DHL case

7/23/2019 DHL case

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DHL case

90% of all Europe shipment and 10 % of all shipment worldwide

Good location at heart of Europe

Award highest Germany pm award within estimated budget

300euro million investment

Natural resources and convincing people to accept the ight operation and

company focus on the other hand

!uilding e"cellent facility and sustainability issues

#his could operate $ hours a day and seven day per wee& and '0 ight per day

and 1(00 ton

Global leader in e"press shipping overland transport and air freight as well ocean

freight and contract logistics

April $011 cove $$0 countries and territories in 1$0000 destination many award

E"press sector is one of the ma)or driver of global trade to capitali*e on customer

re+uirement domestic and international anywhere around the world

,-. was successfully capitali*e on it &nowing the customer and solving the problem

e"panding business and crating win/win for all sta&eholder

.eip*ighalee was based on this formula

hile deciding for plant optimally locating long term future

Economic growth of the region and envoeirmental steps

2pecial place for future of company driving force in the region win/win situation

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4ompany bac&ground

1950 law student university of 4alifornia little money courier service

!etween 2an 6rancisco and .os Angeles by personally pic&ing from source and

dropping at destination

After study own business

6ly bill to 2an 6rancisco to -onolulu

!ecause ying the documents ahead of the freight would save a lot of time with the

processing of the documents ta&ing place even before the vessel arrival7

-illblom along with two friends Adrian ,alsey and 8obert .ynn started thecompany in 19'9

nder the name ,-. :ta&ing the initials of their names; using a portion of hisstudent loans

#hey bought a 19'9 <lymouth ,uster for driving around 2an 6rancisco to personallypic& up the,ocuments then sprinting to the airport for boo&ing ights using the corporate

credit card7

New employee =a" >roll and !lanche >roll who?s dwelling in -awaii was fre+uentlyused as a ma&eshift op house11 for their couriers7 @n the 1950s the companye"panded to East Asian countries li&e the <hilippines apan -ong >ong 2ingaporeand also to Australia7

2uccess of us 6edE" corp ,-. started overnight mar&eting e"press7

@n 19B3 ,-. opened a ma)or distribution hub in 4incinnati7 @n 19B( a European hub opened in !russels7

ithin three years ,-. managed to almost double its customer base by startingoperations in close to twenty new African nations including 4had =o*ambi+ue and=orocco7 ,uring this period it also started its operations in 4hina and the =iddleEast7 !y 1990 the company had e"panded its operations to several !altic 2tates li&e.atvia Estonia and &raine7 @n 199' ,-. opened its Asia/<aciCc hub in =anila the

<hilippines7

Ownership@n 199B ,eutsche <ost AG became a shareholder of ,-. @nternational with thevision of Aligning its European ground/based services with ,-.7,eutsche <ost became the ma)ority shareholder by the end of $000 by ac+uiring(1% of ,-. shares7

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@n $00$ the remaining 9% was also ac+uired to complete the ac+uisition7,eutsche <ost absorbed ,-. into its E"press division and started using the ,-.brand name in its other divisions business units and subsidiaries7 ,-. E"press shared its renowned ,-. brand name with many other ,eutsche <ost!usiness units notably ,-. Global 6orwarding ,-. 6reight ,-. Global =ail and,-. 2upply

4hain7 #he company also formed ,-. Airways @nc7 for its operations inside the 27@n $003,-. Airways was renamed as A2#A8 Air 4argo7

Competitor

#he ma)ority of ,-. E"press?s business operated under the umbrella of ,-.@nternationalGmb-7 6or ,-. the most notable competitors were 6edE" nited <arcel 2ervice@nc71( :<2;

#N# ND1' :#N#; and also national post carriers li&e the 8oyal =ail15 and the nited2tates <ostal2ervice1B7

Partnership

-owever ,-. en)oyed a minor partnership with the 2<2 which allowed it to usethe 2<2Networ& for delivering small pac&ages to the recipients7 ,-. also acted as the soleprovider for2<2 mail operations in @ra+ and Afghanistan7

!esides it e"panded its business to =yanmar 4uba and North >orea7!eing a German/owned company ,-. was not aected by the embargos orsanctions imposed by the 27

