FAST School of Management

National University Of Computer and Emerging Sciences

(NUCES-FAST) Karachi, Pakistan.

Research On DHL EXPRESS

Supervised by:
Sir Muhammad Amjad
FAST School of Management
National University Of Computer and Emerging Sciences
(NUCES-FAST) Karachi, Pakistan.

Submitted by:
MUHAMMAD YASIR
K13-2701
Operations Management
Fall 2014

INTRODUCTION
DHL
Express is
a division of
the German logistics company Deutsche
Post
DHL providing
international express mail services. Deutsche Post is the world's largest logistics company operating
around the world. DHL is a world market leader in sea and air mail.
Originally founded in 1969 to deliver documents between San Francisco and Honolulu, the company
expanded its service throughout the world by the late 1970s. The company was primarily interested in
offshore and inter-continental deliveries, but the success of FedEx prompted their own intra-U.S.
expansion starting in 1983. DHL aggressively expanded to countries that could not be served by any
other delivery service, including the Soviet Union, Eastern Bloc, Iraq, Iran, China, Vietnam and North
Korea.
In 1998, Deutsche Post began to acquire shares in DHL. It finally reached majority ownership in 2001,
and completed the purchase in 2002. Deutsche Post then effectively absorbed DHL into its Express
division, while expanding the use of the DHL brand to other Deutsche Post divisions, business units and
subsidiaries. Today, DHL Express shares its well-known DHL brand with other Deutsche Post business
units, such as DHL Global Forwarding and DHL Supply Chain.

HISTORY
ORIGIN
Larry Hillblom was studying law at University of California, Berkeley's Boalt Hall School of Law and had
little money. He started running courier duty between San Francisco and Los Angeles, picking up
packages for the last flight of the day, and returning on the first flight the next morning, up to five times
a week.
When he graduated, Hillblom decided to go into the courier business himself. He found a niche that no
other company was filling, to fly bills of lading from San Francisco to Honolulu. By flying the documents
ahead of the freight they could be processed prior to vessel arrival and save valuable time after arrival.
Hillblom put up a portion of his student loans to start the company, bringing in his two
friends Adrian Dalsey and Robert Lynn as partners, with their combined initials of their last names as the
company name (DHL). All three shared a Plymouth Duster that they drove around San Francisco to pick
up the documents in suitcases, then rushed to the airport to book flights using another relatively new
invention, the corporate credit card. As the business took off, they started hiring new couriers to join
the company. Their first hires were Max and Blanche Kroll, whose apartment in Hawaii often became a
makeshift flophouse for their couriers.
The company started expanding their service through the early 1970s, first to the Philippines,
then Japan, Hong Kong, Singapore and Australia. For lower-volume routes the company hired couriers
on a one-off basis, trading airline tickets for the delivery. This simple expedient repeatedly saved the
company many legal hassles in the future, when would-be investigators took them up on the open offer
and make a delivery while taking their family on vacation. The first was when the FBI was tipped off
about the groups of briefcase-carrying young men making repeated trips to Hawaii, and when they
investigated and found nothing amiss, several agents became regular couriers for the company.

DOMESTIC EXPANSION
In the 1970s DHL was one of the only truly international delivery companies, and the only one offering
overnight service. The only major competitor in the overnight market was Federal Express (FedEx),
which did not open its first international service until 1981, expanding to Toronto, Ontario, Canada.
Nevertheless, the domestic market was extremely profitable, and DHL was the third largest courier
behind FedEx and the UPS.

DEUTSHE POST PURCHASE

Deutsche Post began to acquire shares in DHL in 1998, finally reaching majority ownership in 2001.
Following the completion of the purchase in 2002, Deutsche Post effectively absorbed DHL into its
Express division, while expanding the use of the DHL brand to other Deutsche Post divisions, business
units and subsidiaries. Today, DHL Express shares its well-known DHL brand with other Deutsche Post
business units, such as DHL Global Forwarding, DHL Freight, DHL Supply Chain, and DHL Global Mail.
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.
2001: Deutsche Post acquires a majority (51%) of DHL's shares, and the remaining 49% in 2002. The
new DHL is launched by merging the old DHL, Danzas and Securicor Omega Euro Express.
2001: The Pack station, an automated delivery booth, is introduced as a pilot project in Dortmund
and Mainz.
2002: Bashkirian Airlines Flight 2937, a Tupolev Tu-154 passenger jet, collides with DHL Flight 611,
a Boeing 757-200 cargo jet, at 35,000 ft (11,000 m) over berlingen, Germany. The 69 people
aboard the Tupolev (consisting mainly of Russian schoolchildren) and the two pilots of the Boeing
were killed.
December 2002: Introduces red and yellow new color scheme and logo.
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.
22 November 2003: DHL shootdown incident in Baghdad: Iraqi insurgents fire an SA-7
"Grail" surface-to-air missile at a European Air Transport Airbus A300 operating on behalf of DHL.
The aircraft takes off from Baghdad airport and the missile strikes the left wing, disabling all
three hydraulic systems and setting the wing on fire. The aircraft begins a dangerous phugoid
(vertical oscillation) but the crew manages to land safely at the airport despite only being able to
control the aircraft by adjusting the engine thrust.
September 2004: a planned expansion by DHL at Brussels International Airport creates a political
crisis in Belgium.
21 October 2004: DHL Express announces that it will move its European hub from Brussels
to Leipzig, Germany (Vatry, Francewas 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 makes an offer to buy contract logistics company Exel plc, which
had just acquired Tibbett & Britten Group.
On 14 December 2005, Deutsche Post announces the completion of the acquisition of Exel plc.
When integrating Exel into its Logistics division, it adds 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 has
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 the United Kingdom. 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 Aero Logic, 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 moves its central depot to Leipzig; Germany, resulting in a significant
positioning for improved service and timeliness to the European Union.
28 May 2008: DHL Express announces the restructuring plans for its United States network,
including terminating its business relationship with ABX Air and entering into a contract with
competitor UPS for air freight operations. Its cargo hub shifts from Wilmington to Louisville. The Air
Line Pilots Association, International protests.
October 2008: Two DHL Express Middle East senior executives, David Giles and Jason Bresler, are
assassinated in Kabul, by one of their own Afghan employees; they receive military honors by the
U.S. military, the first of such kind in Afghanistan.
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
Airport (KPDX) runway 28R.
30 January 2009: DHL ends domestic pickup 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. New Egg is one such company that uses this option as of May 10, 2011.
April 2009: UPS announces that DHL and UPS have ended negotiations for an agreement for UPS to
provide airlift for DHL packages between airports in North America. DHL says in a statement, "We
have not been able to come to a conclusive agreement that is acceptable to both parties." DHL
continues to use its current air cargo providers, ASTAR Air Cargo and ABX Air for now.
On 18 March 2010: a DHL Antonov An-26 aircraft makes an emergency landing on the frozen Lake
lemiste, close to Lennart Meri Tallinn Airport. Initial reports indicate problems with the landing

