Case Study: How DHL Intends to Deliver

Compared with other industries like finance, banking and information technology, the logistics industry is decidedly less glamorous – but for all the businesses in the know, no less critical.

 
Numerous companies work behind the scenes, moving materials, goods and finished products, accurately, quickly, from Point A to Point B. A couple of names come to mind, either due to clever marketing or sheer unmistakable size. One prominent brand and industry player is, without a doubt, DHL.
 
DHL, together with the mail business of Germany, forms Deutsche Post DHL, a global logistics giant with revenues of more than €51 billion in 2010. With some 470,000 people on the payroll in more than 220 territories, the company ships to 120,000 destinations worldwide.
 
Its clientele comprises key players across different industries, including Fortune 500 companies like Caterpillar, Merck, Shell, Baxter, BMW and many more.
 
To ensure its continued success as the logistics company for the world, company CEO Frank Appel unveiled, in 2009, a ‘Strategy 2015’ plan. What does this strategy entail and how will it be executed? Sam Ang, CEO Southeast Asia, DHL Global Forwarding/Freight, threw a few hints at a CEO talk organised by Singapore Management University’s Wee Kim Wee Centre.
 
Ang, who has some three decades of experience in this industry, framed his talk around DHL’s three pillars for growth: being an investment of choice, provider of choice and employer of choice. To the company, each pillar is equally important and relies on the other two for success.
 
 DHL’s bottom line pillars of corporate strength
 

Investment of choice

As with other businesses, DHL grapples with the perennial issues like return on investment, yield for customers and other value-added services. Questions like “How do we do more with less?” and “How do we do even more with even less?” are explored constantly. As the product life cycle is now shorter than ever before, “it is essential to increase productivity so that the same resources can generate more business,” said Ang. 
 
To be sure, it is easy to boost profits by cutting costs. But such obvious “growth” tactics are, according to Ang, akin to “plucking the low-hanging fruit when things are down.”
 
Instead, DHL’s approach is to go for cost effectiveness over cost reduction to ensure sustainability. “Simplify and you will multiply,” he explained. As an example, cargo display information (red light, green light and blinking light) are leveraged as visual cues, providing data, timely updates, and prompting people to action.
 
Beyond that, every action should be necessary: “Every employee should focus on tasks that add real customer value. These are the solutions that will help us do our jobs better,” he said. The company aims to do things right the first time, rather than to waste time on subsequent rectifications.
 
Provider of choice
As customers increasingly expect more, DHL knows it needs to enhance its services by providing “total solutions.” This point may be illustrated in the context of shorter product cycles today. Customers can now monitor the movement of a parcel in real time, which they could not before. Despite these improvements, customers expect more still – such as an invoice from DHL immediately as proof of delivery, said Ang.
 
To maintain its leadership position, DHL needs to improve continuously. There is a very simple, yet effective way of doing so: listening to the customers.
 
Through the findings of its annual survey, the company designs solutions to address the problems highlighted by its customers. The five-step approach, called First Choice, comprises the following steps (see chart below):
 
  • Defining areas of concern,
  • Developing specific activities,
  • Prioritising and selecting activities,
  • Implementing activities and
  • Controlling success
 
By seriously considering and responding to customer feedback, the company believes it can enhance its role as a provider of choice.
 
 
DHL’s five-step approach
 
“We develop innovative solutions to generate sustainable value,” said Ang. One satisfied customer is SIA Cargo, the freight unit of Singapore Airlines, which has hired DHL to handle its cargo. The reason, according to Ang, is this: “We offered them an integrated solution in inventory management that met their needs.”
 
Employer of choice
DHL needs to have the right people running the show and living up to the promises made to customers. This is true for all business – especially those in the service sector. On this front, DHL prides itself on its “passionate, customer-focused, committed, adaptable, responsible and open” culture.
 
“Everyone wants our DHL people,” said Ang. Staff retention is heavily underlined by the company’s employee engagement initiative, which emphasises three “I”s – inform, involve and inspire.
 
Not a terribly complicated concept; but while everyone can dismiss it as common sense, the proof of the pudding is in the eating: employee buy-in. Support has been strong, and its implementation, robust. Ang shared an outline of the programme with the audience (see table below).
 
DHL’s employee engagement programme
 
The logistics business is certainly not just about maintaining trucks and making sure all equipment are in tip-top condition. The “soft” aspects require attention too, like giving due recognition through awards like DHL’s “Most Inspirational Leader” and the national “Go the Extra Mile for Service.”
 
These medals help to reinforce behaviours, said Ang, and they “internalise the quality of leadership and inspiration.” When employees see themselves growing with the company, they are likelier to stay on, so as to realise their career paths, said Ang.
 
At a more personal level, the company demonstrates its “human touch” by, for example, remembering birthdays or celebrating anniversaries. DHL has a strong human resource policy that demonstrates that it values all staff.
 
Aside from remuneration – “we pay the market rate and provide a very attractive total package” – staff get half a day off on their birthdays; their children qualify for DHL bursaries, and there is a friendly and conducive work environment. “We have a fair number of ex-staff who come (back) to DHL to work,” he said.
 
Challenges ahead
By most measures, a logistics business based in Singapore will have access to plenty of market opportunities. There are some 7,000 multinational corporations and another 300,000 or so small and medium enterprises in the country, many of which would require logistics services. For Ang, market opportunities in industries like oil and gas, life sciences and aviation are especially attractive at this point.
 
Of course, there are always challenges. For example, it is always a “careful balancing act” to reconcile being an investment of choice and an employer of choice, he said. “How much do we push our staff (to enhance productivity)? How much do we automate? What IT and performance tools do we use?”
 
External circumstances and situations, such as high oil prices, also have serious, direct bottom line implications on the logistics business. So even though companies hedge their funds whenever prices of oil head north, the companies downstream will feel the pinch.
 
With the rapidly-changing industry landscape, there is the problem of whether a company can change fast enough to fulfil changing demands. Companies like DHL have responded by optimising costs through automation; diversifying product lines, market sectors and geographic spread and so on, and generally being more productive.
 
At the end of the day, DHL knows that a high level of customer service across the entire logistical chain is critical. “We need to make customers feel that their needs are met.” Bridging the gap between standards in different locations is an ongoing priority as “we are judged by our weakest link,” Ang concluded.
 
About the Author
[email protected] is an online resource that offers regularly updated business insights, information and research from a variety of sources, including interviews with industry leaders and Singapore Management University faculty. The resource can be accessed at http://knowledge.smu.edu.sg.This article was re-edited for clarity and conciseness.

 

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