Gesto de Operaes e Logstica de Servios

DHL Logistics Analysis

Farkhat Kainazarov, Raymond Fleming, Renato Chainho, Yen Nguyen, Zarina Kenzhetayeva Porto, 2012 Index Introduction

I. The Corporation
Description of the corporation
About Deutsche Post DHL
DHL has been an innovative leader in the worldwide shipping business for more than 35 years. DHL was formed in 1969 by three friends, Adrian Dalsey, Larry Hillblom, and Robert Lynn, in San Francisco. Originally, the company was in business to take ships documentation by air from San Francisco to Honolulu (carried by the founders themselves) so that cargoes could clear customs before the ships arrived, thus saving days of waiting in the harbour while customs officials processed paperwork. The company is now part of Deutsche Post, the modern privatized German mail service. Deutsche Post acquired Airborne Express in 2003 and integrated it into DHL, creating a division now known as DHL Express.

Deutsche Post DHL is the worlds leading mail and logistics services group. The Deutsche Post and DHL corporate brands represent a one-of-a-kind portfolio of logistics (DHL) and communications (Deutsche Post) services. The Group provides its customers with both easy to use standardized products as well as innovative and tailored solutions ranging from dialog marketing to industrial supply chains. About 470,000 employees in more than 220 countries and territories form a global network focused on service, quality and sustainability. With programs in the areas of climate protection, disaster relief and education, the Group is committed to social responsibility. In 2010, Deutsche Post DHL revenues exceeded $ 51 billion.

Corporate Divisions
DHL has a range of unique services across the globe. Deutsche Post DHL offers integrated services and tailored, customer-focused solutions for managing and transporting letters, goods and information.

1. MAIL Division Service is in effect an alternative post office for the world. 2. EXPRESS Division Service deals with transporting urgent documents and goods reliably and on time from door to door. 3. GLOBAL FORWARDING, FREIGHT Division The products and services offered by DHLs Global Forwarding and Freight business units extend from standardised logistics operations to multimodal transport solutions and highly individualised industrial projects. 4. SUPPLY CHAIN Division The SUPPLY CHAIN division comprises the two business units of Supply Chain and Williams Lea. In the Supply Chain business, DHL provides contract logistics solutions along the entire supply chain for customers from a wide variety of sectors. Williams Lea is a global provider of Business Process Outsourcing and a specialist in corporate information solutions, the management of companies' information and communication processes. Due to the fact that DHL logistic company are operating in variety division, in this research we are only want to focus on DHL express to perceive their operation and what factors make them success.

Corporate Strategy
In March 2009 CEO Frank Appel unveiled his Strategy 2015 aimed at making the company fit for the future. The management board recognized that country-level managers would need to make hard-line decisions about: who should be the right customers in DHLs market what product bundles would be contracted or promised to customers via the service concept how the service components would be executed throughout the service delivery system. These three concepts represent the basics for any service operations strategy (Heskett et al. 1987, Goldstein et al. 2002, Roth and Menor 2003). A high level of strategic fit, congruence, or alignment between all three concepts usually leads to greater customer satisfaction and desirable performance.

Market Position:
DHL is the world's leading provider of international postal solutions. Only in Germany, at some 20,000 retail outlets and points of sale, around 2,500 Packstations and around 1,000 Paketboxes, they are available for their customers practically everywhere to send and collect parcels and small packages at any time they like. They ship about 2.9 million of these items in Germany each working day. Their Packstations are located in approximately 1,600 towns and cities across Germany. Nearly 90% of all residents in Germany are just about ten

minutes or less away from the nearest Packstation. The German parcel market volume totalled around 7.3 billion in 2011, nearly 7% more than the prior year. For years now, e-commerce has been a central driver of growth. In 2011 Germans purchased products online at record levels, leading to another year of double-digit growth in e-commerce. This had a positive impact on growth in the mail-order and parcel services business. Overall, DHL expanded their market in the reporting year to approximately 40%.

Their core market of Germany is not only the only place in which they offer their services. They also carry mail across borders and offer international dialogue marketing services to many countries all over the world. The global market volume for outbound international mail was approximately 6.7 billion. The market is growing because the economy is recovering from the crisis and more heavy items are being shipped instead of simple letters. Despite increasing competition, DHL was able to grow with the market and maintain their share of 15.7%.

