Grow! Grow! Grow!
Big in Brazil
Already the industry leader and the core warehousing provider in one of the largest markets in the region, DHL Supply Chain (DSC) is on a roll. Jose Nava, President DSC Latin America, on progress to date and plans for the future.More
When Jose Nava thinks Brazil, he thinks big. Really big. And he is justified in doing so, having recently reeled in the biggest ever deal in divisional history.
The ten-year contract with Makro, Brazil's leading cash and carry wholesaler, sees DSC operating from a new 40,000 square meter warehousing facility near Campinas in the Brazilian state of São Paulo. As a consolidated inbound/outbound contract, it includes not just receipt and storage, but picking, packing, and delivery to Makro stores across Brazil. Most impressive of all, it secures a long-term relationship with a new customer. Nava says Brazilian business thrives on consistent economic policies and the many ways that high commodity prices boost the economy - not least in attracting foreign investment.
The strong Real fosters high imports of consumer and other goods. While this has its upsides, it also stunts domestic production. Cheaper goods from countries like China outcompete Brazil's home-grown items. Add heavy subsidies for the Brazilian Development Bank, a complex tax system and efforts to curb inflation, and the government has a job keeping the economy in check. But there are signs that the President and her cabinet have an eye on it all. They're trying hard to balance the spend and increase revenue," he explains.
How do you manage a country with nine time zones?
Russia is an important new market for the Group. Head of DHL Freight Russia Marco Leineweber answers five questions regarding that exiting country and explains how to handle nine time zones.More
Five years ago the Group announced that it was going to invest US$250 million (€176 million) in Russia. Did the investment pay off?
Leineweber: Yes, very much so. DHL Freight has benefited from this enormous investment and it has put us in a very strong position. We were able to recover much faster than our competition after the financial crisis in 2008 and 2009. Today we’re in very good shape.
Russia covers over 17 million square meters, but has relatively few people compared to China and India. Are there many opportunities for DPDHL to grow?
Leineweber: Russia is a very attractive market and there is great potential here. Firstly, because the logistics infrastructure is not yet fully developed. And secondly because so far, many companies have not yet dared to move into Russia. But that's starting to change. There's been a new wave of investments. Consumer goods, retail, fashion, manufacturing technology, high-tech and automotive industries have all seen major growth. These are the sectors we'll be focusing on.
Don't the nine time zones make work challenging?
Leineweber: It's easier than you might think. When I drive to work in the morning I first call the office in Vladivostok on the Pacific coast. Then I work my way west calling one regional manager after the other. By the time I arrive at the office I have a complete overview of the situation across the country. We always set up conference calls early in the morning so that all the offices can take part.
Infrastructure must play a very important role for DHL Freight. What's the road situation like in Russia?
Leineweber: There is a program to improve the infrastructure with a budget in the trillions. But there has been a hitch in its implementation, the pace is all wrong and they've missed a lot out. There is infrastructure in the west and south of the country. Further north is a no man's land. East of the Urals in the West Siberian plains there is significant development in oil and gas, but still hardly any roads. As a road freight company what can you do?
We use the railway. The rail network in Russia is very good. It needs a bit of an overhaul, but nevertheless it is pretty reliable.
After Europe, China has become Russia's most important foreign trade partner. How does that impact DHL?
Leineweber: China's north western city Urumqi has over a million people and is growing very quickly. Along with DHL Global Forwarding's multimodal services, we have set up a new hub. Goods heading for Russia are sent on express trains to Urumqi and from there, they go to the border by truck. At the border, the goods are loaded onto Russian trucks and customs is handled electronically by the Novosibirsk customs competence center. The goods head to Novosibirsk and are then connected to the groupage network in the western part of the country. We are planning to use the same approach in Kazakhstan.
The Indian Growth Syndrome
Skyrocketing growth rates. Opportunities everywhere you look. A highly fragmented market, an uneven regulatory landscape and lagging infrastructure – in India, the rate of change is a curse as well as a blessing. DHL juggles the opportunities and the hurdles, helping customers and the company cope with dynamic growth.More
Whatever kind of business they are in, one ‘problem’ firms face in India is massive growth. International pharmaceutical firm Pfizer produces and sells goods in India. But it uses many different distributers in each state, which are hard to keep track of.
"If it was just business as usual, we would be taking €600 million in 2009 to €1.8 billion in 2015. But because of Grow India and working together, we are looking at making €2.3 billion in 2015," explains Malcolm Monteiro, SVP and Area Director, South Asia, DHL Express.
All business units will grow their market share aggressively as a result. Monteiro and the heads of the other business units - Christoph Remund of DGF, Oscar De Bok of DSC, R S Subramanian of Express, and Anil Khanna of Blue Dart Express - form the India Steering Committee (ISC) and jointly lead the corporate growth initiative Grow India. This focuses on particular areas to pursue growth: SMEs, the sales stimulation program, and the major business sectors technology, energy and life sciences and healthcare. It is working spectacularly well. What has been important, Monteiro says, is empowering people to pursue the goals, through a sustainable framework of managers in 23 cities.
