Commerce on a global scale

As multinational companies expanded into new markets during the 1970s, they needed to share information across their global operations. Back then, that process was physical, using paper documents and, eventually, digital tapes and disks. Companies needed quick, reliable shipment of envelopes and small packages. That’s where the three young men Dalsey, Hillblom and Lynn saw their opportunity, creating a courier service that was faster and more secure than existing alternatives and thereby creating the express courier industry. DHL’s first customers came from four industries that have helped to define the modern world. Today the company has a dedicated industry sector approach, with teams of experts offering tailored sector solutions, and has expanded to offer the entire spectrum of logistics and supply chain solutions. And, like DHL, those industries have grown and changed dramatically in the past 50 years.

Where there is commerce, there are banks. One of DHL’s very first contracts was with the Bank of Hawaii, for the delivery of documents to the Federal Reserve Bank. The U.S. central bank soon became a customer in its own right. Within two years, other financial institutions and banks followed, using DHL’s overnight service to beat the postal system and ensure faster and more reliable transportation of documents and cheques. And as those businesses expanded their relationships with institutions in Asia and elsewhere, DHL expanded its finance industry customer base too.

The past 50 years have been a period of extraordinary growth and upheaval in the international financial sector. In the years after World War II, commercial and financial relations between the U.S. and Canada, Western Europe, Japan and Australia were governed by the Bretton Woods system. That agreement attempted to stabilize international commerce by pegging currencies to the dollar, which in turn was convertible to gold. By the end of the 1960s, however, the system was creaking as other economies grew larger relative to the U.S. In 1971, President Nixon abruptly abandoned the dollar’s convertibility to gold, and over the next few years the other participants in the system gradually abandoned it, allowing their currencies to float.

In the following decades, the financial sector entered a wave of unprecedented deregulation and globalization. Banks expanded their territories and grew by acquisition. New global financial centers emerged, notably London. In 1970, the U.K. banking sector’s assets were roughly the same size as the country’s GDP. By 2005 they were 5 1/2 times larger. DHL opened its first office in London in 1974, driven by demand from the financial sector and the booming oil industry.

Technology would play an increasingly important role in banking too. In the 1970s, banks relied on telephones and telex systems for real-time communications. In 1977, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) launched a secure electronic messaging service that became the backbone of international communication in the sector. End customers were benefiting from technology too. In 1967, the first automated teller machine (ATM) was installed by U.K. bank Barclays at its branch in Enfield, North London. By 2016, bank customers worldwide were making almost 100 billion cash withdrawals a year from the now ubiquitous machines. In the 1980s, banks started to offer online access, using direct dial-in connections or services such as Prestel in the U.K. and Minitel in France. The emergence of the World Wide Web in the 1990s led to mainstream adoption of online banking, and by 2019 more customers were accessing such services via mobile phone apps than conventional web browsers.

While the finance sector has embraced digitalization, the fast, secure movement of documents and small packages remains essential to its day-to-day operations. DHL has continued to develop its support for the unique needs of the sector. In 2015, for example, it launched London’s first express helicopter service, providing a congestion-beating, direct link between Heathrow airport and the financial districts of the City and Canary Wharf. Similar services are also operating in New York and Los Angeles.

In 1969, building work on the twin towers of the World Trade Center in New York was underway. Completed in 1972 and 1973, the 110-story buildings were the tallest in the world. They took that crown from the nearby Empire State Building, which had held it for 40 years, but kept it for only two years until overtaken by the Sears Tower (today Willis Tower) in Chicago.

Skyscrapers were important business for DHL. Early customers included the Otis elevator company as well as other big players in the construction sector. They needed to move plans, orders and contracts quickly and efficiently between customers, suppliers and contractors. Today, the company is built into the heart of the construction sector. DHL’s Supply Chain and Global Forward divisions keep industry players supplied with the tools and materials they need and manage the movement of the large, complex and delicate equipment required for major commercial, industrial and infrastructure projects.

The Twin Towers no longer dominate the New York skyline. They were destroyed in the terrorist attack of September 11, 2001. But the world’s enthusiasm for tall buildings remains. The current record-holder, at 828 meters, is the Burj Khalifa in Dubai, built in 2009. It too is set to be overtaken in 2020 by the 167-floor, 1000-meter Jeddah Tower, currently under construction in Saudi Arabia.

Its biggest projects may be the ones that grab the headlines, but understanding the true scale of the construction industry requires a wider view. Worldwide, the construction sector is the largest consumer of resources. It accounts for around half of annual global steel production, for example, and uses 3 billion metric tons of raw materials. Today, the sector employs more than 100 million people and generates annual revenues of $10 trillion – and DHL’s Engineering and Manufacturing sector experts are on hand around the world to support this ever-growing industry.

Oil has dominated the global energy landscape over the past 50 years. It overtook coal as the world’s largest source of primary energy in the mid-1960s, and until the early 1970s it was a cheap and readily available fuel. By the middle of that decade, however, oil had come to dominate political, economic and strategic thinking in much of the world. Saudi Arabia overtook the U.S. to become, briefly, the world’s largest oil producer, and it and other members of the Organization of Petroleum Exporting Countries (OPEC) sought to control markets and oil supply around the world. A series of oil crises pushed prices up fourfold, unleashing a search for new oil reserves as consuming countries looked to diversify their sources of supply and producers sought to profit from a hugely valuable commodity.