Customer segments:
An understanding of the target market is fundamental to service operations and accepted wisdom recognizes that there may be advantages to segmenting markets and offering different service packages to different segments. In a B2B context, segmenting customers can be difficult and prior efforts to integrate customer requirements into operations strategies have not demonstrate significant business value. DHL applied a three-step process to select the best segment solution: (1) identify the model with the best information criterion-based fit; (2) examine the classification statistics for the preferred model to ensure that the models has an acceptably low ratio of classification errors; and (3) plot the estimates for each segment in the preferred model against one another to ensure that the segment solution is not an artefact of scale-factor differences that would result in a systematic tendency to respond to questionnaire items on a basis other than what the specific items were designed to measure. An examination of the fit statistics, classification statistics, and estimates for each segment revealed that a three-segment solution is the preferred model. Figure x shows the relative main effects for each segment. In a simple, visual way, it highlights the variation between segments based on the order of magnitude of difference for each attribute. Segment 3 is highest on the

broader value-based attribute such as customer interaction, customer service recovery, and supply chain innovation; it aligns most closely with the integrator-developer coding metric. Segment 2 is driven most noticeably by reliable performance; its score is more than twice as high as the nearest alternative group. It aligns most closely with the integrator-administrator coding metric. Segment 1 is clearly dominated by price and supply chain capacity, which aligns closest with the administrator-producer coding metric. One of the most interesting aspects of these models is that they show how segments differ both in terms of what does and does not matter to respondents. This point was critical in developing their service delivery system.

Figure x: The graph illustrates the relative importance of attributes across segment Having determined that a three-segment model provides the best statistical solution, then in Industry base, DHL includes these sectors below into their target customers: Automotive Engineering/Manufacturing Healthcare Chemical Technology Retail Consumer Goods

Competitive analysis

Strengths: Strong Brand Image: In 1997, DHL became the global express transportation company to obtain simultaneous system-wide ISO 9001 certification in international quality standards. DHL has also developed their own quality system that matches their customers standards. In the Global rankings of Brand Finance plc, London, a UK market research company, the DHL brand climbed 16 places from number 107 in 2010 to number 91 in 2011. Brand Finance calculates current brand value by benchmarking the strength,

risk and future potential of a brand relative to the competition. The study put the brand value of DHL at US $9.78 billion in 2011, up from US $7.30 billion in the previous year. Globalism: DHL operates on a global scale. They operate in more than 220 countries. They provide service that appeal to most of the world. They have such a large market in which to operate, and thus realize tremendous revenues. They can also achieve global economies of scale. E-Services and technology: DHL uses and continues to search for new technology. They spend nearly 10% of total revenues for information technology. DHL also has excellent e-Service that provide access to systems that ensure customers have control and visibility of their supply chains at all times. Products can be tracked, queried and ordered online. Creativity and innovations are encourage for improving the effectiveness of DHL Corporate symbiosis: DHL has developed its own organizational structure to serve the global market, which it has called corporate symbiosis. This approach encompasses the empowerment of the DHL personnel at a local level, at the same time recognizing the interdependence of the parts of DHL as a corporate whole. Smart-truck Project: It is the programme which allows DHL to deliver faster. SmartTruck is about dynamic route planning, in the real time. Additional, the SmartTruck is one of the solutions that will reduce CO2 emissions in their daily operations. They were succeed in their test in Germany, for example, in Berlin their intelligent transporters drove on average 15% fewer kilometres and routes were completed 8% faster. Shorter routes mean redced fuel consumption and lower emissions.

