Introduction
The international express market is expanding rapidly. According to a recent report by the Boeing company, it occupied a global market share of 5% of the total international air cargo market in 1994. This rapid growth rate is set to continue and to attain 31% of the total international air cargo market by the year 2014.
The largest share of this growing market is handled by international express carrier, DHL. This case study therefore sets out to chart how DHL Worldwide Express has created one of the greatest success stories in terms of world-wide renown, company growth and enterprise in the last quarter of the twentieth century. Its foundation, 27 years ago (in 1969), started an entire industry - air express distribution – of which it has remained the undisputed world leader. Today, following tremendous growth and expansion, DHL continues to drive the industry it created through a relentless pursuit of excellence in all aspects of product and service, in every operation throughout the world. Understanding the needs and concerns of customers, both globally and locally, is central to DHL’s business philosophy and lies at the heart of the leadership position maintained throughout the 223 countries it serves.
Founded in 1969 by Adrian Dalsey, Larry Hillblom and Robert Lynn, DHL is the world’s largest international express carrier. The founders, whose initials form the company name, launched the air express industry “overnight” as they transported shipping documents from San Fransisco to Hawaii, in advance of the actual shipments, saving significant time, as well as money, on turnaround in customs, previously impossible through traditional methods of transportation.
But what have been the factors which have shaped the development of this relatively new industry in the UK and internationally? What are the developing trends and what does the future hold? We look back over the past three decades to find out.....
In the late 1960s, companies had three alternatives if they needed to send
documents and parcels overseas:
The largest share of this growing market is handled by international express carrier, DHL. This case study therefore sets out to chart how DHL Worldwide Express has created one of the greatest success stories in terms of world-wide renown, company growth and enterprise in the last quarter of the twentieth century. Its foundation, 27 years ago (in 1969), started an entire industry - air express distribution – of which it has remained the undisputed world leader. Today, following tremendous growth and expansion, DHL continues to drive the industry it created through a relentless pursuit of excellence in all aspects of product and service, in every operation throughout the world. Understanding the needs and concerns of customers, both globally and locally, is central to DHL’s business philosophy and lies at the heart of the leadership position maintained throughout the 223 countries it serves.
Founded in 1969 by Adrian Dalsey, Larry Hillblom and Robert Lynn, DHL is the world’s largest international express carrier. The founders, whose initials form the company name, launched the air express industry “overnight” as they transported shipping documents from San Fransisco to Hawaii, in advance of the actual shipments, saving significant time, as well as money, on turnaround in customs, previously impossible through traditional methods of transportation.
But what have been the factors which have shaped the development of this relatively new industry in the UK and internationally? What are the developing trends and what does the future hold? We look back over the past three decades to find out.....
In the late 1960s, companies had three alternatives if they needed to send
documents and parcels overseas:
- They could use the Post Office or local equivalent, geared towards private users;
- They could use expensive on-board couriers who were limited by the weight they could carry; or
- They could use standard air freight which usually involved built-in delays at customs.
A gap in the market
There was therefore a distinct gap in the market for a fast, reliable and cost effective method of distribution and it was the recognition of this fact which lay behind the foundation of DHL by Dalsey, Hillblom and Lynn in 1969 in California. Initially express distribution companies, like DHL, focused primarily on emergency document delivery. However, with the maturing market, this rapidly developed to include consignments of all sizes. Far from being just a quick fix solution in a crisis, express distribution was to become an integral part of a company’s planned distribution strategy.
During the 1970s, banks and financial institutions, by virtue of the nature of their business, were the most prolific users of express services. Since this time however, demand has expanded to all industry sectors, including manufacturing and service industries, in line with the development of world trade and multinational corporations.
The consolidation of the marketBy the 1980s it had become the norm for companies in some industries to use air-express services, with larger and larger companies investing heavily in their logistics strategies. In 1982, the total world-wide air express market was worth only $0.5 billion; by theend of the decade it had risen in size to $4.5 billion.
Increased demand encouraged air express companies to supplement use of existing commercial flights with their own fleet of aircraft and to set up their own sorting depots in order to be in a position to offer greater flexibility to their customer. In the UK, for example, DHL International (UK) Ltd took the lead in 1980 by creating a hub at Heathrow Airport, followed by a second hub at East Midlands Airport in 1989, which today has become the third largest air cargo airport after Heathrow and Stanstead.
New technology also became an important force driving change and enabling greater speed and efficiency. In 1981, DHL became fully computerised with considerable investment taking place in automated equipment and processes throughout the organisation. This in turn heralded the advent of total logistics solutions, with customers looking to express distribution companies as partners to assist them in reducing costs and overheads by reducing stock holding and warehousing.