-owever as the head+uarters of ,-. was situated in Germany it was considered tobe a foreign company in the 27 -ence the 2 Government did not allow it tooperate inside the country using domestic ights7

@n $010 ,-. had its operations in around $$0 countries and territories via over3$300 service points7@ts customer base was close to $7B million and customers were served by over'$000 Dehicles owned by ,-.7 @ts si" ma)or operational hubs19 were located at -ong >ong .eip*ig !ahrain.agos =iami 4incinnati Northern >entuc&y Airport7

Developing the hub at Leipzig

@n $00( ,eutsche <ost approved the decision to construct a new operating hub incentral Europe

,-. could not further e"pand its night/ight operations at the e"isting ,-. hub in!russels

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New hub in $00 its previous !russels base when night/time ights were banned7

#wo options // Datry and .eip*ig airport

6airly e+ual option both

.eip*ig regional government oering an attractive pac&age of grants incentivesand fast approvals ,-. opted for the latter7$$

Acquisition

#he company bought appro"imately two million s+uare meters of land near thevillage of 2ch&eudit* located to the west of .eip*ig in Germany7

4onstruction wor& commenced in 6ebruary $00' under the supervision of theproject manager Michael Reinbooth

@n mid/$005 the hub?s operative head+uarters as well as the aircraft hangar andthe oFce tractNeighboring the warehouse were transferred to ,-.7!y that time the 3'00 meter long southern runway construction was also Cnished7

#he hub?s operating launch was originally planned for fall $00B but due to sometechnical diFculties it was delayed till spring $00B7

@n =ay $00B Appel oFcially announced the opening of the hub for business #henew hub became one of three important centers in ,-.?s global e"press networ&the others being -ong >ong and the 27$

Four phase transition

! Phase

@n summer $005 when the hub?s core structural and technical elements werecompleted the basic test operations were done at the .eip*ig hub7

,uring this phase the testing of the technical e+uipment?s was done to reduce thechances of faults and other start/up problems7 Also the normal operations with50000 test parcels were tested during this phase7

"! Phase

After successful completion of all the tests in three months trials of the distributionoperationsere initiated in fall $0057

6or testing the distribution operations ,-. increased ight operations in stages7

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@n late ctober $005 it transferred about $0 aircraft to its base from theCologne#$onnAirport7 At the end of =arch $00B 30 more aircraft were shifted to the .eip*ig-allebase from!russels7

As of anuary $009 more than '0 daily ights$' were able to y ,-.Hs intra/Europeand@ntercontinental e"press air routes from .eip*ig covering around 100destinations7$5

#he increase in the number of incoming and outgoing ights dramatically increasedthe amount of 2hipments handled7

!y 2eptember $00B the volume of e"press items transshipped had risen to about1(00 tons per night from a mere (00 tons per night in early $00B

!y $01$ ,-. e"pected this Cgure to climb up to $000 tons7

%orting& hiring& training

#he company had to underta&e the challenges involving the installation of theautomated sorting6acility as well as the everyday planning and coordination between the individualoperational levels <rocesses7 @t also had to employ and train a huge number of newpersonnel7

!y the end of une $010 around $(00 new employees +ualiCed for their tas&swere operating at the hub7

Location a'vantages

.ocated in the heart of Europe and e+uipped with outstanding transport facilitiesthe .eip*ig hubered the ideal logistics launch pad for companies operating internationally7

#he location had innumerable direct connections to the emerging mar&ets inEastern Europe and

Asia7

@nternational e"press business had been growing steadily

.eip*ig-alle site had developed the potential to become a crucial )unction for thee"press and logistics specialists

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At the same time ,-. considered an additional starting and landing capacity in4entral Europe to be necessary as the company?s e"isting European hub in !russelshad reached its threshold limit7

Given this scenario the establishment of a new hub at .eip*ig-alle would not onlyincrease the

6light capacity of ,-.30 but would also remove the restrictions on night timeights7

Other a'vantages

Long term ContractNot only opted for a site e+uipped with the necessary settings7

#o eectively control the ever/escalating amounts of shipments and the risingcompetition in theGlobal e"press business but also more importantly in $00( ,-. signed the

contract with the .eip*ig-alle Airport and =itteldeutscher 6lughafen AG

6or obtaining all the rights and obligations of the location till $03(7

(CO)OM*C A++RAC+*,()(%% OF +-( R(.*O)E"perts predicted that the European air e"press business would grow at aroun' /0per annum!