Weaknesses High Prices: DHLs prices are above some of their competitors. This can be a weakness if their customers do not perceive a difference between DHL and its competitors services. And in the fact, some of their price-sensitive customers turned to their competitors. Mistakes in the Market-Share estimate: The biggest weakness is DHL/s market-share estimate. It is difficult to estimate even when the market is stagnant and contains few competitors, and all market-share estimates should be viewed with circumspection. Weak Visibility: It has weak visibility in the community compared with its potential. Loyalty problems on customer behaviour Not as well known as UPS and Fedex

Opportunities: Expansion Globally: DHL can continue to expand globally, including the other companies under DHL. Joint-Ventures: DHL can form joint ventures to enjoy the growth if integrating their customer bases. Expansion of E-commerce: DHL already has a major presence of shipping online. They should keep finding Internet companies to contract delivery of their products. Since the

growth of e-commerce is rapid now, DHL could enjoy both profit and brand name recognition from this kind of expansion. Increase in the Number of Manufactured Goods: The World Trade Organization estimates that the rate of world trade in manufactured good will increase exponentially. - Logistics industry will continue to grow much faster than national economies (this is especially true of Asia, where trade flows will continue to increase both within the continent and to other regions.) - We offer integrated logistics and transport solutions from a single source to an ever-increasing extent, which gives us a major competitive advantage. - Online communication and e-business are creating demand for transporting documents and goods. This is in turn creates growth opportunities for us in our mail and parcel businesses. - Finally, environmental awareness on the part of customers brings opportunities for above average growth. Customers want to reduce their carbon emissions permanently, which is why they are increasingly requesting energy- efficiently transport and climate-neutral products. We lead our sector in this area, offering carbon-neutral mail, parcel and express products plus air and ocean freight transport.

Threats Relations with foreign countries: Through DHLs expansions globally, they are subject to laws and regulations of all foreign countries. There could be major problems in this area, stunting growth and raising costs. Everywhere DHL goes, they are at risk for regulations that hinder their operations or efficiency. Competitors caught DHL strategies Political and regulatory environment: Risks associated with the general business environment primarily arise from the fact that DHL provides some of its services in a regulated market. The regulatory authority approves or reviews prices, formulates the terms of downstream access and undertakes special monitoring of market abuse. The general regulatory risk could lead to a decline in revenue and earnings in the event of detrimental decisions. New tax system: changing in tax authorities could raise risk to the company. For instance, the German tax authorities have announced their intention to qualify several VAT-exempt mail products retroactively as subject to VAT, this decision strongly effected to DHLs pricing policy. Restriction: Some restrictions such as To prevent import from China are big problems in the logistic sector. Their operations probably are disrupted when they were subject to legal restrictions in some countries (especially in North Africa and the Middle East). Economic downturn: Economic downturn is decreasing the number of products that are produced. The national debt crisis in the euro zone represents another element of uncertainty, not only for logistic companies, and has lowered economic expectation. Cost

flexibilities is therefore becoming increasingly necessary to allow a fast response to changes in market demand. Fuel prices go up: As the previous year, most of the risks arising from commodity price fluctuation, in particular fluctuating prices for kerosene and marine diesel fuel, were passed on to customers via operating measures. However, the impact of the related fuel surcharges is delayed by one to two months, so that earning may be affected temporarily if there are significant short-term fuel price variations.

Positioning strategy:
DHL Expresss Focus strategic programme extends to four areas:

Employee motivation: Employees are very important to the company and constitute their main competitive advantage in retaining current customers and winning new ones. Their Certified International Specialist (CIS) training initiative ensures that employees have the requisite knowledge of the international express business at their disposal. The programme additionally reinforces the team atmosphere in and loyalty to the division. All employees in international shipping, whether couriers or call centre staff, are expected to consider themselves are DHL ambassadors and place the customer at the centre of their work. DHL regularly honour employees who have proved to be outstanding International Specialist through special achievements. Since September 2011, all DHLs employees have been CIS-certified. They are now being trained in additional modules specific to their functions. Service quality: DHL is increasing their focus on promoting customer loyalty through high service quality in order to differentiate theirselves from the competition. To this end, they keep a constant eye on changing customer requirements and adapt their services accordingly. They are improving their workflows to make them the provider of choice when it comes to speed, reliability and cost-efficiency. At their quality control centres they track shipments globally and adapt processes dynamically to enable them to guarantee quick delivery, even in the event of unforeseen circumstances. Reliability and speed are vital to their position as experts in international shipping. Customer loyalty: The customer is always the focus of attention of their approximately 100,000 employees. DHL makes it as easy as possible for their customers to give feedback on their performance, from conventional customer service to in-person surveys. Moreover, they use their First Choice methodology constantly to review customer behaviour and customer response and to draw the necessary conclusions, starting with the customers very first contact with the call center, internet site or sales employee all the way to delivery of the shipment to the recipient and invoicing. Profitability: To ensure a stable earnings contribution and continue growing over the long term, they monitor costs continuously and make sustainable investments in their business. For instance, they are expanding and revamping their fleet of aircraft to enable

