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

INTRODUCTIONDHL 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.

HISTORYORIGINLarry 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 EXPANSIONIn 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 PURCHASEDeutsche 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 Überlingen, 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 Ülemiste, 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 company’s 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.

SERVICESDHL 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 ISSUESDHL 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 DHL—a global giant with a presence in some 225 countries—the 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 vice-president 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 GlobalDeutsche 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 BrownIn 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 2011—and 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 QuestionsFor Wilmington (Ohio) ABX Air (ATSG)—the company DHL spun off from Airborne to operate a majority of its yellow-painted aircraft—the 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 competitors—has 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 GreenerIt 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 places—so 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 time—they'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 CHALLENGESINFLUENCES FROM BUSINESS AND STUDYSociety 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. GlobalizationSweeping opportunities for logisticsThe 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 globalizationIn 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 globalizationGlobalization 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 societyFrom product to serviceEver 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 solutionToday, 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 cyclesLogistics, the trend-blazing pioneerFor a company to be successful, the ability to react promptly to customer requests is becoming increasingly important. As a result of today’s 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 demandsMore 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 company’s 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. “Moore’s 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 conditionIn 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 awarenessThe environment: the most precious resourceSince 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 managementIn 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 world’s 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 orientationHolistic management for tremendous successNumerous 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 chainsKey factors that contribute to a company’s 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 company’s 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 privatizationFrom government-run companies to private logistics service providersIn 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 servicesThe 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 sectorsEven 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 thinkingConcentrating on the essentialsThe 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 outsourcingIn 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 multi-linked value chains, company structures and national economies of the future.

A focus on simple, clear structuresIn 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 RiskEvery 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 RiskUnlike 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 RiskThe 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 RiskOne 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 INCURREDDeutsche 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 full-time 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.

METHODOLOGYThe 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 ApproachThe 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 MethodsThe 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 OptimizationSupply 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

DHL’s 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; de-consolidation 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 OPTIMIZATIONThrough 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 customer’s 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 OptimizationSupply 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

DHL’s 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-engineeringDHL 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 OPTIMIZATIONOptimizing return logistics and spare parts logistics as well as maintenance and repair services.

Vehicle Management ServicesOur 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 ManagementDHL’s 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

FINDINGSThe 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 285,000Number of Offices: around 6,500Number of Hubs, Warehouses & Terminals: more than 450Number of Gateways: 240Number of Aircraft*: 420 Number of Vehicles: 76,200Number of Countries & Territories: more than 220Shipments per Year: more than 1.5 billionDestinations 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.

CONCLUSIONThe way in which DHL’s 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 DHL’s 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.