DHL Plans to Ease Its $1.3 Billion Headache
Entry into the US domestic market cost more than anticipated, causing the delivery giant to take dramatic measures to staunch a gushing loss.
While DHL is expanding its use of the US Postal Service to serve for last mile delivery in certain locations, there will be some impact on customers in areas affected by closures and consolidation. DHL characterizes the customer impact as “minimal,” translating into 3.3% fewer deliveries and 0.06% less pickups.
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For DHL for the time being the bottom line is the bottom line. Implementation of its new strategy is expected to cost $2 Billion. The company anticipates decreasing losses in US Express business over the next three years at $900 Million in 2009, $500 Million in 2010 and $300 Million in 2011.
“If we can get it to the area of a $300 million loss that we’ve targeted, that’s our step one,” claims Mullen. “We picked that figure because we wanted to be able to walk before we ran but also because at that level, we’re actually better off having the US with those losses than not having the US with those losses. That said, nobody wants to lose money. If we can get there in the time frame that we’ve scoped, the next plan will be how to get the $300 million down to zero.”
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DHL Creates a Major Hub
The new Leipzig/Halle Airport facility is an important cog in the company’s global commerce backbone that includes its major hub in Hong Kong. Two days before announcing plans for changing its market approach in the US, the international delivery giant opened this € 300 million facility to enhance its global express network. For the company, this hub transfers flights previously going to its Cologne gateway and its previous European air freight hub in Brussels. Some 60 planes per day arrive at the new hub from 46 destinations across the globe. In addition to freight arriving from the US and Hong Kong, cargo moves between Leipzig/Halle and such points as Sharjahj in the UAE, Delhi, Istanbul, Sofia, Warsaw and Ostrava, to name a few. These sites are mentioned here to provide a sense of why this particular location was chosen by DHL for creation of the new hub. At the formal opening of the facility, Frank Appel, Chairman of the Managing Board of Deutsche Post World Net, spoke of a shift in global commerce increasingly toward the east, not only with freight moving from China and India, but with emerging markets that include the Mideast, the Baltic States and Russia. Appel explained that this location in Germany is central to DHL’s continuing business with western destinations as well as to serving markets to its north and south and the growing markets to the east. John Mullen, CEO of DHL Express, observed that, “Demand for Express services is growing worldwide and we took the decision to invest in our international network in order to meet this need. The state-of-the-art new hub will enable us to continue to offer the best possible service, quality and reach for our customers. It is not only one of the industry’s most technically advanced hubs, with some of the world’s most sophisticated sorting equipment, but it will also protect and strengthen our leading position in the European, and indeed global, express market.” The hub’s sorting line is fully automatic and has been designed to minimize sound levels as it operates. Its main sorter is 6,500 meters long. There is a 900-meter document sorter and 260 loading and unloading slots for air containers. At present it is capable of handling 1,500 tons per day, anticipated to grow to 2,000 tons per day by 2012. The line can handle 60,000 parcels and 36,000 documents per hour. The facility is environmentally sensitive with, for example, the use of natural gas powered cogeneration technology for electricity, heating and cooling. The hub has 1,000 square meters of solar cells on the roof of its workshop used for generating electricity. The hub catches and stores rainwater that it then uses for drinking water and cleaning aircraft. |
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