It is in the last ten years that we have seen the most dramatic changes in the express distribution industry. A number of factors have driven these changes:
During the 1970s, banks and financial institutions, by virtue of the nature of their business, were the most prolific users of express services. Since this time however, demand has expanded to all industry sectors, including manufacturing and service industries, in line with the development of world trade and multinational corporations.
The consolidation of the marketBy the 1980s it had become the norm for companies in some industries to use air-express services, with larger and larger companies investing heavily in their logistics strategies. In 1982, the total world-wide air express market was worth only $0.5 billion; by theend of the decade it had risen in size to $4.5 billion.
Increased demand encouraged air express companies to supplement use of existing commercial flights with their own fleet of aircraft and to set up their own sorting depots in order to be in a position to offer greater flexibility to their customer. In the UK, for example, DHL International (UK) Ltd took the lead in 1980 by creating a hub at Heathrow Airport, followed by a second hub at East Midlands Airport in 1989, which today has become the third largest air cargo airport after Heathrow and Stanstead.
New technology also became an important force driving change and enabling greater speed and efficiency. In 1981, DHL became fully computerised with considerable investment taking place in automated equipment and processes throughout the organisation. This in turn heralded the advent of total logistics solutions, with customers looking to express distribution companies as partners to assist them in reducing costs and overheads by reducing stock holding and warehousing.
It is in the last ten years that we have seen the most dramatic changes in the express distribution industry. A number of factors have driven these changes:
- Changing Expectations. The globalisation of trade and new approaches to the manufacturing process have shortened consumer lead time expectations. In Europe, the relaxation of trade barriers and emergence of developing markets and economies such as Eastern Europe, have increased the demand for a high standard of reliable service.
- A Fresh Perspective on Distribution. Distribution is now seen as a powerful business tool with direct implications to the bottom line. As a result, efficiency in this area plays a vital role in maintaining competitive edge. By being able to offer far more than just an express delivery service, companies such as DHL, have become an integral part of their client’s distribution strategy, servicing the needs of the world’s largest multinationals through inventory management, mailroom management services and direct distribution services.
- Technological Advancement. Technology began to have a major impact on added reliability in the 1980s, causing large scale investment on the part of the leading distribution companies. Computerisation allowed organisations such as DHL to offer completely integrated solutions, so that multinational organisations could rely on just one air express carrier to fulfil all of their requirements. Technology simplified administration, reduced the margin for error and made it easier to cut down on costs.
- Changing shipping trends. Air express in the UK is growing in popularity at the expense of air freight. There is also a growth in heavier parcel weights in all markets.
- Growing emphasis on exports. In the UK in particular, it is argued that increasing exports has helped to move the country out of recession. Increased export levels have in turn led to a greater demand for express services.
- Environmental pressures The growing importance of environmental and social responsibility has affected all businesses regardless of industry or size and has put pressure on all express distribution companies to improve their distribution methods to ensure minimum impact to the surrounding environment.
Products and services
Today, the European Union provides business organisations within Europe with a wide market involving 15 countries. Above and beyond this, the European Union has integrated trading links with many of its neighbours, who have negotiated trading links of mutual benefit. Trade and exchange within these areas requires integrated distribution systems which are able to manage a sophisticated and complex series of customer requirements.
DHL offers the best express delivery service, regardless of distance, to its customers in Europe. It stands alone as the global leader and is differentiated from its competitors by placing a consistent emphasis on customer care and an individualised service. With advanced technology and the largest geographical reach, combined with later pick up and earlier delivery times, a wide range of products and services are available. DHL delivers and collects from 60 locations in Europe and is preparing for increased demand in the next millennium by investing $600 million to improve technology and infrastructure in Europe.
The biggest and most advanced hub in Europe is the Brussels Super Hub, often described as “DHL’s gateway to Europe.” Opened in July 1985, as the first fully functional air express hub, it handles distribution and delivery from the rest of the world. The hub doubled in size in 1993 when DHL took over Federal Express’s sorting centre.
The Super Hub currently sorts more than 80,000 packages an hour with over 1,000 employees working around the clock and handles more than 400 tons (110,000 shipments) a night in Europe. Strategically based in Europe, the hub is able to meet the growing demands within the logistics and express field.
