the acronym DHL, thus beginning an air-courier company that revolutionized the delivery industry. DHL rapidly developed into an express delivery service between California and Hawaii, and then quickly expanded to points east. The company's primary customer was the Bank of America, which needed a single company to carry its letters of credit and other documents. DHL branched into the international market in the early 1970s when it began flying routes to the Far East. In addition, while competitor Federal Express was developing its domestic overnight delivery network, DHL focused on further developing its international service. In 1972, the three original investors recruited Po Chung, a Hong Kong entrepreneur, to help them build a global network. Chung started DHL's sister company, DHL International Ltd., headquartered in Brussels, Belgium. Since that date DHL Worldwide has functioned as two separate companies, DHL Airways, Inc. based in Redwood City, California, and DHL International. While each company acted as the exclusive agent for the other, by 1983 DHL International had grown to be five times larger than its domestic counterpart. DHL International's rapid expansion continued throughout the 1970s, adding destinations in Europe in 1974, the Middle East in 1976, Latin America in 1977, and Africa in 1978.
FedEx and UPS Up the Ante, 1980-88
The 1980s would bring the firm increased growth as well as greater competition. During this time DHL continued to expand, by turns cooperating with competitors and warring with
them. The company also sought new outlets for service, working out an arrangement with Hilton International Co. in 1980, agreeing to provide daily pickup of documents at 49 Hilton Hotels, arranging for international delivery--its couriers moving the packages through customs--then delivering them locally. It was a win-win situation as Hilton was able to offer its patrons a high-class delivery service and DHL was guaranteed new outlets for its business. The next year, 1981, DHL flew 10 million shipments between 268 cities and had approximately $100 million in sales. The following year, Lawrence Roberts, who had founded Telenet Communications Corp. and headed GTE, joined DHL Corp. as president. Although DHL had a strong international presence, business was occasionally made difficult because it was necessary for the company to negotiate with foreign governments. In 1982, for example, the French post office sought to reassert a monopoly dating back to the 15th century, and DHL--possessing 80 percent of the French market--was ordered to halt operations outside Paris. What could have been a potential crisis for the company was, however, favorably resolved. DHL continued to expand its horizons, though, adding Eastern bloc nations in 1983. Prior to 1983, DHL had not pursued much business in the United States, leaving the field to Federal Express and United Parcel Service (UPS). Despite counting 97 percent of the nation's 500 largest companies among its customers, DHL still held only a minuscule share of the overall domestic market. To bolster its share of the American market, DHL installed two major hubs at airports in Cincinnati and Salt Lake City, and added nine mini-hubs in major cities across the country. The company also bought three Boeing 727s and seven Learjets, as well as new sorting equipment. In addition, in 1983 DHL Worldwide started using helicopters in New York and Houston to expedite documents during rush hour and the following year initiated helicopter service in Los Angeles as well. Once the hubs had been installed, DHL Airways began offering point-to-point overnight service between 126 American cities. Still, for the year ending in 1983, DHL reached only two or three percent of the domestic market--yet had more than 5,000 employees with 400 offices in over 90 countries. As in its earliest days, banks accounted for a large portion of its business; other common shipments consisted of computer tapes, spare parts, and shipping papers. That year, DHL estimated it carried 80 percent of the bank material traveling by courier from Europe to the U.S. and revenues were approximated at $600 million. In 1984, as former courier-driver Joseph Waechter became president of DHL Airways, DHL provided service to more than 125 countries, and its 500 stations were handling 15 million international and domestic shipments annually. But just as DHL was looking to cut into the business of its domestic competitors, those same companies were aiming to siphon off portions of DHL's international business. In 1985 both Federal Express and UPS entered the international express market. As competition became more intense, DHL increasingly began to cooperate with businesses in similar areas. The company teamed up with Western Union to deliver documents generated on Western Union's EasyLink electronic mails, allowing people to send documents via courier without having to hand-deliver material to the courier's office. The next year, 1986, as DHL International formed its first joint venture with the People's Republic of China, known as DHL Sinotrans, Charles A. Lynch was named chairman and chief executive of DHL Airways, replacing Roberts. Lynch remained with the company just two years and was replaced by Patrick Foley, the former chairman of Hyatt Hotels. Meanwhile, FedEx and UPS were eroding DHL's market share, which fell from 54 percent in 1985 to 50 percent in 1987. However, an important competitive battleground existed in Japan, and while FedEx and UPS gained footholds in that country in the 1980s, by 1988 DHL still controlled 80 percent of the Japanese overseas market.