gear and one of the engines. The flight is operated by Exinon behalf of DHL. The aircraft involved is
SP-FDO and the flight departed from Helsinki Airport. Two of the six crew members are injured.
June 13, 2013 in Erlanger, Kentucky, USA Kentucky Governor Steve Beshear joined DHL and local
officials to unveil the companys newly expanded and upgraded global hub at the
Cincinnati/Northern Kentucky International Airport (CVG). DHL Express, a division of leading global
logistics company DHL, has invested $105 million over the past four years to enhance infrastructure
and add state-of-the-art sorting capabilities to meet increasing demand. The expansion includes a
new 180,000-square-foot sorting facility specifically designed to accommodate larger express
shipments, an expanded south ramp for additional wide-body aircraft, an employee and pilot
building, and a facility-wide information technology upgrade. The expanded global hub sits at the
heart of the DHL U.S. network, with flights connecting customers from more than 220 countries and
territories worldwide to every corner of the United States. In addition to global hubs in Hong Kong
and Germany, the CVG hub completes the backbone of the DHL intercontinental network.
DHL shapes up its ocean freight technology with "Ocean Secure". Customers can choose between
container tracking along key milestones, monitoring of any opening of the container, or of
temperature and humidity in the container leveraging the DHL Smart Sensor GSM technology as
well as real-time and in-transit information for all container parameters from remote areas and at
sea through satellite transmission.

SERVICES
DHL Express's global headquarters are part of the Deutsche Post headquarters in Bonn.
Headquarters for the Americas are located in Plantation, Florida, USA, while its Asia-Pacific and
Emerging Markets headquarters are located in Singapore, Malaysia, Hong Kong and China. The
European hub is in Leipzig, Germany.
Most of DHL Express' business is incorporated as DHL International GmbH.
Major competitors include FedEx, UPS, TOLL, TNT and national post carriers such as United States Postal
Service and Royal Mail. However, DHL has a minor partnership with the USPS, which allows DHL to
deliver small packages to the recipient through the USPS network known as DHL Global Mail. It is also
the sole provider for transferring USPS mail in and out of Iraq and Afghanistan.
DHL offers worldwide services, including deliveries to countries such as Iraq, Afghanistan, and Myanmar
(formerly called Burma). As it is German-owned, DHL is not affected by U.S. embargoes or sanctions and
will ship to Cuba and North Korea. However there are strict codes for delivering to North Korea, as the
country has shaky relations with the West.
As DHL is not a US company, it is not allowed to make domestic flights between U.S. airports. DHL
contracts these services to other providers.

BUSINESS ISSUES
DHL Express entered the U.S. aiming to shake up the UPS-FedEx duopoly. After losing billions, it hatched
a new plan: hold hands with UPS. Shortly after DHL Express was purchased in 2002 by privatized
German postal service Deutsche Post World Net (DPWGN.F), the yellow-clad global delivery service

launched an ambitious assault on United Parcel Service (UPS) and Federal Express (now officially FedEx)
(FDX), the two mainstays of the U.S. express-delivery market. DHL acquired Seattle-based Airborne, the
third-largest player, for a little more than $1 billion in 2003. And DHL made explicit appeals to customers
of the more established competitors with marketing slogans such as "Yellow. It's the new Brown": a
challenge to UPS' highly recognizable brown trucks.
DHL has made impressive strides in the past six years. It raised awareness of its brand. It built an
impressive air and ground network covering the U.S. And it made a significant impact on the market's
dynamics. "We've created a third choice which was not there before, a real threat to the competition,"
says John Mullen, chief executive of DHL's global business. Perhaps more important for DHLa global
giant with a presence in some 225 countriesthe expansion represented a bigger footprint in the U.S.
the largest market in the industry by far.