#he ,-. aviation hub had ade+uate capacity to handle the ampliCed volume ofshipments due to the growth of the industry7 #his capacity acted as a logisticsIcalling cardJ and enhanced the region?s overall economic attractiveness7

,ierent types of companies from growth sectors li&e @# and telecommunications tothe manufacturing sectors // automotive chemical and pharmaceutical industries Kwere e"pected to beneCt from the presence of a high/performance air freight hub inthe vicinity of their premises7

#he time/critical goods and documents produced by those companiesften thrived on late acceptance of outgoing shipments as well as internationaldelivery within a2hort transit time which would be operationali*ed by $/hour functioning of the hubwith ta&eosAnd landings every day throughout the year7

1-2$ A)D %PO3(%4 )(+5OR3 ,-. oered its e"press services to appro"imately $$0 countries across the globeusing anE"tensive transport networ&7

Nevertheless to connect all the airports in all the countries directly would not onlyinvolve a huge number of ights!ut would also create capacity utili*ation <roblems as the volume of goods fortransport would vary for dierent routes7

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2o ,-. pooled the @tems at certain nodes re/sorted and consolidated them intoreasonable loading units and transported them onward to their Cnal destinations7

@n this mechanism &nown as the Ihub and 2po&eJ mechanism the central nodescould be compared to the hub of a bicycle wheel while the Attached spo&es stood

for the incoming and outgoing freights7

.eip*ig-alle located in the heart of Europe served as the main hub connecting thecomplete networ&7 @n a nutshell ights from across the globe congregated at.eip*ig-alle with their shipments for delivery across Europe K and shipments fromacross Europe congregated here for delivery across the globe7 Around (0 airportseach in Europe Asia and the 2 could be directly connected to the new hub viaregular scheduled ights7

+RA)%POR+ FAC*L*+*(%

#he hub at the .eip*ig-alle airport was e"ceptionally well connected with dierentregional and@ntercontinental locations7

#he growth mar&ets in 4entral and Eastern Europe were easily reachable from thesite by air road or rail7

Economic and eco/friendly connectivity with the closer destinations was achievedby combining these three &ey modes of transport ma&ing .eip*ig-alle a ItrimodalJhub7

=oreover ,-. e"pected the railroad connectivity of the location to be enhancedfurther by the opening up of a new freight train station at .eip*ig-alle7Also from winter $00B$009 ,-. started using ,eutsche !ahn freight trains fortransporting cargo between .eip*ig-alle and the 6ran&furt airport7 #hese trainsconnected the .eip*ig-alle hub to one of the most signiCcant airfreight sites inGermany7

(MP-A%*% O) +(C-)OLO.6

D6)AM*C RO2+( PLA))*).7 +(L(MA+*C% %OF+5AR(,ynamic route planning was commonly regarded as comple" problems in which thedelivery2ituation evolved intensely7Ad)ustments in route planning might become necessary due to new or abandoned

deliveries or modiCed environmental circumstances7

,-. used road/transport telematics to help it to optimi*e its transportation system7@n Germany alone about 1 billion liters of fuel each year were unnecessarilyconsumed due to highway traFc problems7

#hus this problem not only damaged the economy by wasting wor& time but it alsoaected theEnvironment heavily7

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+he D-L *nnovation Center helped by dierent business and scientiCccommunities tried to,evelop software which could signiCcantly improve the scheduling of companyvehicles7

,-. started using dynamic scheduling supported by the latest data for traFc tooptimi*e routes and stops for the vehicles7

6or route planning ,-. used satellite8base' navigation s9stems7 #he companyplanned to improve the system by including and analy*ing more informationconcerning terms of traFc traFc lights and construction sites7

Also as the vehicles in Europe were right han'8'rives left/hand turns weree"pensive in terms of both time and fuel7 -ence while route planning ,-. tried toavoid left/hand turns as much as possible7

Another particular potency of this '9namic telematics software was its capability

to organi*e probable meetings of delivery drivers7

An omnipresent real time observing system was used to determine the distancesbetween two vehicles7