As the world economy boomed in the 1980s, DHL followed suit, even breaking new ground in the Communist-bloc countries. The company had first cracked the eastern bloc in 1983, when it began delivering packages to Hungary, East Germany, and several other countries. DHL Airways was not slouching either, reporting that between 1986 and 1987 alone, its volume rose 34 percent; in 1987 it was the 318th largest private company in the United States, with 5,000 employees and estimated sales of $375 million. Revenues for the entire DHL network, in 1988, were calculated to be between $1.2 and $1.5 billion, helped in part by another joint venture with a Hungarian company to create DHL Budapest Ltd. That year, DHL controlled 91 percent of the packages bound for Eastern Europe from the West and 98 percent of all outbound shipments.
Holding and Increasing Market Share, 1989-93
In 1989, DHL Worldwide was the 84th largest company in the United States with 18,000 employees, more than 50 million shipments, and service to 184 countries. However, though DHL's international success was becoming firmly established, the company was not making the headway it had planned in the United States. As of 1989, DHL had only five percent of the domestic market. To bolster its name recognition in the United States, the company turned to innovative advertising techniques, including the use of humor. Cartoonist Gary Larson, creator of the wildly popular comic "The Far Side," was employed to draw cartoons for use in DHL advertising, and in 1990 the company introduced a campaign featuring flying DHL vans whizzing past competitors' planes. DHL also took an unusual approach to air delivery. Although the company used its own fleet of planes within Europe and on some major routes, DHL often used scheduled airlines to carry its shipments. Federal Express, in contrast, maintained its own fleet and seldom used other airlines. Rather than purchase its own planes, DHL chose instead to invest its capital in technology and ground-handling equipment, spending some $250 million on those areas in 1990 and 1991 alone. In 1990, in order to infuse the company with fresh capital and take advantage of the resources of larger airlines, DHL International sold parts of its business to three companies. Japan Air Lines and the German airline Lufthansa each purchased five percent, while Nissho Iwai, a Japanese trading company, purchased 2.5 percent. Each firm also had the option of buying greater shares. In addition, the three companies also own a combined stake of 2.5 percent in the U.S-based DHL Airways. The sale of these closely held interests brought $500 million in capital into the firm. The same year, despite a 60 percent share of the international overnight delivery market, the company began to expand into new areas of business. To keep up in an increasingly competitive industry, DHL Worldwide entered the freight services industry and began carrying heavier cargo. In the company's 20-year history of carrying small packages-generally under 70 pounds--this was DHL's first major departure from its core business. In 1991, DHL Worldwide had revenues of $2.3 billion, and was the 59th largest private company in the U.S., its 21,000 employees handling more than 80 million shipments. In June 1992, all three of DHL's major shareholders exercised their option to increase their shares in DHL International; Japan Air Lines and Lufthansa each increased their stake to 25 percent, while Nissho Iwai's holdings grew to 7.5 percent. This was also the year DHL began service to Albania, Estonia, Latvia, and Greenland, and reestablished ties with Kuwait. In addition, in an unusual move DHL signed an agreement to share transatlantic and European aircraft operations with one of its competitors, Emery Worldwide. The economic recession and an overcrowded North Atlantic airway were cited as the reasons behind these cooperative measures, which would allow greater operating efficiency and expanded service. The arrangement represented the first of several alliances between integrated carriers, due to increasing pressure from other competitors, including Airborne Express and TNT. In 1993 as revenues hit $3 billion, DHL commenced a four-year $1.25 billion capital spending program to step up its technological capabilities, automation, and communications.