them to offer additional and more frequent flight connections. An international advertising campaign has been initiated to increase the name recognition of the DHL brand. They also actively seek profitable business opportunities, for example through the establishment of a new hub in Shanghai to expand our Asia business. DHL uncovers potential and takes measures accordingly to improve their earnings through targeted monitoring of their portfolio. Each country and each location in their network has contributed to these endeavours.

Service process classification Order winners and order qualifiers 2. Role of Operations, Logistics and S&M Strategies in the corporation Location Design and Layouts Warehousing and Storage layouts Bottlenecks and Queueing LEAN in services Logistics

Supply chain management

1. The concept of supply chain management: All for one and one for all: The spread of globalization has an impact on the entire supply chain. The driving forces of this trend are primarily the increasing homogenization of economic regions, rising customer requirements and new developments in information technology. To meet todays competitive demands, the supply process must be optimized across all levels of the supply chain beginning with raw-material extraction and extending to the final customer. This requires all participating companies to cooperate together. This integrated approach is called supply chain management.

2. Supply chain in term of DHL In DHL, SCM is managing flow of materials, information and assets as they progress from suppliers to installation through complete asset life cycle.

Works planning: Fail to plan and youre planning to fail. You have heard it before. They know it is a fact. That is why DHL has made project management a core discipline and key differentiator. They have designed, from the ground up, a proprietary management approach that simply works better. Procurement: Procurement works continuously to reduce the Groups expenditures and this includes providing support to the divisions to make important investments cost-effectively. For instance, a master agreement for aircraft fuel, into which the department entered for European Air Transport, reduces annual costs by more than 1 million. Procurement also makes progress as an internal service department and supports the divisions with recycle projects. Procurement is centralised function in the Group. The heads of Global Sourcing and their 14 category managers work closely with regional procurement managers and report to the head of Corporate Procurement. This allows them to bundle the Groups worldwide requirements and still meet the local needs of the business units. Additional, DHL is greater using of procurement systems. The use of IT applications to procure goods and services more efficiently again increase in 2011, they also use e-sourcing to make their procurement processes more efficient and transparent.

Suppliers:

Distribution centers Outbase locations Field works 3. A typical supply chain at DHLs express

4. The supply chain and Competitive advantage (Competence) The supply chain is used to manage the Business Processes as a Visionary of DHL express.

Supply Chain Metrics that used at DHL usually cover 4 areas: - Financial. For instance, the cost of manufacturing, warehousing, transportation - Customer. This includes Order Fill Rate, Backorder Levels, On Time Delivery, Feedback of Customers. - Internal Business. For instance: Adherence-To-Plan, Forecast Error. - Training. Relating to all training programme that company organized to train their employees, for instance In house Training Hours 5. DHLs Supply Chain Innovation
Physical Vendor Managed Inventory

Supply chain flows

Information

Financial

One of the most important challenges facing supply chain managers is the effective control of inventory. At the core of inventory management resides a fundamental dilemma. When it comes to the timely fulfillment of customer requirements, inventory is necessary and useful. DHL has some innovations to improve their Supply chain: Partnership with a leading financial company Access to low cost capital Delay buyer purchases, free up cash tied in inventories Transitioned from Just in Case to Just in Time (JIT) inventory management Improve cash to cash cycles, reduce inventory balance sheet and increase inventory turnover Leveraged IT to provide global visibility of goods on hand and goods in transit for 350 suppliers and scores of carries The innovations bring them many benefits:

6. The mission of logistics management 7. The supply chain and competitive performance 8. The changing competitive environment

Capacity management Inventory management Conclusion Annex