@f a path could be optimi*ed by creating a meeting between two drivers at whichthey could e"change parcels the routes would be merged7 #his would not only savefuel and time but would also signiCcantly reduce the emission of greenhouse gases7

#he system also used a feedbac& networ& which helped in wor&ing out the optimumroutes when the database was increasing continuously7

,-. planned to launch the Crst prototype at the end of $011

%orting :acilit9

Every sortable item arriving at the .eip*ig-alle hub was arranged by thewarehouse?s fullyAutomated sorting facility which reduced sorting errors to the minimum7

#he capacity of this sorting facility was appro"imately 100000 parcels anddocuments per hour7 As of uly $010 around 1(0000 items were re/sorted andtransshipped within a couple of hours each night7

Average handling time was less than 1$0 minutes with the oLoad to reload processta&ing )ust seven minutes7

#he system was primarily governed by :our sorting belts with a total length of '7(>ilometers running together through the distribution center7

#he sorting system from Danderlande @ndustries was installed at a cost of M50million and was said to be the largest single investment in the hub7

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#he basic operations of the sorting facility were

! Apron to the -ub

After an incoming ight landed at the .eip*ig-alle airport the appro"imately

1(0000 parcels-andled at the hub each night started their movement through several stations7 Amobile hoisting<latform was used to lift the containers weighing about seven tons out of theaircraft and to place

#hem onto small trailers7 #he employees then drove these trailers to the sortingcenter and shoved the containers over the steel oors imbedded with rollers to theLoad 2ection on the ground oor7

@n this area ha*ardous goods and the bul&y items that could not be inserted intothe sorting system were automatically sorted and separated from the rest7 #hesorted items were then carried by a for&lift to the ad)acent 8eload Area for onward

transport7

"! %orting %ection

#he sorted items were then carried forward to the 8eload 2ection using conveyorbelts7 6irst they were scanned using one of eight si"/sided scanners andautomatically divided into parcels and documents and then they were placed onfour main conveyor belts to be transported to the upper oor of the warehouse7

#he initial scanning procedure also included the programming of the route whichevery individual item had to follow inside the labyrinth of conveyors in thedistribution center7 #his programming was such that the items were guided through

the shortest path to their destination containers7

#ypically the ma"imum time ta&en for this process was seven minutes per item! #he fully automated sorting process had a few remar&able technical featuresincluding a casca'e8li;e arrangement o: conve9or belts an' small par;ingschemes which prevente' the parcels :rom ;noc;ing into one another!

#his procedure protected against 'amages7 Also ,-. had a pull/out conveyor belte"tension manufactured and patente' especially for the hub7 #o avoid liftingparcels which could weigh up to 31 &ilograms employees could use the redtelescoping conveyor belts and load the parcels there7

<! Fl9er %orting #hen documents :termed as IyersJ; were separated from the parcels and sortedusing the 6lyer2orter7 #he documents were later automatically placed in red bags containing theappropriate destination information7 #hese red bags were transported to the !agload 2ection7 #he capacity of the fully automated 6lyer 2orter was about 3'000items per hour and on an average it sorted documents for (00 destinationsworldwide7

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=! Reloa'ing the Parcels an' Documents

After the parcels and the document bags were passed through the Cnal section ofthe conveyor!elt they were sent along the yellow slides to the 8eload Area @n this section thecontainers for dierent destinations were loaded again7

-ere a concluding control scan was e"ecuted on the items to chec& that theintended destination and the data necessary for the corresponding shipmenttrac&ing was saved in the ,-. data processing system7

2imilar to the oLoad procedure the loaded containers were again lifted onto thetrailers waitingutside the warehouse building to be driven to the outgoing freight planes7 #oguarantee optimum.oading there was an in/house hub team positioned near the aircraft to place eachcontainer4arefully inside the aircraft based on their weight7

Also the containers bound for destinations ithin 300 &ilometers from the hub were&ept aside to be transported by truc& or train7

>! Customs an' -ospital %ections

@n addition to unloading sorting and reloading the .eip*ig-alle hub oered twospecial

#reatments for the items if re+uired7 ne of them was for items which were re+uiredto clear4ustoms processes7 #hese items were appropriately pre/mar&ed and were sortedout for individual