Towards a New Century, 1994 Onward
By 1994, DHL Worldwide's 25-year anniversary, the company controlled 52 percent of the Asian express shipment marketplace, with FedEx and UPS garnering a 24 percent slice each. The next year, DHL poured over $700 million into expansion of its Pacific Rim operations. DHL was not only shoring up facilities in Hong Kong and Australia, but venturing into 16 new cities in China, India, and Vietnam. A new $60 million hub at Manila's Ninoy Aquino International Airport was scheduled to open in late 1995, with additional facilities slated for Bangkok, Tokyo, Auckland, and Sydney. In the midst of its ambitious expansion, DHL was rocked by the news of founder and majority shareholder Larry Lee Hillblom's death. Known as an avid though reckless pilot (he had survived a previous crash and had his pilot's license suspended), Hillblom, who had withdrawn from DHL's daily operations in 1980, was killed in a seaplane accident near Saipan where he lived. The management at DHL was soon embroiled in an ugly controversy after Hillblom's 1982 will was released, as a spate of paternity claims and lawsuits were filed. Lurid details of Hillblom's penchant for young island girls reached the press, including an in-depth exposé in the generally staid Wall Street Journal. Since Hillblom had retained a mighty 60 percent of DHL Airways and 23 percent of DHL International (valued conservatively at the time at around $300 million), the company's officers scrambled to exercise an option to repurchase his shares. Yet financing and a host of complications held up the buyback and soon the entire estate was a miasma of lawsuits, bad judgement calls, and island politics. Yet 1995 was still a good year for DHL Worldwide, as the company debuted its web site (www.dhl.com) and experienced an overall 23 percent growth in revenue to $3.8 billion, with an incredible 40 percent surge in volume in its Middle East operations. In response to the encouraging numbers, DHL broke ground on a new $4 million state-of-the-art express facility at the Dubai International Airport in the United Arab Emirates in 1996. The new 42,000square-foot hub was to complement DHL's existing facilities in Bahrain. Over on the Asian continent, DHL broke with its longstanding tradition of leasing planes to buy its own cargo fleet. Though DHL International's previous strategy of leasing out cargo space had proved both successful and prudent, Chairman and CEO Foley told the San Francisco Business Times the company needed to control its own destiny, and having its own fleet would help alleviate the space limitations and scheduling snafus of commercial flights. In 1996, DHL was looking to the future again by announcing plans for a $100 million hub in the Midwest to carry the company through the next two decades. While its Cincinnati "superhub" handled around 45 incoming flights every night, and sorted over 135,000 pieces at a rate of 60,000 per hour--DHL believed its growth would soon outpace the facility. The same was true for the San Francisco area, where Silicon Valley shipments represented 40 percent of DHL Airways' business in the Bay Area. Internationally, DHL was still growing at the speed of sound with expansion in the former Soviet Union to 37 branches, a new facility at Ferihegy Airport in Budapest, and the acquisition of Shigur Express in Israel. Though DHL had worked with Shigur for years, the $3.5 million purchase gave DHL a firmer presence in the country's emerging market. By 1998, DHL served 227 countries with 2,381 stations in cities from Paris and Prague to Bombay and Bangkok with over 53,200 employees. Stateside, however, DHL Airways still represented less than two percent of the market, though the California-based company got a boost from the Teamsters' strike against UPS. As the 1990s came to a close, DHL International announced its intention to sell a 22.5 percent stake in the company to Deutsche Post AG, for an infusion of funds and to strengthen its presence in Germany. With the air cargo industry projected to grow at an annual rate of 6.7 percent for the next dozen or so years, DHL International continued to stave off competitors and dominated global express shipments with over 40 percent of the market. Its
U.S.-based sibling, DHL Airways, maintained a healthy bottom line and was positioned to carve away at the market share of FedEx and UPS.
Mergers and Acquisitions by Deutsche Post/ DHL
All US domestic flights were handled by DHL Airways, Inc. which in 2003 was renamed ASTAR Air Cargo. DHL's first airline still remains with over 550 pilots in service, as of October 2008.