DHL's "Financial Pain"

But going head-to-head with the go-everywhere, do-everything models of UPS and FedEx proved costly.
"They are so strong we have to maintain almost a similar scale of network to them, but with only 6% or
7% market share," admits Mullen. "Hence the reason for financial pain." DHL's U.S. business lost $3
billion over the past four years, according to a Dow Jones report, while market share never surpassed
10%.
Much of the losses stem from DHL's low load rate, or inability to fill planes to capacity. "The problem has
been that DHL wasn't flying full. If the plane isn't full you can't just say 'I'm sorry those packages are
going to be delayed for a day or two until we fill up the plane,'" says Doug Caldwell, executive vicepresident of ParcelPool.com, an Orem (Utah) logistics provider. "I've heard some numbers that suggest
that they were well under 70% of capacity." By contrast, UPS and FedEx will typically fill planes to
around 80% to 85% of capacity. For every light load DHL flew, it lost money in labor and fuel costs.
The skyrocketing cost of fuel itself has become an impediment to DHL's growth in the U.S. in two ways.
"It's keeping market growth down because as the fuel surcharges climb to these exorbitant rates,
customers are looking to go from air service to ground service. And it increases air costs at the same
time," says Caldwell.

The Struggle To Be Global

Deutsche Post shareholders grew impatient. Personnel changes did little to appease: Four different
leaders have been hired for DHL's top U.S. post in the past four years (including Mullen, who was
promoted to lead DHL's global operations in 2006). In recent years, the company began to mull a more
drastic shift in strategy. The most obvious option was to sell the unit completely. "The easiest decision
would have been just pack up and go home," says CEO Mullen. "The markets would have applauded us,
because they [would have seen] the loss eradicated straight away." But that move, management
decided, would deliver a severe blow to the company's attempts to bill itself as a global player. Explains
Mullen, "We're a global network. Every country in the network trades with every other country every
day. And the U.S. is the largest, most important market in the world. If we say to our U.S. customers that
we want your volume in Asia, but we can't help you in your home country, are we going to get the
volumes in Asia? We think probably not."

A Big Win for Brown

In May, Deutsche Post announced a compromise solution, which would allow it to both retain its
presence in the U.S. and slash costs. The company said it had begun talks to outsource all of DHL's airlift
operations in the U.S. to a new partner. DHL plans to deliver, pick up, and track all cargo to and from the
aircraft as usual. "The customer doesn't actually see a difference at all," says Mullen. That is, unless they
pay attention to the color of the partner's planes: UPS brown. DHL plans to pay UPS $1 billion annually
to deliver its air freight, which DHL expects will help it to reduce annual losses from an expected $1.3
billion this year to $300 million by 2011and put it back on the road to profitability in the U.S. As part
of the restructuring, it will cut about 17% of its ground delivery routes and implement a new
management structure that holds one person accountable for both sales and operations in each of four
regions in the U.S. For UPS, it's a huge win. "UPS had a very sophisticated network in the U.S. with
[excess] capacity. And [with this deal] they better utilize that capacity," says Mullen.

Winner, Losers, and Questions

For Wilmington (Ohio) ABX Air (ATSG)the company DHL spun off from Airborne to operate a majority
of its yellow-painted aircraftthe deal will likely mean the loss of more than 6,000 jobs.
But while clear winners and losers have emerged, other aspects of the deal are more opaque. Will the
substantial cost-cutting help DHL become a more competitive force in the tough U.S. market? What
pressure will a DHL-UPS partnership put on prices across the market? And how will the alliance play out
in international markets such as Europe and Asia, where DHL has more of the upper hand in the rivalry?
For the insight of experts and those close to the deal, read "The Analysis: DHL Saves Face."
Partnering with a competitor may help DHL salvage its business reputation in the U.S.
Anytime a company joins hands with a rival, it's bound to raise concerns. And yet "co-opetition"the
sharing of resources amongst competitorshas a successful track record in dozens of industries, from
shipping to financial services to telecommunications. DHL's proposal to outsource its air shipments to
UPS (UPS) is likely to benefit both companies, and it may also set a precedent for similar partnerships in
the express delivery market, according to industry analysts. "I think it's a brilliant stroke for both DHL
and UPS," says Doug Caldwell, executive vice-president of ParcelPool.com, an Orem (Utah) logistics
provider. He believes the extra freight from DHL customers will help UPS fill its planes to near-capacity,
building efficiency and ultimately lowering costs. To be sure, it's not the first such move in the industry.
In 2000, Federal Express (FDX) forged a long-term agreement to carry U.S. Postal Service packages
through its air network. In return, FedEx placed drop-off boxes in some 38,000 retail postal outlets
across the country. The deal currently being negotiated between DHL and UPS is similar, but it would be
the first of its kind between two private players. "With fuel prices unlikely to ever come back down
materially and with ever-increasing costs of maintaining these networks, it makes sense that you will see
competitive sharing arrangements around the world," says John Mullen, CEO of DHL's global business.
"It makes sense anywhere where you can generate productivity and a better use of assets."

Going Greener
It could also be an environmentally beneficial move, according to Jim Le Rose, principal of logistics
consultancy Agile Network. "If you share capacity, you are reducing the amount of planes, cars, and
trucks that go to the same placesso perhaps this is a twist on a [green initiative] as well," he says.
Many critics believe the deal is a win for DHL customers because of the strong reputation of UPS.

"You're going to be moving from essentially a DHL air network to a UPS air network, and there's really
nobody better operationally than UPS," says Caldwell. "They run on time, they sort on timethey're
very
efficient."
It's less clear what effect the arrangement will have on prices across the industry. "DHL was a downside
pressure on the market," says Dan O'Rourke, editor of trade magazine Parcel. "It was another major
carrier, so that kept some pressure on the other major private carriers. Obviously that pressure has
dwindled quite a bit now." The clearest beneficiaries of the deal are shareholders of Deutsche Post
World Net, DHL's German parent, who have suffered billions of dollars in losses while DHL waited to
make a major strategy shift in the U.S. "This stops the bleeding as far as their situation in the U.S.," says
ParcelPool.com's Caldwell. "The question has been up until now whether DHL is even going to be able to
maintain a presence in the U.S. market, much less expand it. If they perform the transition well, it's
possible that they could increase their market share in the future."