In Europe, development of the North Sea oil and gas fields, which had begun in the 1960s, accelerated dramatically, with annual production peaking in 1999 at 398 million barrels. Oil companies ventured into remote regions of Siberia and Alaska. Technically challenging deep-water exploration and production expanded around the world, with significant investments in the Gulf of Mexico and off the coast of Brazil.

The global expansion of oil exploration and production was an opportunity for DHL, which supported oil industry customers by shuttling documents and tapes of seismic data across their rapidly expanding production networks. By 1977, DHL was working right at the heart of the sector, opening an office in Aberdeen, Scotland, to support North Sea customers and starting its first service to Saudi Arabia.

The shifting dynamics of the oil market also upset the balance of power in the industry. In the 1970s, state-owned national oil companies controlled only 10% of the world’s known oil reserves. By 2013, that figure had risen to 90%. Now the pendulum is swinging again. Developments in technology have opened up new sources of oil and gas. These “unconventional” production techniques include the extraction of oil from the tar sands of Canada and the use of hydraulic fracturing techniques to release deposits of oil and gas from relatively impermeable rock. The widespread use of unconventional techniques has helped the U.S. to overtake Russia and Saudi Arabia to reclaim its place as the world’s largest oil producer.

Oil is also under pressure from other energy sources. Concerns about price volatility, availability and the environmental impact of oil have helped to drive the development of non-fossil fuel energy sources.

Proponents of nuclear power say it still has a vital role to play in meeting rising electricity demand, but the sector has struggled against significant headwinds, including high costs and major accidents at Three Mile Island in the U.S. in 1979, Chernobyl, Ukraine, in 1986  and Fukushima, Japan, in 2011.

Renewable energy technologies, especially wind and solar power, have fared much better: By 2017 they made up 10% of the global energy mix, up from almost zero in the 1970s. Renewable power generation capacity is currently growing at more than 20% per year. The renewables industry’s scale has helped to bring costs down to the point where these technologies can compete directly with new fossil fuel power stations, but the world is only just beginning to tackle the challenges presented by power sources that are intermittent and unpredictable.

All that means the oil era is far from over. Global demand is still growing, and most forecasters expect that growth to continue until at least the 2030s. Nor is the oil going to run out. BP estimates that known oil reserves and currently available extraction techniques could deliver twice the oil the world will need until 2050. It seems most likely, therefore, that the industry will keep pumping until society decides that, for the sake of the climate, the remaining oil should be left in the ground.

As the energy industry has grown and changed, so has DHL’s involvement. In 2012, the company opened a dedicated Energy Center in Houston. Today DHL plays a central role in all areas of the energy industry, supporting the construction, operation and maintenance of assets around the world with a team of global sector specialists, with expertise in everything from heavy lift operations and rig move management to inventory planning for maintenance and support operations.

International trade flourished during the 1970s, and major shipping lines invested in bigger, faster cargo vessels to meet growing demand. Where there is cargo, there is paperwork, however, and if manifests didn’t arrive at ports on time, lines had to pay demurrage charges as their vessels waited to dock. DHL’s new express delivery service helped reduce that cost overnight, allowing shipping companies to send documentation ahead for processing prior to their arrival at destination ports.

The first documents transported by DHL were carried by Dalsey and Hillblom themselves, on commercial flights between San Francisco and Honolulu. Word about the new service spread quickly in the industry and by 1970 the company had 40 customers, many of them in shipping.

In that year, international seaborne trade moved 2.6 billion metric tons of cargo. More than half of that cargo was crude oil and petroleum products. By 2017, shipping volumes had quadrupled to 10.7 million metric tons. Today’s maritime industry isn’t just bigger, however: Almost every other aspect of the sector has also changed. Until the millennium, global trade broadly followed the “colonial” pattern that had existed for more than a century. Developing nations exported large quantities of raw materials and imported relatively small quantities of consumer goods. Today, many of those countries are integrated much further into the supply chain. They have become major importers and exporters of manufactured components and finished products.

Then there’s the composition of the fleet. Oil products now account for less than a third of total maritime trade, and today’s tankers are smaller than the vessels of the past. In the 1970s, the industry looked for economies of scale, ordering ultra large crude carriers (ULCCs) capable of holding around 4 million barrels of oil. By the end of the decade, however, the rising oil price meant such cargoes were too costly (almost half a billion dollars per consignment in today’s prices) and the vessels too inflexible. Modern-day tankers are around half the size. 

The 1970s and 1980s also saw the containerization revolution. The first container vessels, built or converted during the 1960s, had a capacity of less than 1,000 twenty-foot equivalent units (TEUs). Ten years later, the industry was already building its fourth generation of vessels, with capacities greater than 4,000 TEUs. Today’s largest container ships have a capacity of more than 20,000 TEUs. By 2005, the global container fleet had overtaken the capacity of the general cargo fleet. By 2017 it was almost 3 1/2 times larger. Today, DHL doesn’t just move container paperwork. The company’s Global Forwarding division is the world’s second-largest freight forwarder, managing the transport of more than 3 million TEUs of containerized cargo every year.

Container shipping requires appropriately equipped ports, and the development of container ports around the world paints a clear picture of the way trade flows have evolved in recent years. In 1993, ports in China are estimated to have handled only 2.7 million TEUs of containerized freight. Today, six of the world’s top 10 container ports are in China, and the country handles around 200 million TEUs every year. — Jonathan Ward

Published: September 2019

Images: iStock