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2001: Deutsche Post acquired a majority (51%) of DHL's shares, and the remaining 49% in 2002. The new DHL was launched by merging the old DHL, Danzas and Securicor Omega Euro Express. 2001: The Packstation, an automated delivery booth, is introduced as a pilot project in Dortmund and Mainz. August 2003: Deutsche Post acquires Airborne Express, and begins to integrate it into DHL. The Airborne Express Airline named ABX Air is to provide contract ACMI service until 2011. September 2004: a planned expansion by DHL at Brussels International Airport created a political crisis in Belgium. 21 October 2004: DHL Express announced that it would move its European hub from Brussels to Leipzig, Germany (Vatry, France was considered and rejected). DHL's unions call a strike in response, paralyzing work for a day. 8 November 2004: DHL Express invests €120 million in Indian domestic courier Blue Dart and becomes the majority shareholder in the company. September 2005: Deutsche Post made an offer to buy contract logistics company Exel plc, which had just acquired Tibbett & Britten Group. On December 14, 2005, Deutsche Post announced the completion of the acquisition of Exel plc. When integrating Exel into its Logistics division, it added its well-known DHL brand acquired with the purchase of DHL Express to form the name DHL Exel Supply Chain. Following the latest deal, DHL have a global workforce of 285,000 people (500,000 people including DPWN and other sister companies) and roughly $65 billion in annual sales. September 2006: DHL wins ten year contract worth £1.6 billion, to run the NHS Supply Chain (part of the UK's National Health Service). DHL will be responsible for providing logistics services for over 500,000 products to support 600 hospitals and other health providers in England. As part of this new contract, in 2008 DHL will open a new 250,000 sq ft (23,000 m2) distribution centre to act as a stock holding hub for food and other products, with another distribution centre opening in 2012. The two new distribution centres will create around 1,000 new jobs. September 2007: DHL Express co-founds new cargo airline AeroLogic, based at Leipzig/Halle Airport, in a 50:50 joint venture with Lufthansa Cargo. The carrier will operate up to 11 Boeing 777Fs by 2012. December 2007: DHL becomes the first ever carrier to transport cargo via wind powered ships flying MS Beluga Skysails kites. May 2008: DHL Aviation moved their central depot to Leipzig; Germany, resulting in a significant positioning for improved service and timeliness to the European Union.
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28 May 2008: DHL Express announced the restructuring plans for its United States network, including terminating its business relationship with ABX Airand entering into a contract with competitor UPS for air freight operations. Its cargo hub would shift from Wilmington to Louisville. The Air Line Pilots Association, International protests. 10 November 2008: DHL announces that it is cutting 9,500 jobs as it discontinues domestic air and ground operations within the United States to deal with economic uncertainty. It is retaining international services, and is still in talks with UPS to transport DHL packages between U.S. airports. N785AX, a Boeing 767-200 with DHL livery, operated by ABX Air, departs Portland International (KPDX) runway 28R. A Tupolev Tu-204C operated for DHL byAviastar-TU at Sheremetyevo International Airport in Moscow, Russia. 30 January 2009 DHL ends domestic pick up and delivery service in the United States, effectively leaving UPS and FedEx as the two major express parcel delivery companies in the United States Limited domestic service is still available from DHL, provided that the packages are tendered to USPS for local delivery. NewEgg is one such company that uses this option as of May 10, 2011. April 2009: UPS announced that DHL and UPS have ended negotiations for an agreement for UPS to provide airlift for DHL packages between airports in North America. DHL said in a statement, "We have not been able to come to a conclusive agreement that is acceptable to both parties." DHL will continue to use its current air cargo providers, ASTAR Air Cargo and ABX Air for now.
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Mission and Vision Statement
Mission:
“DHL enhances the business of our customers by offering highest quality express and logistics solutions based on strong local expertise combined with the most extensive global network presence. Customers trust DHL as the preferred global express and logistics partner, leading the industry in terms of quality, profitability and market share.”