TRENDS AND CHALLENGES

INFLUENCES FROM BUSINESS AND STUDY
Society is changing. At the same time, new economic concepts are having a far-ranging impact on the
entire economy. Modern logistics systems are optimally adapting to these changes.

1. Globalization
Sweeping opportunities for logistics
The world is growing closer and closer together. Political and ideological borders are disappearing. Trade
barriers are being dismantled and customs duties are being eliminated. At the same time, innovative
information and communication technologies are creating new, far-reaching possibilities. As a result of
this dynamic development, the demand for logistics services is climbing enormously. Logistics has
become a critical factor in the success of modern companies because customer and supply networks can
be extended around the world. At the same time, though, intensifying global competition is developing.
The result: Globalization is creating new challenges to go along with its sweeping opportunities.

The new opportunities of globalization

In the past 20 years, the conditions for global trade and business have improved tremendously. Many
political, ideological and customs-related borders between countries and regions of the world have been
dismantled. The Iron Curtain fell and the socialist economic order collapsed while the integration
of Europe continued to advance. Similar developments have occurred in other regions, including South
America (MERCOSUR), North America (NAFTA) and the Pacific region (ASEAN).
In addition, worldwide efforts to remove trade barriers are progressing slowly but surely. These include
the Global Agreement on Tariffs and Trade (GATT) and the Organization for Economic Cooperation and
Development Organization for Economic Cooperation and Development (OECD). A driving force of these
improvements has been the enormous advances made in information and communications technology
since the 1990s. This development is the result of both the World Wide Web and globally accepted,
factual standards, including Windows-based PC systems, the EDIFACT. EDIFACT , EAN EAN coding and,
last but not least, English as the world language of business.

The standards help business partners to be located more quickly and cost effectively, and make the
processes used in the everyday business world considerably more efficient than it was in the 1980s.
These strides have been complemented by progressive standardization in packaging and containers led
by the International Standards Organization (ISO). For industrial and trade companies, the possibility of
extending the networks of their suppliers and customers farther and farther internationally has become
much more appealing. After all, they can search for materials, employees, know-how and the conditions
for their activities in countries and regions that offer them the best cost-performance ratio. Customs
regulations and document processing have been greatly simplified. Communications and transport
options have become significantly faster, more cost effective and more reliable. The lower transport
costs arising from these changes are the reason that more and more companies are deciding to extend
their value-creation processes around the world.

New challenges of globalization

Globalization is not just a world of new opportunities for companies. It also poses certain risks.
In many sectors, more intense, global commercial competition has arisen. Even in their home markets,
companies are facing new competitors from around the world, and these competitors frequently enjoy
massive cost advantages generated by such factors as lower production expenses. As a result of this
development, the demand for transport, storage, transshipping, communications, planning, and control
services is continuously growing. At the same time, pressure to optimize the quality and costs of services
is growing on companies. Logistics has become one of the most important levers that companies can use
to survive and succeed in global competition.

2. Post-industrial society
From product to service
Ever since humans began to systematically examine economic questions, the scarcity and shortage of
goods have been critical factors in trade. Scarce capital must be optimally employed, scarce labor
sensibly distributed and scarce resources economically used. Since the middle of the 20th century,
though, the key to success in more and more markets of the global economy has been something else.
The successful companies today are those that are capable of asserting themselves in a world of
oversupply and abundance. As a result, services are becoming increasingly vital.

The evolution and its causes

The fundamental reasons that have fueled this sweeping evolution are rich nations transformation from
industrial to post-industrial societies, new demographics related to this change as well as new material
and service technologies:
Population levels are stagnating. In those places where they are not, growth is based on
immigration and, as a result, the rise of multicultural and, thus, more heterogeneous societies.
The average age of people is climbing. Households are becoming smaller and more mobile.
More and more money is being spent on non-material needs like communications,
entertainment and health care. At the same time, less money is being spent on needs like food
and beverages, clothing, important household items and the construction of apartments.
New materials and technologies open the way for efficient production around the world.

In the wake of these developments, companies are having more difficulty generating revenue with
standardized, mass-produced products. Needs are becoming more individual, diverse, malleable and
fleeting. Market niches that can be successfully supplied over a long period of time are shrinking and
more frequently require a combination with services. This applies not only to consumer goods but also
to industrial sectors of the economy.

The path to the tailored solution

Today, many companies are trying to meet the new demands by employing individualization or mass
individualization (mass customization" Mass customization ) of their assortments and products. In a
reflection of this trend, material products are upgraded through the use of value-added services and
improved quality. It is not only products but also "problem solutions" ("solutions")that are in demand.
As examples from a variety of business sectors show, the successful companies are those that are able
to offer their customers tailor-made, service-focused solutions without being smothered by an
overwhelming assortment, inventories and production costs. Concepts from modern logistics are being
expected to provide answers to the new challenges arising from mass individualization, decreasing
loyalty to companies and brands, reduced predictability and the growing service demands of customers.

3. Shortened product life cycles

Logistics, the trend-blazing pioneer
For a company to be successful, the ability to react promptly to customer requests is becoming
increasingly important. As a result of todays tremendous technical advances, products take less time to
develop and spend less time in the marketplace. As the architect of modern value chains, logistics
provides tailored concepts that help optimize product development and order processing times as well
as companies reaction times.