"This enables people to collaborate locally, to share their leads and relationships." The ISC established a reward and recognition program, and a program facilitation council. "It's a cross functional, cross business unit team to keep it on track so we meet our commitments."
DGF, DSC, Express, and its domestic subsidiary Blue Dart, have all worked closely together for many years. "Employee communications, an i-share, and shared Living Responsibility activities really show there's a purpose. It's not just the numbers - there's a real feeling of togetherness."
SVP and Area Director, South Asia, DHL Express
China: Reaching the trigger Point
There are big opportunities in China. Production is moving west, but finding qualified people is tough. Regulations change frequently. Five questions to Kelvin Leung, CEO Asia Pacific, DHL Global Forwarding.More
Shanghai, Beijing; a few years ago the focus for business in China was along the coast. Why is everyone moving west?
Leung: Prices are rising, so businesses are moving inland, encouraged to do so by the government, which is trying to shift economic development to the west and north.
How established is DHL in western China?
Leung: We have been established for a long time in Chengdu, for example, and more and more customers are moving in there. We have an experienced team of staff and strong local relationships with customs offices for example, to help manage any issues that arise, such as processing issues, or the opening times of the offices, and so on.
Trucks with license plates from one city cannot always make deliveries in another city. Why is that?
Leung: At the moment no single foreign company has a countrywide road freight license. All foreign firms have to apply for that city by city. There are a lot of local players, but they do not always comply with the safety standards required of foreign companies. Customers who make high end goods are willing to pay for reliable transport. Customers who make lower or mid-range commodities have to consider whether they want to take that risk. For us, it isn't ideal that we can't get a nationwide license but we apply on a city by city basis so that doesn't stop us.
What about rail freight, is that an option?
Leung: Our multimodal product connects China with Russia and from there to Europe. It is an option for some customers. It's not a mature product yet, but the total cost and total journey time mean it's worth considering. If you look at sea freight, from the coast to Europe is easily 30 to 35 days plus inland. Goods sent by rail via Urumqi can reach Moscow from South China in about 17 or 18 days. That doesn't include the modal switch.
The product is still in its infancy but DHL is trying different combinations of operations and testing different routes.
How far can customers to predict demand?
Leung: We beg our customers to try and forecast better. That's crucial for us to plan our business but often this is difficult. The market here is very volatile. In developed economies it is more predictable, and changes tend to be gradual - but in a dynamic market, things can go well or badly in the double digits. It's not easy to plan because there are a lot of factors we cannot control, from natural disasters to political disputes. We are in the middle, and we have to be very agile.
Mañana was yesterday
Mexico, the land of mañana, has seen enormous change over the past twenty years. With strong growth predicted into 2015 and beyond, it looks like tomorrow has finally arrived. Twenty years ago, one in five dwellings in Mexico had a bare earth floor.More
One in ten went without electricity and one in three lacked proper sewerage. In 2011, more houses have televisions (93%) than fridges (82%) or showers (65%). Among the populace, two thirds own a mobile phone. Mexico is a nation that has changed fast and is not likely to slow down any time soon.
The country has a very healthy outlook. Its 5% growth rate is forecast through to 2015 and is almost equally balanced across imports and exports. It is the second largest economy in Latin America and the 14th largest worldwide. It is committed to a free market economy and generates enormous trade with the U.S. thanks to its membership of the North American Free Trade Agreement (NAFTA).
Mexico’s healthy trillion dollar free market economy and growing middle class make the country a magnet for foreign investment. It has become a major manufacturing base for many leading global players in the automotive and pharmaceutical sectors. And from cars to pharmaceuticals, clothes to beer, business is growing rapidly – and keeping DHL busy.
Waiting for Kick Off
Another big company investing heavily in Mexico is DHL Express. The domestic express market is worth close to €1 billion and is growing at a rate of 8% annually. “We were the pioneers in 1979, we effectively created the Express market in Mexico and we’re totally committed to it,” says Antonio Arranz, DHL Express Country Manager. Express will invest some €88 million into developing gateways, technology and points of sale to ensure Express remains the market leader. €23 million will be invested in the development of the largest automated ground hub in Latin America, which will help link together DHL Mexico’s 400 points of sale.
DGF will focus less on point of sale and more on the high end of the scale. Going forward it will look at developing high-value sectors and products such as oil and energy, life sciences & healthcare, and high tech.
With a focus on proactively meeting customers’ needs through continuous investment and innovation, DHL anticipates staying ahead of the market with double-digit growth in Mexico for many years to come.
DHL Express Country Manager, Mexico