4hec&ing by customs inspectors on site depending on the documents provided7

nce the 4ustoms approval had been obtained the items were then put on a shelfwhich showed a green light7 #he items were then rescanned and returned to thenormal +ueue for further<rocessing7

#he other specialty of this sorting facility was the I-ospital areaJ where damagedparcels or documents were treated separately7 After the repairs were done therethe items were brought bac& to the normal sorting process7

+(C-)OLO.6 +O PRO+(C+ +-( (),*RO)M()+

#he .eip*ig-alle hub was the Crst ,eutsche <ost orld Net facility which wasalmost self/suFcient in meeting its energy demands for electricity heating andcooling7

6or this purpose the ,-. authorities installed a high8tech cogeneration unit witha highly competent bloc& heat and power plant running on natural gas7 #he unitcould be operated simultaneously with the public power grid as well as separately7

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#his allowed the hub to have power even when the public power supply systemwent down7

@n addition to power generation the cogeneration unit was also used to facilitateheating and cooling e7g7 heating the operating facility in winter or cooling thestorage 8ooms in summer7

+he hub?s photovoltaic s9stem added another dimension to its environmental<rotection activities7 4lose to a 1000 s+uare meters area of the warehouse roof waswrapped with2olar cells to generate electricity from solar energy7 #hese could generate 100000&ilowatt hoursf electricity a year7

#his electricity was fed into the public grid and in accordance with the German8enewable Energies Act ,-. received energy credits in return7

@n comparison to the conventional technologies the usage of the cogeneration

system and solar cells eectively restricted appro"imately 3000 tons of 4$ frombeing released into the atmosphere each year7

@n .eip*ig-alle ,eutsche <ost orld Net decided to go in for the Go Green climateprotection<rogram in $010 and as its long/term ob)ective it was set to improve thecompany?s 4$EFciency by 30% by $0$07

Also two cisterns with the capacity to collect around 3000 cubic meters ofrainwater each year were constructed underground for storing water to wash the,-. aircraft7

+RA)%POR+ FAC*L*+*(%

A*RCRAF+ A,A*LA$L(

Ever since ,-. had transferred most of the wor&load from its previous Europeanhub in !russels

#o .eip*ig-alle the new hub had been in full operation7 !etween 0000 a7m7 and00 a7m7Appro"imately '0 aircraft too& o and landed every day ta&ing the toll toappro"imately one

=achine every Cve minutes7

,-. predominantly used !oeing 5(5/26 carriers for its ight operations at the hub7ver the course of the past several years ,-. had invested around M173 billion onthe high/tech !5(5/26 aircraft which showed the importance it placed on superiorenvironmental safety in the international e"press business7 @n addition to !oeing5(5/26 aircraft ,-. also used several Airbus A 300!/$006 =c,onnell ,ouglas=,116 and Antonov $' and 1$ aircraft7

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#he !oeing 5(5/26 aircraft not only met E noise protection standards by areduction of 55%Noise compared to its predecessor the !oeing 5$5 but also reduced fuelconsumption per ton of 6reight by around $0% resulting in a signiCcant reduction in 4$ emission peright7

Also at night it ew its aircraft at lower speeds compared to day time7

=oreover authorities at the .eip*ig-alle airport too& several precautions to reducenoise pollution by ma&ing e"tensive use of soundproof windows ventilators andother noise/insulating precautions7 #he area covered under the noise/control *onewas more than twice that of the e"isting re+uirements under German regulations forfortiCcation against aircraft noise pollution7

OP+*M*@A+*O) OF +RA)%POR+ FAC*L*+*(%

#he transport eFciency of the .eip*ig-alle hub was enhanced by the presence of

the crossroadsf Europe which gave the hub a strategic advantage7 #he practice of usingcombined transportAlso helped preserve energy resources7

#he selection of the mode of transport for the rapid movement of goods anddocuments was decided by the customers? +uality demand as well as the cost factorand the amount of emission by the carrier7

#his concept was further enhanced by coupling the airfreight hub with the newneighboring freight train station7

#he optimi*ation of railroad connections to 6ran&furt with the main airport and otherdestinations was e"pected to result in the shifting of freight traFc from road to rail7

