DHL: MORE GLOBAL THAN LOCAL

Since the early 1970s, DHL has been the leading (or often only) overnight carrier in many markets around the world. Founded in 1969 by Adrian Dalsey, Larry Hillblom, and Robert Lynn (hence, the D, H, and L) to transport letters of credit across the Pacific, DHL expanded rapidly in Asia and Europe (the early 1970s), the Middle East (1976), Latin America (1977), Africa (1978), Eastern Europe (early 1980s), China (1986), and Albania and the Baltic States (1992). Today, DHL has more than 53,000 employees, 209 aircraft, 2,381 stations, 12,203 vehicles, and 32 hubs and subhubs serving more than 675,000 destinations in 227 countries. In one year, it handles 95 million shipments—not bad for a company approaching its thirtieth birthday! To handle all these shipments, DHL uses a worldwide hub and spoke system. It collects packages, documents, and letters from individual local business offices and sends them to the nearest service center. The service center then sends the parcels to a hub that serves a larger geographic area (such as Australia or the Middle East). There, the items are sorted by destination and shipped to service centers in each country, where they are resorted for the last leg of the journey to a local destination. The Brussels hub is typical. Each night, starting at 10:30 P.M., the first of more than 120,000 documents and packages begin arriving at the hub. As they are unloaded, workers throw them onto $15 million worth of sorting machines, resembling a kind of crazy amusement park ride. Dozens of conveyor belts whisk the parcels away. As many as 400 people sort packages and put them on other belts, hurrying to get them loaded on trucks and airplanes by 3:30 A.M.. In another room, more than 50 people frantically read paperwork in dozens of languages so that all the parcels can clear customs without delay. In-house translators and customs clearance services are among DHL’s distinguishing characteristics. Another is that DHL employs its own people to deliver documents and packages abroad; most other carriers hire local agencies. However, DHL does not always use its own airplanes, as FedEx and UPS do. Instead, wherever possible, DHL buys lift capability from international carriers, establishing its own air service only when it must. By doing this, DHL can find flights at all times between locations rather than relying on one or two flights of its own. This gives DHL greater flexibility not only in timing, but also in capacity. Flexibility is important in serving today’s distribution customers. One important form of

flexibility is the timing of delivery and pickups. To provide such flexibility, DHL is experimenting with mobile collections. In Dublin, it launched the Super Bus, which follows a set route through the city to pick up and deliver parcels. From the bus, walking couriers deliver and collect shipments from

businesses. By using one large bus to replace the multiple trucks or vans that once crisscrossed Dublin’s city center, DHL has reduced congestion. More important, it has improved service through earlier deliveries and later pickups.

DHL follows the same principle in its floating express distribution center in Amsterdam. The center, actually a canal boat, follows a set route through Amsterdam’s canals, using bicycle couriers to handle parcels. The boat not only relieves congestion and improves service, it also reduces pollution in one of Europe’s most crowded cities. DHL provides another important customer service through DHLNET—a high-speed data network developed jointly by DHL and IBM. When packages first arrive, DHL employees enter shipment information into the network. Each package’s airbill receives a unique barcoded number that is scanned into DHL’s information network at each stage of its journey. The system provides DHL management with information on routing, delivery times, and volumes. DHL has also created a system called EasyShip, which lets customers prepare their own shipping documents and maintain databases of their customer addresses in-house. DHL will either install the EasyShip computer and software free of charge in the customer’s office or provide software that users can install on their own computer systems. Working with AT&T, DHL has also introduced a comprehensive automated international shipment notification system which lets U.S. shippers alert recipients electronically that a delivery is on its way. Along with other critical shipment information, recipients are given the shipment airbill number for easy tracking. When preparing a shipment with DHL’s shipping software, customers have the option of sending their recipients an e-mail message or a fax describing the shipment’s contents and other information. Because the shipment airbill number is included, progress can be traced through DHL’s Web site (DHL.com), DHL’s GlobalTrackSM Software, or by calling DHL’s automated GlobalTrack telephone service. With some e-mail applications, customers can even link directly from the Electronic Shipment Advisory e-mail message to the tracking page on the DHL Website. In some countries, the message is translated automatically from English to the local language. „As DHL is the leader in international air express delivery, Electronic Shipment Advisory is designed with the international shipper in mind, offering 10 language options,“ says Alan Boehme, director of customer access for DHL Airways. „Confirming the trend toward the growing importance of information in international and domestic shipping, our customers indicated that there was demand for a system that automatically advises a recipient that a shipment is coming their way,“ said Patrick Foley, DHL’s chairman and chief executive officer. „Shippers can now eliminate the extra phone calls, faxes, and paperwork associated with informing a recipient of an inbound shipment.“ In addition to its traditional services—such as overnight documents and parcels delivery, sameday service between locations in the United States and to some foreign countries, and international air freight—DHL also provides third-party logistics services. As corporations downsize and work to trim costs, they have begun to reduce their investments in inventories and warehouses by outsourcing logistics functions. An example is DHL’s experience with Japan’s Kubota. DHL warehouses spare parts for Kubota computers. When customers call the Kubota service number, they actually reach DHL, which immediately ships needed parts through the DHL system.