Vision:
“DHL is a Deutsche Post DHL brand with a vision to become “The logistics company for the world”. Our promise to customers is to provide simplifying services and sustainable solutions, and to always demonstrate respect without compromising on results.” DHL’s mission is to be first choice worldwide by making the most scale and experience and the passion. Its vision is the transform the logistic industry and to deliver beyond customers experience for the future. DHL’s vision is
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To intensify customer focus. To deliver consistence service excellence. To extend capabilities (creating local strength and driving practical innovation) To attract, develop and retain talents. To relentless drive efficiency. To be proactive in social.
With using the vision and mission statement, DHL’s core organizational values can be increased by examining its weakness, threats, strength and opportunities.
SWOT Analysis
Company Strength
• Strong brand image- In 1997, DHL became the global express transportation company simultaneous system-wide ISO 9001 certificate in international quality standards.
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Globalism- DHL operate mare than 220 countries over the world on a global scale. E services and technology- it uses and search for a new technology. Product can be tracked, queried, and ordered online.
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Corporate symbiosis— it helps to encompass the empowerment of its personnel at a local level.
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Smart-truck projects— it allows DHL to deliver faster.
COMPANY WEAKNESS
• • • High prices—prices above their rival company. Mistakes in market share estimate—it it’s the biggest weakness of DHL. Weak visibility—in the community compared with its potential.
COMPANY OPPORTUNITY
• • • • Expansion globally—it can expand globally including other companies under DHL. Joint venture—DHL can form joint venture integrating their customer bases. Expansion of ecommerce—it serves with shipping online. DHL can enjoy both profit and brand name recognition form this kind of expansion. Increased in the number of manufactured goods—manufactured goods will increased exponentially as a report given be WTO.
COMPANY THREATS: • • • •
Relations with foreign countries— in every country, DHL subjects to laws and order which hinders their operation and efficiency. Economic and political condition— as a global company they are subjects to more risks than other domestic companies. Restrictions— some restrictions like to prevent from china are big problems in the logistic sector. Economic slow down— it decrease the number of products they produced.
Implementation of the Group strategy
Presented by CEO Frank Appel in the spring of this year is progressing according to plan. Deutsche Post DHL presented DHL Solutions & Innovation (DSI), its newly launched business unit at the 26th German Logistics Congress in Berlin. As a motor of innovation and a cross-cutting function of DHL it pools and drives technological development within the Group. Headed by Petra Kiwitt, it reports directly to CEO Frank Appel. "Logistics is becoming a sector for trendsetters and setting standards not only with respect to technological development. Petra Kiwitt and her team will contribute to ensuring that our Group remains one of these trendsetters and helps to secure the economic success of our customers by offering future-oriented logistics solutions," said Frank Appel. The
newly created organizational unit consolidates the innovation activities of the individual branches of DHL. Based on the results of market studies, analyses of sector strategies and intensive customer surveys, DHL Solutions & Innovation lays the groundwork for futureoriented and standardized logistics solutions that are becoming applicable across sectors. "Our customers expect sustainable solutions, understandable services that are easy to use and uncomplicated access to their service provider. We are achieving this among other things by enhancing connections between the various DHL Units dealing with research and development. This is a way to tap the full creative potential of our staff," Petra Kiwitt stressed. Right from the start, DHL Solutions & Innovations has been able to benefit from successful platform approaches, such as the Control Tower Concept. Used for several customers, this concept enables a strategic transport management through modern IT solutions which provide a permanently updated access to all details of the supply chain. The experience and innovative strength of the DHL Innovation Centre, which opened in 2007, is another asset. This is where ground breaking logistics solutions such as the parcel robot, the carbon offsetting procedure and the smart truck originated. DSI also proves that the Group Strategy presented in March 2009, which is aimed at strengthening Deutsche Post DHL's leading role in the international logistics market, is being implemented. The strategy is aimed at leveraging the full potential of the world's leading logistics provider and increasing the profitability of DHL by improving cooperation as "One DHL" and increasingly dovetailing operations with DHL Global Customer Solutions (GCS). The needs in particular of the 100 biggest customers handled by GCS are valuable indicators, which are now being fed into development processes at an early stage. DHL Solutions & Innovations is also the result of the study "Delivering Tomorrow - Customer Expectations in 2020 and Beyond" that was recently presented by Deutsche Post DHL. "Our study shows that the omnipresence of the Internet, sustainable resource management and climate change are issues of relevance to society. The logistics sector too must respond to these challenges," stated Frank Appel. "DHL Solutions & Innovation is another building block that will help Deutsche Post DHL turn these challenges into opportunities."