Western EuropeAs well as its major distribution centres - its hubs, DHL has created a number of Gateways providing links through its hubs throughout the world. Gateway facilities have been expanded and improved in Dublin, Copenhagen and in joint alliance with Lufthansa, DHL has moved into a new purpose built cargo centre in Frankfurt. An urgent parcel or document which is collected before 04.45h will arrive in Frankfurt before the close of business the same day. Alternatively, DHL collects from anywhere in the UK to deliver to major European destinations by the following morning.
DHL was the first air express carrier to explore the East European market. A changing political landscape has meant rapid growth, with DHL offering levels of customer service and operational capability equal to those offered in the West. It led the way in 1983, by opening a Yugoslavian office. Since 1989, $50 million has been invested in Central and Eastern Europe by DHL as a commitment to the growing part logistics has to play. Half of this sum has been used to develop and invest in aircraft, vehicles, staff training and state-of-the-art computer technology. In 1995, a new dedicated line haul to Bucharest, Romania and
Sofia in Bulgaria was introduced. Prague, Warsaw and Budapest saw a significant upgrade and improvement in capacity because of the growth of volumes. DHL has already led the way forward, developing an effective air express network for the fast growing economies of Eastern Europe.
Servicing the USAIn the USA, DHL’s US-based fleet comprises 87 aircraft, including five DC-8 aircraft. In November 1995, a new $20 million international gateway facility was opened at John F Kennedy Airport to serve as the international express network’s largest transfer point for shipments between North America and Europe, Africa and the Middle East.
Next-day Worldwide Documents Express and Next-Day Worldwide Parcel Express offers customers requiring the delivery of documents and packages from the UK to the US a next day door-to-door service to the USA.
DHL offers the best express delivery service, regardless of distance, to its customers in Europe. It stands alone as the global leader and is differentiated from its competitors by placing a consistent emphasis on customer care and an individualised service. With advanced technology and the largest geographical reach, combined with later pick up and earlier delivery times, a wide range of products and services are available. DHL delivers and collects from 60 locations in Europe and is preparing for increased demand in the next millennium by investing $600 million to improve technology and infrastructure in Europe.
The biggest and most advanced hub in Europe is the Brussels Super Hub, often described as “DHL’s gateway to Europe.” Opened in July 1985, as the first fully functional air express hub, it handles distribution and delivery from the rest of the world. The hub doubled in size in 1993 when DHL took over Federal Express’s sorting centre.
The Super Hub currently sorts more than 80,000 packages an hour with over 1,000 employees working around the clock and handles more than 400 tons (110,000 shipments) a night in Europe. Strategically based in Europe, the hub is able to meet the growing demands within the logistics and express field.
Western EuropeAs well as its major distribution centres - its hubs, DHL has created a number of Gateways providing links through its hubs throughout the world. Gateway facilities have been expanded and improved in Dublin, Copenhagen and in joint alliance with Lufthansa, DHL has moved into a new purpose built cargo centre in Frankfurt. An urgent parcel or document which is collected before 04.45h will arrive in Frankfurt before the close of business the same day. Alternatively, DHL collects from anywhere in the UK to deliver to major European destinations by the following morning.
DHL was the first air express carrier to explore the East European market. A changing political landscape has meant rapid growth, with DHL offering levels of customer service and operational capability equal to those offered in the West. It led the way in 1983, by opening a Yugoslavian office. Since 1989, $50 million has been invested in Central and Eastern Europe by DHL as a commitment to the growing part logistics has to play. Half of this sum has been used to develop and invest in aircraft, vehicles, staff training and state-of-the-art computer technology. In 1995, a new dedicated line haul to Bucharest, Romania and
Sofia in Bulgaria was introduced. Prague, Warsaw and Budapest saw a significant upgrade and improvement in capacity because of the growth of volumes. DHL has already led the way forward, developing an effective air express network for the fast growing economies of Eastern Europe.
Servicing the USAIn the USA, DHL’s US-based fleet comprises 87 aircraft, including five DC-8 aircraft. In November 1995, a new $20 million international gateway facility was opened at John F Kennedy Airport to serve as the international express network’s largest transfer point for shipments between North America and Europe, Africa and the Middle East.
Next-day Worldwide Documents Express and Next-Day Worldwide Parcel Express offers customers requiring the delivery of documents and packages from the UK to the US a next day door-to-door service to the USA.
Core products
The following products comprise DHL’s core business products in the international express delivery industry:
To provide details on the latest global activities and service enhancements of the DHL Worldwide Express network, a new section, “DHL News” has also been added to the site. This section features DHL news releases from around the world, with information on global network expansion, new products and company announcements.