Reacting immediately to new demands

More than 10 years ago, George Stalk, an American working at the Boston Consulting Group, announced
the transition from cost- and price-based competition to time-based competition. In doing so, he
summed up a development that had been brewing for some time: that a companys success was
becoming more dependent on its ability to react immediately to customer requests. Furthermore, new
technologies are being developed faster and faster in many areas. The result: The time frame for
technologies or individual products to be commercially successful is becoming shorter. The reason for
this development is that they are being crowded out by innovations more quickly. Moores Law is a
much-quoted and a particularly extreme example of developments in the microelectronic industry.
According to this law, processing speed will double in every product generation while the price of this
speed will be cut in half. As a result, factories that produce a certain generation of microchips grow
obsolete in an increasingly shorter period of time - and with them the PCs and the numerous other
products based on a chip generation.

Speed as the best condition

In the past, companies with the most reasonably priced products usually were particularly successful in
the marketplace. Today, though, quick reaction time is the key factor. Companies are successful
primarily when they can react especially rapidly to the needs of their customers and can be the first to

bring a new technology or a new product to the market. This applies in particular to the computer,
telecommunications and fashion businesses and, to a less extent, to many other economic sectors.
The concepts and technologies used in modern logistics do their part to boost product-development and
order-processing times as well as reaction time by companies. As experts for the architecture of
intelligent, modular supply and value chains (or supply chains Supply chain) logisticians have taken on
responsibility for a new, important area.

4. Growing environmental awareness

The environment: the most precious resource
Since the beginning of the 1970s, a new environmental awareness has emerged among political leaders
and the general public. People have realized that sustainable business practices are indispensable over
the long run and that special attention must be given to natural resources and the environment. This
consciousness has taken hold in the logistics sector as well, resulting in new concepts such as combined
transports or systems of circulatory flow management to address the challenges.

Recycling and the vision of circulatory flow management

In addition to considering economic and commercial interests, modern logistics also addresses
environmental questions. Since the beginning of the 1970s - particularly as a result of the Club of Rome
and the first global oil crises - the limits of growth in the modern economy have been the focal point of
discussions. This debate has given birth to a new consciousness among the general public and political
leaders.
People have realized that it is necessary to prudently use the worlds natural resources and to employ
sustainable business practices. In the process, many companies have discovered that the careful use of
resources and energy is not only environmentally sensible but also particularly efficient in commercial
terms. This purpose is served by material-flow analyses in industrial production, recycling concepts for
materials, and the conscious avoidance of overproduction and the resulting storage costs, among other
things. Since the 1990s, "city logistics City logistics " designed to bring relief to downtown areas or the
consolidation of distribution and logistics tasks with the help of freight traffic centers Freight center and
combined transports Combined transport have gained popularity. The latest developments focus
on CO2 neutral products. As part of this effort, some logistics service providers offer products in which
investments equaling the amount of CO2 emissions produced by a transport are made in environmental
protection projects. With the spread of sustainable business practices, new system-designing jobs have
arisen. These systems underscore the need for professional logistics, including circulatory flow
management Circulatory flow management , intelligent canalization as well as the consolidation,
Consolidations and optimization of the transport of people and goods.

5. Structure and process orientation

Holistic management for tremendous success
Numerous activities and processes must be managed within a company. To satisfy customers and to be
commercially successful, these activities and processes must be optimally coordinated. The idea was
taken up in the 1980s and became known in academic research as supply chain orientation. This form of
management now plays a dominant role in related academic areas and in the daily world of business.
Supply chain methods are widely applied in logistics as well.

Thinking in processes and value chains

Key factors that contribute to a companys survival and success include the efficient use of material,
financial and personnel resources, the optimization of functions, research and development, as well as
product innovation. To ensure long-term success, optimization of subsections is far from the only critical
element. Above all, thinking and acting within broad contexts play a major role as well.
One particularly crucial component of successful company management is the linking of commercial
activities that facilitate customer satisfaction. These activities have a major impact on production costs,
quality, a companys reaction time and its adaptability to changing business and market conditions.
This realization, promoted around the world in particular by the writings of Harvard Professor Michael
Porter in the 1980s, is known as process orientation and supply chain thinking) (as well as process
thinking, value chain thinking, flow system thinking). It is becoming a bigger part of companies
vocabularies and actions. Logistics is the field where the knowledge and methods of holistic,
systematically optimized process and supply chain design, management and mobilization are collected
and applied.

6. Deregulation and privatization

From government-run companies to private logistics service providers
In a trend driven by Anglo-Saxon countries, processes of deregulation and liberalization have been
initiated since the 1980s around the world in an effort to increase commercial efficiency. Within
academia, the idea of far-reaching liberalization was prompted in particular by Milton Friedman (USA).
The elimination of government-controlled prices and access rights increased streamlining pressures in
the liberalized sectors and, subsequently, triggered a revolution in the markets. The effects of
deregulation were felt especially by the transport sector and by postal and telecommunications services.

The end of government-run communications and transport services

The past two decades in the logistics sector have been primarily shaped by the global trend to
deregulate former public or government activities such as communications and transport services.
Previously, modern thinking about business and the role of the state included the expectation that all
citizens and companies in a country would be offered such services at the same quality level and at the
same price - just like the provision of water, electricity, hospitals and security services like the police and
armed forces. Here, the state was either an owner or a monopolist - e.g., of postal services, railroads or
air-traffic systems - or, at a minimum, regulated rates, access rights and conveyance obligations through
the issuance of concessions and licenses.

The revolution among service sectors

Even the Treaty of Rome, the agreement that set up the European Community in 1958, said that such
regulations should not be retained in a modern economy. Since the 1980s, American and British
governments under leaders such as Carter, Reagan and Thatcher have taken energetic steps to
introduce processes of deregulation and liberalization. Many other countries - not least of all Germany followed slowly. The subsequent elimination of government-set prices and access rights in the area of
transport and postal and telecommunications services unleashed a revolution in the service sectors.