Strategy 2015:
The Strategy 2015, which CEO Frank Appel announced on March 11, 2009, is based on two pillars: The first is a strong mail business that is clearly committed to carrying out the universal service obligation of Deutsche Post and that plans to add new value-added electronic services to its range of offerings. The second is an integrated international logistics business that vigorously focuses on quality and customers. The core aim of this strategic shift is to unleash the company's unexploited potential following the aggressive phase of expansion pursued in recent years. The objective is to achieve growth in all divisions that exceeds market performance by 1 to 2 percentage points. At the same time, the Group is committed to ensuring that these growth targets are reached in accord with its responsibility for the environment and society. At DHL, the individual divisions in the future will work even more closely together in order to better address customer needs and to improve profitability of the entire business. The Group has also introduced a new guiding principle for employees with the aim of increasing employee involvement and commitment and of ensuring swift implementation of
the Strategy 2015. The strengthening of the First Choice customer initiative will also contribute to this end.
Challenges 2009:
The world's economy has been experiencing a tailspin of historic proportions since the fourth quarter of 2008. Throughout all regions and sectors, many customers of Deutsche Post DHL are seeing unparalleled decreases in demand, which then result in lower shipping volume. In the United States, the restructuring of the Express business continues to make good progress. The termination of the entire domestic business was carried out on schedule at the end of January. The remaining international express cargo will be shipped by DHL's current carriers ABX Air and ASTAR Air Cargo. The talks between UPS and DHL about a potential airlift agreement have been terminated. Despite having to master major economic challenges this year, the Group will remain fully committed to its responsibility for the environment and society. As presented in its Sustainability Report 2009, the Group has introduced various initiatives in all Corporate Divisions covering the areas of fleet, buildings, innovative technologies and employee motivation to help improve carbon efficiency. Deutsche Post DHL a year ago launched its Go Green climate protection program aimed at improving carbon efficiency by 10% through 2012 and by 30% through 2020.
Financial improvements:
In terms of costs, DPWN expects to see overall profits for DHL Express US improve by $1 billion in 2011, with expected losses of $1.8 billion in 2008, $900 million in 2009, $500 million in 2010, and $300 million in 2011. Although this restructuring is expected to have a significant material impact on DHL’s cost base and overall infrastructure, it is expected to have a smaller impact on customers, said DHL Express CEO John Mullen. DPWN said it expects to spend up to $2 billion to finance the restructuring plan, which will go towards termination costs, leases, severance, aviation assets, and pickup and delivery optimization. And DPWN noted that it anticipates these restructuring efforts will result in annual savings of $1 billion per year (in earnings before taxes), with key changes expected to be completed by the end of 2009 and full plan implementation taking hold by 2010. “As a result of this, we will have a less complicated ground and air network than we had before, which should deliver more reliability across the whole platform of our combined operations,” said Mullen. “Most importantly, we believe this plan will protect our international network franchise and our global coverage, which is critical to a global player such as us. It is essential that we have a continuing presence in the U.S.” Industry analysts suggest that there are pros and cons in terms of the type of impact today’s news may have for shippers.