- DOX Worldwide Document Express - an express international door-to-door delivery service for documents and non-dutiable items weighing up to 50kg per piece and 250kg per shipment.
- WPX Worldwide Parcel Express - an express international delivery service for dutiable and declarable goods of up to 50kg per piece and 250kg per shipment.
- EUX European Union Express – a next day, door-to-door delivery service for documents and goods to the EU.
- WorldMail An international business mail service. It provides a simple and cost-effective method for UK companies to send large quantities of mail to the rest of the world.
- Import Express A convenient and flexible inbound door-to-door delivery service of freight from 37 countries into the UK.
- EasyShip Designed for high volume customers, this comprehensive kit produces airwaybills (documents required for sending goods by air), as well as management reports for customers which can be linked into DHL’s international data network to access shipment transit details.
- EDI Through Electronic Data Interchange, customers are now linked to DHL. This transmits and receives information electronically rather than using paperwork to increase efficiency, reduce inventories, speed up deliveries and improve cash flow.
- Internet/World Wide Web Service for International Shippers Recently (April 1996) DHL enhanced its home page (http://www.dhl.com) on the World Wide Web (WWW) section of the Internet, to include world-wide tracking of shipments and regularly updated news about the network’s operations in more than 220 countries.
To provide details on the latest global activities and service enhancements of the DHL Worldwide Express network, a new section, “DHL News” has also been added to the site. This section features DHL news releases from around the world, with information on global network expansion, new products and company announcements.
Just-in-time
When faced with the problem of how to deliver a perishable cancer detection kit to doctors’ surgeries around Europe, the choice of leading health care company Bard was clear: they chose DHL. The Bard Bladder Tumour Antigen (BTA) test is a five-minute urine test for monitoring bladder cancer, the fourth most common cancer in men. This disease is usually successfully treated if found early, but life threatening if undetected until it reaches advanced stages. The Bard BTA kit is a potential life-saver.
The Bard BTA test is currently being sent directly to doctors around Europe on a trial basis. However, as the product is perishable, it needs to reach doctors’ surgeries within 72 hours, after which it can be refrigerated. Bard started sending the Bard BTA test to its key European markets - Spain, Italy, France and Germany - in early 1995. The Bard BTA test was launched globally in 1996.
DHL is able to make two collections every day from Bard’s Clacton-on-Sea warehouse, as well as being “on-call” to make pick-ups at short notice. Bard now sends over 100 products abroad per month with DHL. The advantages of using DHL include pick-up and door-to-door delivery, coupled with the ability to generate paper-work instantly and to track deliveries through the Internet. International exporters such as Bard know that they can rely on a single air express carrier, rather than a multitude of distribution suppliers. This simplifies administration and offers greater control over the time of delivery. It also dramatically lowers costs, through reduced inventory holding.
Just-in-time delivery services are now a common feature within total logistics chains serving the requirements of manufacturing, retail and service industries. It is the reliability of delivery by air express companies, such as DHL, that has led to considerable growth in the requirement for such logistical facilities and DHL is now being used by all of the top companies listed in the FT’s Top 100 Exporters.
The Bard BTA test is currently being sent directly to doctors around Europe on a trial basis. However, as the product is perishable, it needs to reach doctors’ surgeries within 72 hours, after which it can be refrigerated. Bard started sending the Bard BTA test to its key European markets - Spain, Italy, France and Germany - in early 1995. The Bard BTA test was launched globally in 1996.
DHL is able to make two collections every day from Bard’s Clacton-on-Sea warehouse, as well as being “on-call” to make pick-ups at short notice. Bard now sends over 100 products abroad per month with DHL. The advantages of using DHL include pick-up and door-to-door delivery, coupled with the ability to generate paper-work instantly and to track deliveries through the Internet. International exporters such as Bard know that they can rely on a single air express carrier, rather than a multitude of distribution suppliers. This simplifies administration and offers greater control over the time of delivery. It also dramatically lowers costs, through reduced inventory holding.
Just-in-time delivery services are now a common feature within total logistics chains serving the requirements of manufacturing, retail and service industries. It is the reliability of delivery by air express companies, such as DHL, that has led to considerable growth in the requirement for such logistical facilities and DHL is now being used by all of the top companies listed in the FT’s Top 100 Exporters.
Conclusion
This case study has highlighted the way in which DHL has filled an important gap in the market in express delivery services. To conclude, therefore, it is helpful to provide an example of how effective and important this service is. This service is exemplified by the way it has supported medical treatments by getting medicines and supplies to where they are most urgently needed.