Significant rate cuts for parcel and goods shipping have produced intense streamlining pressures in
these markets. Traditional providers had to undergo restructuring, create new quality products and
launch aggressive marketing campaigns in order to survive. Such activities resulted from the fact that
more and more providers, armed with new ideas, rushed into the marketplace. Today, new business
models and provider structures like contract logistics Contract logistics and "3PL 3PL /4PL 4PL " services
have taken hold. They are creating new approaches to streamlining, quality improvement and flexibility
in industrial and trade companies. In this process, modern logistics is not just reacting to the changing
needs of the global economy. Rather, it is becoming a driving force of innovation.

7. Shareholder-value thinking
Concentrating on the essentials
The global economy is becoming increasingly far-reaching and networked. As a result of these changes,
companies must overcome many challenges, including massive individualization, time-based
competition and new environmental requirements. Lean, flexible companies are the ones best equipped
to respond to these demands. They can concentrate on their core skills and simply outsource
unimportant jobs. By doing so, they ensure that every activity, every investment and every business unit
contributes to added value and increases the benefits of shareholders. At the same time, the number of
interrelationships and interfaces among smaller companies is expanding, raising the importance of
logistics.

Strengthening core skills through the use of outsourcing

In the past few decades, business-administration academics and managers have come to an important
realization. The increasing use of complicated management systems and complex organization units is
not considered to be a promising way to approach the challenges posed by the global economy, massive
individualization, time-based competition and new environmental demands. The reason is that such
systems fuel rapid cost increases, and these costs frequently erode or even surpass the desired gains,
e.g., in the form of increased planning and management effort, increased system failures and follow-up
costs of system disruptions. In response to this realization, a trend in which companies concentrate on
their core skills has been spreading since the 1990s. The preferred approach is straightforward, lean
organizational units that focus on one or a limited number of tasks and manage themselves to the
largest possible extent. Those activities that are considered to be outside the realm of core skills are
outsourced. As a result of outsourcing, new organizations consisting of smaller, simple and similarly
structured modules are created, and these modules can be flexibly linked to one another. In this
process, the organizations are converted into high-performance, manageable components of multilinked value chains, company structures and national economies of the future.

A focus on simple, clear structures

In the world of stock markets and financial-commercial activities, a preference for simple, clear
structures has emerged. The thinking here is that every commercial activity, every investment and every
business unit should be measured by its contribution to the added value of a product or other outputs in
the sense of "shareholder-value thinking Shareholder value ." Stock markets and investors who focus on
shareholder-value thinking favor simple company structures, for which services and earnings can be
easily and clearly measured, over the complex company and partnership structures of the 1970s and

1980s.
With the return of modular organizational structures among companies, the so-called "loosely coupled
systems", the number of interfaces and the importance of coordinating the modules in the value chain
become more important. This, too, means a bigger role for logistics.

EXTENT OF PROBLEMS
Country Risk
Every country has different regulations and legislations that expose DHL to potential loss or adverse
effects on company operations and profitability. On the other hand, governments of countries where
DHL is presented could give a support to business activities that DHL provide.

Cross-cultural Risk
Unlike political, legal, and economic systems, culture has proved very difficult to identify and analyze. Its
effects on International Business are deep and broad. DHL is also has challenges in terms of cultural
Risks in different countries where DHL has subdivisions, through making business in various
countries DHL should focus on different aspects that will be accepted and lead to success in
chosen country. For example, Asian people are much more focused on respect and honesty, whereas
Europeans having priorities mainly in business ethics and getting the better results-profit.

Commercial Risk
The strategy of DHL is standardized for all subsidiaries and there is allowed rate of risk that this strategy
will not be accepted by subsidiaries. DHL Company expands its business worldwide with implementing
the same procedures, tactics and strategy. The structure of the company is well organized and DHL
Company is operating successfully in USA, Middle East, Africa and Europe.

Currency Risk
One of the major risks that the company can face is inflation which can have immediate consequences
for exchange rates, which influences on the value of the firm assets, earnings and income.

LOSSES INCURRED
Deutsche Post AG's decision to scale back its DHL express-delivery unit in the U.S. highlights a broad
retrenchment by the German postal giant, which made dozens of acquisitions over the past 15 years to

transform itself into a package-delivery, logistics and banking behemoth with operations in about 200
countries. In this file photo, a DHL delivery truck drives outside a DHL facility in Franklin Park, Illinois.
Monday's decision marks a strategic reversal by Deutsche Post after it invested, and lost, billions of
dollars in the U.S. over the past five years to try and wrestle market share away from United Parcel
Service Inc. and FedEx Corp.
Beginning in February, DHL will only provide cross-border package delivery services for U.S. customers,
reducing U.S.-linked shipping volume to about 100,000 deliveries a day from 1.2 million.
As recently as last May, Bonn-based Deutsche Post had rolled out a more modest U.S. restructuring plan
in which it planned to outsource the airlift -- the airport-to-airport part -- of its domestic U.S. deliveries
to UPS while maintaining most of its domestic ground network. Deutsche Post Chief Executive Frank
Appel said that the broader pullback was necessary because of deteriorating conditions in the U.S.
economy that have further cut DHL's volume and exacerbated losses in recent months.
"There is no alternative," Mr. Appel said at a news conference in Bonn on Monday. A more radical
restructuring was the only "realistic" scenario in the current conditions, he said.
Deutsche Post began its ambitious expansion drive into the U.S. in 2003, when it paid $1.05 billion to
acquire Seattle-based Airborne Inc. and combined it with DHL. But despite market leadership positions
in much of Europe and Asia, DHL's market share in the U.S. has remained stubbornly below 10%.
UPS and FedEx also have issued profit warnings this year, hurt by declining U.S. economic activity that
results in fewer shipped packages. Both companies have predicted a rebound in shipping demand could
take some time.
But the biggest loser has been DHL, which disclosed Monday that shipping volume in the U.S. has fallen
in each of the past three quarters from the year before, including a drop of around 15% in the third
quarter. DHL's shipping volumes in Europe and Asia have continued to grow this year, albeit at an
increasingly slow pace.
Deutsche Post said its U.S. restructuring will cost $3.9 billion, up from the $2 billion estimated in May. It
also expects its U.S. express business to post an operating loss of $1.5 billion in 2008, up from $1 billion
last year.
DHL will shut its 18 U.S. ground hubs and reduce the number of delivery stations to 103 from 412. It
plans to retain between 3,000 and 4,000 full-time DHL employees in the U.S., down from 13,000 fulltime DHL workers currently.
In the process, Deutsche Post said it hopes to cut DHL's operating costs in the U.S. to about $1 billion
from $5.4 billion.
Mr. Appel said the company will continue trying to negotiate a scaled-down airlift agreement with UPS,
adding that he hoped it could be clinched by year end.