“DHL has stated in the past that its customers pay less than its competitors on many occasions,” said Doug Caldwell, executive vice president of ParcelPool, a small parcel delivery consultancy and services provider. “So now you have a situation where current DHL shippers with good rates can think this is a positive, because it says DHL is clearly staying in the U.S. and they don’t have to worry about DHL shipments down the line.” But shippers will want to see a smooth transition for DHL’s U.S. restructuring, noted Caldwell, and he said they don’t necessarily need to be exploring other options. Instead, shippers using DHL should be looking to hold onto those rates for as long as they can for two reasons: one being that DHL’s rates are by and large better than what the competition offers, and the second point being the reliability of UPS airlift. “Why would a shipper want to switch from DHL to UPS, when UPS is already handling the line haul for airfreight on shipments right now? Also, UPS operationally is second to none line haul with very few service failures. This is a plus for DHL shippers, except for those with a lot of rural shipments, and for those in rural areas normally have a different service expectation.” While Parcel Pool’s Caldwell, said that DHL’s probable agreement with UPS is largely favourable for shippers, Jerry Hempstead, president of Hempstead Consulting in Orlando, Fla., said that today’s announcement overlooks some important points for shippers. One point being that this deal with UPS leaves DHL bound to the UPS flight schedule. DHL, said Hempstead, has a large number of shippers that use DHL, because it has been flexible over the years with its flight scheduling to accommodate the special needs of specific shippers. As an example, he said DHL has a special flight into Memphis that allows it to deliver as early as 4 a.m. to a company that repairs laptops. This gives the laptop repair company the ability to extend its repair window so that laptops can be turned in the same day and shipped out to the customer. He also pointed out that other businesses have special flights into certain cities via these specific DHL flights. Its infrastructure network and in aviation with a restructuring plan that focuses on three main elements: • Reducing infrastructure network capacity by approximately 30% through the following detailed measures: ? Consolidating and closing smaller sorting facilities into modernized, larger stations, resulting in reductions of approximately 34%
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Rationalizing pickup and delivery routes by 17%, including new courier routing plans to enable better route planning and avoiding peaks in the operation, as well as making changes to staffing plans
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Ground linehaul network rationalized by 18% through improved capacity utilization and footprint reductions in some remote areas.
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A proposed contract between DHL and UPS whereby UPS will provide air uplift for DHL Express U.S. domestic and international shipments within North America.
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Reduction in overhead and other administrative costs. DHL's strategic priorities in the U.S. will be to continue to provide record service reliability, and accelerating growth in more profitable segments of the market through leveraging innovative sales channel strategies like the recently announced Walgreens partnership.
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To drive the implementation of the restructuring plan, DHL recently announced the appointment of long-time DHL senior executive, Ken Allen, as CEO of DHL Express U.S. Allen has extensive experience executing restructuring plans within DHL. In his previous role as CEO of DHL Express Eastern Europe, Middle East and Africa (EEMEA), Allen has doubled revenue growth and margin within two years. In addition, his experience as CEO of DHL Express Canada resulted in turning many years of negative performance into what is now positive financial development for the company.
Key Competitors
Company Express Logistics Telecomm Aviation Shippin g Stude nt Servic e Import s/ Export s Cargo Event Services
DHL TCS OCS FedEx Leopards
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IFE MATRIX for DHL
Strength Weight Rating Weighted
(1-4) 1. Strong Brand Image 2. Globalism 3. Good Reputation
4.
Score .24 .27 .14 .24 .24 .14 .24 .14 .21 .07 Weighted Score .14 .14 .06 .07 2.28
.08 .09 .07 .08 .08 .07 .06 .07 .07 .07 Weight .07 .07 .06 .07 1.0
3 3 2 3 3 2 3 2 3 1 Rating 2 2 1 1
eServices and technology
5. Kept in same strategies for years
6.
DP adjust structure for PostBank Contract
7. President and VP have significant experience and skills of management 8. eBusiness 9. DP investing in mail business 10.Creativity and innovations for improving effectiveness Weakness 1. High Prices 2. Mistakes in market-share estimate 3. Weak visibility 4. Loyalty problems on consumer behaviour Total
Porter five forces model Threat of New
Bargaining powers of suppliers
Rivalry
Bargaining power of buyers
Threat of substitute product or
BCG Analysis
DHL logistics + Inbound Services
DHL domestic services
Prioritize
Divest
Invest
KiLL
Bibliography
• DHL press release
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http://www.dhl.com/publish/g0/en/press/release/2004/081104.high.html http://www.dhl.co.uk/publish/gb/en/press/release/2006/dhl_wins_contract.high .html
http://www.dhl-usa.com/about/pr/PRDetail.asp? nav=PressRoom/PressReleases&year=2008&seq=1246 http://www.samples-help.org.uk/mission-statements/dhl-mission-statement.htm
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