Another example is Bendon, Ltd., a New Zealand manufacturer of women’s lingerie. In the past, it took 10 days for Bendon to ship goods to Australia. However, through its alliance with DHL, Bendon can now accept Australian orders until 1:00 P.M. for next-morning delivery. By using DHL’s information system, Bendon knows that all its shipments have cleared customs, and it receives delivery reports on all shipments. As a result, Bendon can invoice customers more quickly, improving its cash flow and reducing inventories. More recently, DHL Worldwide Express formalized a multimillion-dollar agreement with Roche Diagnostics, a division of the international healthcare company, F. Hoffman-La Roche Ltd.. DHL will act as Roche’s logistics partner, with responsibility for the storage, pick and pack distribution, and inventory management of parts for diagnostic analytical systems. All routine deliveries will be dispatched from the DHL Strategic Parts Center in Hoofddorp, the Netherlands. Consignments will be delivered door-to-door using DHL’s air express capabilities. This partnership with DHL will enable Roche Diagnostics to keep fewer spare parts in stockpiles around the world, provide speedier and more reliable response to customer requests, and offer value-added emergency service that will set Roche apart from its competitors in the worldwide diagnostics market. Although DHL has captured the leading share of the international air express market, it lags behind FedEx and UPS in the United States, with less than 2 percent market share. However, comments Patrick Lupo, chairman and CEO of DHL Worldwide Express, „[DHL’s share] may be less than 2 percent of the intra-U.S. market, but from the United States to a foreign point, DHL’s share would be in the 22 percent to 25 percent range. That’s a statement about our management focus on export shipments.… As the large U.S. couriers are launching expensive fleets of aircraft, they’re saddled with high fixed costs. DHL’s U.S. position is that it can buy uplift on an as-needed basis to match customer requirements. This gives us a lot of flexibility.“ Lupo’s comments highlight the heightened competition in the air express business. FedEx, with 30 percent of U.S. overseas shipments, spends millions on advertising and touts its image of speed and reliability. UPS, with only 10 percent of U.S. exports, also spends heavily on advertising that emphasizes speed and diversified services to more than 200 international territories. How do these U.S. giants stack up against DHL? When FedEx and UPS announced same-day delivery in 1995, they found that DHL was already providing such a service. Is DHL worried about the competition? „DHL has always had a very good reputation,“ says Chairman Foley. „We find that international customers have a proclivity to stay with their service provider much more than in the United States. In the United States, if you mis-ship one shipment out of 400, or even 4,000..., your customer may lose patience and make a change. Internationally, that isn’t so. We were the first in the international field, and we service the international field very professionally and efficiently. Because of that, we rarely lose customers.“ Another asset is that DHL does not have a single national identity. It is a truly global corporation. „If you look at our main competition, FedEx and UPS, their [international] focus has always been into and

out of the United States. That’s where they advertise and that’s where they specialize.… But its a big world and DHL goes everyplace,“ comments Foley. Perhaps so. Still, some critics wonder if DHL can keep its international market share without more U.S. market share.

Sources: Lisa Coleman, „Overnight Isn’t Fast Enough,“ Brandweek, July 31, 1995, pp. 26-27; Douglas W. Nelms, „Holding Its Own,“ Air Transport World, June, 1996, pp. 151-154; Andrew Tausz, „DHL Is Delivering on Courier Challenges, Distribution, September 1997, pp. 22; Mitch Wagner, „Apps Gather Diverse Data from the Web,“ Computerworld, April 14, 1997, pp. 61; numerous company supplied materials; and information from the DHL Web site.