Deutsche Post's shares rose 6.9% to €10 ($12.76) Monday on Frankfurt's stock exchange. Many
investors had urged management to pull the plug on its money-losing U.S. expansion drive.

METHODOLOGY
The current research is exploratory in nature as this topic has received very little research attention and
hence there is very limited empirical literature available to draw from.

Research Philosophy and Approach

The guiding philosophy of the present research is interpretivism. In contrast to the positivist paradigm
which proposes that there is only a single reality and therefore causal relationships can be identified
using objective quantitative measures, interpretivism proposes that there are multiple realities and
hence the different interpretations should be derived using subjective measures. In line, the current
research will employ a qualitative approach.

Data Collection and Analysis Methods

The primary data collection method that will be employed for collecting required data is interviews. The
interview method is chosen as the primary data collection method as the data gathered using this
method is rich, holistic and socially constructed. The interviews that will be conducted for the purpose
of the current research will be semi structured in nature. Semi structured interviews have the
advantage of providing a structure to the interview similar to structured interviews, but are not as rigid
as structured interviews. In fact semi structured interviews provide sufficient flexibility such that the
interview takes the form of a discussion.
The current research will focus on a single case, which is DHL, a leading third party logistics services
provider. The interview will be conducted with an operations manager at DHL' headquarters in UK.
The qualitative data collected using the interview method will be analyzed using Glaser and Strauss'
(1967) grounded theory approach. The grounded theory analysis process will involve four key stages,
namely, codes, concepts, categories and finally theory.

OPTIMIZATION METHODOLOGY
Supply Chain Optimization
Supply chain management is the management of upstream and downstream relationships with suppliers
and customers to deliver superior customer value at less cost to the supply chain as a whole.

The supply chain is the network of organizations that are involved through upstream and downstream
linkages, in the different processes and activities that produce value in the form of products and services
in the hands of ultimate consumer. Good design is at the heart of an effective supply chain solution. DHL
has developed a reputation for consistently developing innovative solutions that streamline operations
and improve control. Their in-house teams have contributed to the solutions design of some of the
world's leading brands and enabled to win key contacts. DHL solutions design team offers a wide
portfolio of expertise and services, from logistics network strategy, transport design, warehouse design
and simulation, through to operational improvement and inventory analysis.

International Supply Chain

Extended Supply chain Services
Implementation Services
Outsourcing Projects
DHL International Supply Chain

DHLs international supply chain management solutions are focused on helping customers take
increased control of international inbound supply chain to maximize the value of international and
global sourcing.

Give visibility of the upstream supply chain, and enable earlier decision making

Create a more agile supply chain, better able to respond to changes in consumer demand

Reduce lead times, inventories, and associated storage costs

Customer-focused solutions are built up from the following core services:

Origin management, including: vendor management; supplier collections; customs brokerage;

consolidation services and value-added services

Global forwarding, including: air/ocean/road/rail freight forwarding and management; European

managed transport

Destination management, including: port and demurrage management; customs brokerage; deconsolidation and pre-retail services; port to distribution centre transportation; direct store delivery
(US only).

Supply chain visibility and management, including: purchase order management; RFID product
tracking; exception management; planning and forecasting; inventory management.

Global forwarding services are provided across all major routes.

INVENTORY OPTIMIZATION
Through effective inventory management, inefficiencies can be driven out of the supply chain, overall
costs reduced and high service levels achieved. We optimize inventory at a line-item level at every stage
of the supply chain.
DHL focuses on driving results in:

Supplier management
Expediting
Order replenishment
Demand forecasting
Safety stock setting
Order pipeline monitoring
Excess stock management

Inventory optimization is supported by inventory management software that calculates 'line item risk
profiles' that measure the variability of demand and supply for each line item within a customers
inventory.
DHL offers:

Average of 20% inventory reduction and 8% improvement in product availability

Reduced inventory and overhead costs

Improved sales, profitability and return on investment

High service standards

Better matching of supply with demand

More streamlined and responsive supply chain

Innovative Supply Chain Optimization

Supply Chain Management services are delivered across industry sectors and provide expertise,
knowledge and resources in terms of personnel and supply chain tools. All services are targeted at
optimizing logistical operations in both process and strategy, and are aligned to the client's commercial
expectations.
The services are as follows:

Strategic Logistics Consulting

Lead Logistics Provider
Consulting and providing Transport optimization: Route-Pro and Trans-Pro
Consulting and providing Supply Chain Design
Consulting and providing Transportation
Engineering, optimization and re-engineering
Implementation and Project Management
Process Management
Outsourcing

DHLs consulting services also offer re-organization of customer facilities, project management for
customers, implementation of new IT Systems, creation of tender documents and tender processing.