As an increase in daily ight operations results in an increment in stress andha*ards both for-umans and the environment ,-. tried to optimi*e those operations7 6or instanceit optimi*ed

#he transport room in the aircraft by eliminating empty and half/loaded ights orshort/distance6lights as they were both economically ineFcient and ecologically unsound7

6or short distance deliveries within a radius up to 300 &ilometers it used the roadwhereas between 300 &ilometers and '00 &ilometers it used the railways as thetransport medium7

=oreover ,-. always tried to identify the particular type of aircraft best suited fora particular route7

As of mid/$010 the facility at .eip*ig airport manned by about $(00 peoplehandled 90% of all

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European ,-. E"press shipments and 10% of all shipments7 3 #he hub had ($aircraft par&ing2paces and also had plans to e"tend the apron to accommodate four more7

Problems

*)*+*AL -*+C-(%hile many e"perts praised the new hub and said that it would serve the companywell it was also the sub)ect of some criticism7

#he main problems related to the poor performance of the handling processbecause of the lac& of well/trained handling sta and too little manpower7

4ritics claimed that it would ta&e too much time to complete both unloading andshipping7 #hese delays would impact time slots &eeping planes on the ground andincreasing costs they said7

#hese criticisms were a result of an investigation carried out and published by Die

Welt a leading German newspaper in $00B7 #his led to concerns whether thecompany had implemented the pro)ect too +uic&ly7

-owever these criticisms were rebued by the company7 According to ,-. thedelays e"perienced were due only to the weather conditions7 @t also clariCed thatthe additional ight that had been started in early $00B from !russels airport was tocover seasonality/related volumes and not to compensate for the poor performancein the new hub7

.ater with the .eip*ig-alle hub up and running the company claimed that Imosts&eptics have been won over and business could not have gotten o to a betterstart7J

F2+2R( (BP(C+A+*O)%

As the European nion' was continuously growing closer toward the Eastern blocthe@mportance of the .eip*ig-alle region also grew rapidly7 As the region en)oyedhighly eFcient4onnectivity with the rest of the Europe the trimodal .eip*ig-alle hub allowed ,-.to lead theay in growing the freight e"press business in Eastern Europe as well as in Asia7

@n addition this hub had ade+uate capacity for an increase in volumes in future7wing to these the importance of the .eip*ig-alle airport as an internationallogistics hub steadily increased7

@n $005 ,-. founded a freight company for commercial transport of mail and cargonamed Aerologic in partnership with .ufthansa 4argo7

@n $00B .eip*ig-alle airport ran&ed seventh among all the airports in Europe interms of total freight and mail carried and Crst in terms of growth during that Cscal

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year7 @n terms of the total number of freight ights in $00B .eip*ig-alle airportran&ed second only to the 4harles de Gaulle airport in <aris7

@n $009 ,-.?s primary base was transferred to .eip*ig-alle7

Aerologic was e"pected to continue its operations in transporting both e"press and

freight goods between Asia :!ahrain -ong >ong @ndia 2ingapore 2outh >oreaAE and *be&istan; Europe :!elgium Germany and the >; and America :the2A;7

A hub located in the heart of Europe considerably ampliCed the plea of the.eip*ig-alle region to!ecome an industrial center7 4onsidering the growth of the demand for the airfreight transport@ndustry in that region ,-. also planned to increase the capacity of the hub infuture7 ,uring hispening speech at the .eip*ig-alle hub Appel stated Ie will e"ploit growthopportunities and are already thin&ing about how to e"pand the hub7 #he property

has enough space for two other sorting facilities that are )ust as large as the Crstone7 #hese are ideal conditions we need to meet the world?s growing demand fore"press services and to create a world/class logistics center in .eip*ig-alle7J

#he appeal of the region for companies was further enhanced by the pro"imity ofthe .eip*igE"hibition 4enter the superior life/+uality and the huge mar&et of close to sevenmillion people.iving near the .eip*ig-alle hub7 Along with the motto Iat home in the worldcommitted to the8egionJ7

D-L actuall9 gave immense importance to simultaneousl9 ma;ing the hubourish along5ith the people an' share' the responsibilit9 o: becoming a goo'neighbor to them!