Supply Chain Re-engineering

DHL works with customers to review supply chain efficiencies. One of the main tasks is to evaluate cost
efficiency to ensure that costs are being driven down throughout the contract duration. Data analysis
allows DHL to provide customers with 'what if modeling' or the impact of changing the business rules.

PERPORMACE AFTER OPTIMIZATION

Optimizing return logistics and spare parts logistics as well as maintenance and repair services.

Vehicle Management Services

Our vehicle management services focus on the management of sales and marketing support programs
for automotive manufacturers. Combining a range of services and systems to deliver a global response,
we help you overcome challenges at the end of the automotive supply chain.

Distribution to Stores Management

DHLs distribution to store solutions are focused on helping retailers create efficient and flexible supply
chains to deliver product to retail outlets at high levels of service. These solutions are built from several
core services including reverse logistics:
Logistics network strategy
Warehouse design and simulation
Transport modelling

FINDINGS
The world's largest express and logistics Network. DHL is the global market leader in international
express, overland transport and air freight. It is also the world's number 1 in ocean freight and contract
logistics. DHL offers a full range of customized solutions - from express document shipping to supply
chain management. Below are the global facts and figures that show you the scale of the world's largest
express and logistics network.
Global Facts and Figures Number of Employees: around 285,000
Number of Offices: around 6,500
Number of Hubs, Warehouses & Terminals: more than 450
Number of Gateways: 240
Number of Aircraft*: 420
Number of Vehicles: 76,200
Number of Countries & Territories: more than 220

Shipments per Year: more than 1.5 billion

Destinations Covered: 120,000
The reason for the success of DHL is due to its very effective and efficient way of carrying out the
process of project management. The basic steps in it are as follows:
DHL manages projects according to a six-step process:

Initiation: The formal start of the project

Design: The formal agreement on how to approach the project and its deliverables

Planning: Following agreement, a detailed plan is created

Execution: After detailed planning and preparation, the project goes 'live'

Closing: Gradually phase out and prepare for handover of the deliverables

Handover: The formal end of the project

THE TESTED PROBLEMS

DHL also has a salesforce, which has access to all of its key systems (phone, e-mail, sales information,
and reporting systems (through a single mobile device). DHL attracts its customers "by offering one-stop
shopping for innovative, made-to-measure solutions".
DHL has hubs located around the world as well as its own DHL Network of Express Logistics Centers
comprised of eight DHL-operated and -managed facilities located. DHL's "globally centralized points of
distribution" enhance its.
DHL's main competitors in the United States are UPS and FedEx, but with DHL dropping out of the U.S.
express delivery market and emphasizing its international presence, it will become more concerned with
overseas competitors. Overseas, it will have to contend with TNT and DB.
DHL's market share, according to DHL CEO John Mullen in June 2008, was only 6% or 7% (MacMillan,
2008). In fact, a Dow Jones report found that DHL's U.S. business suffered losses of $3 billion over the
past four years and that its market share never rose above 10%.
DHL's competitive advantage lies in its global approach. CEO John Mullen points out that DHL has
"created a third choice which was not there before, a real threat to the competition," and the company
has also raised brand awareness, established "an impressive air and ground network covering the U.S.,
and impacted the market's dynamics. Most importantly, though, DHL has become "a global giant" doing
business in 225 countries, giving it a bigger footprint in the United States, which is the industry's largest
market to date.

CONCLUSION
The way in which DHLs hierarchy is set out is suited to the nature of the logistics industry. Information
can be cascaded down quickly and efficiently, before eventually falling into the hands of those to whom
it is relevant, saving time. For example, it is no use for the sales team to be briefed on a large shipment
coming. Internally, mobile phones act as a good link between managers in the warehouse and couriers.
These work well as drivers are able to be redirected as soon as managers know there is a problem. One
point that could be improved however is for couriers to contact each other so they do not have to go
through the manager. Mobile phones also allow for the couriers to contact managers to warn of any
uncharacteristically large pick-ups, so the warehouse staff can then make room for them. In offices, the
use of an internal e-mail system means that any member of staff can be searched for in a company
address book. This allows for users to quickly find an address for somebody they need to contact in
order to save time. The feedback I have gained is that this system works well and is easy to operate.
Also, this ensures that there is no mistranslation of the original message as there might be if phones had
to be used. However, there is no way to e-mail more than one level up the hierarchy, something that
could be looked at.
One way that internal communications could perhaps be improved, is for lower levels of staff to be
given more information on how the service centre is operating. Despite being given plenty of
information on schemes used by DHL on the canteen wall and on the board, performance figures are not
openly published. Staff may feel more immersed in the company, feel a sense of pride, and more
importantly, trust what the managers are doing if they had such insight.
Externally, DHL have found a very cost-efficient way to advertise. Despite FedEx running regular TV
campaigns, DHL are arguably as well known a company (in Europe) and they use this brand awareness to
their advantage. Although effective, this method does not give DHL much of a personality. People are
well aware of the brand, but may not have much idea of what it stands for. On the other hand however,
this lack of personality could work to DHLs advantage as there is no scope for any message the
company transmits to be distorted. The adverts on the vans merely describe services and cannot be
perceived in different ways by different people. DHL have used sponsorship cleverly to cover for this lack
of personality, as they have been able to control the image portrayed by them, using the events they
sponsor.