Delivering excellence in a digital world
Deutsche Post DHL Group has launched its Strategy 2025. DPDHL Group CEO Frank Appel discusses its core elements and the megatrends that are impacting both the logistics business and the business of its customers.
Deutsche Post DHL Group has made significant progress with its Strategy 2020. Due to its geographical spread and wide range of logistics offerings, the Group is now better positioned than ever before. With “Strategy 2025 – Delivering excellence in a digital world”, the company is laying the groundwork to continue its successful growth trajectory beyond 2020.
The four most important trends that have been impacting logistics in recent years will also shape the industry going forward and shape the framework for the Group’s future development: globalization, digitalization, e-commerce and sustainability. The company will build on these trends to harness the potential for profitable long-term growth within its core logistics businesses, at the same time stepping up the digital transformation that is already underway across the entire Group. All efforts are focused on the established three bottom lines of Strategy 2020, which continue to provide the foundation for Strategy 2025. Accordingly, Deutsche Post DHL Group aims to be regarded as Employer, Provider, and Investment of choice in all its activities.
A new strategy usually demands that a company first takes a closer look at the one it replaces. So was Strategy 2020 a success?
Yes, it was. As we approach the year 2020, Deutsche Post DHL Group is really well positioned for the future. We’re the global leader in Time Definite International, the core product of our Express division. We’re No. 1 in air freight and in global contract logistics. And of course we’re the market leader in mail and parcel in Germany. I could mention many other examples: Our EBIT was at €2.4 billion in 2015; it’s forecast to be above €4 billion this year. We were the first logistics company to commit to zero carbon emissions by 2050. Employee engagement is at an all-time high. Customer satisfaction has also increased in nearly all our DHL divisions. I think this shows that we’re in a very good position today.
You mention customer satisfaction. How have customers profited from Strategy 2020?
That’s a very broad field, but let me reduce it to just two important areas: quality and innovation. If there are two things customers seek, the first is that you get the work done, and done correctly. We have invested a lot of time and energy in improving our quality. Sometimes these are larger programs, like we’re currently conducting at DHL Supply Chain to ensure greater standardization across our sites; and sometimes they might just be seemingly small, like daily Performance Dialogs, during which teams track, discuss and improve quality. In the end, we’ve really been creating a culture for quality with Strategy 2020. That said, customers don’t just want the same, only better. They want new ideas and we’ve worked a lot on this too: from new cold chain solutions, to robotics and automation, to new delivery vehicles like the StreetScooter, we’re constantly re-examining our business. Can we do it cheaper, better, different? Strategy 2020 helped us – and our customers – in that respect, too.
If the last strategy has been such a success, does DPDHL Group really need a new one?
I think any business leader would agree with me that you always need to adjust and readjust your strategy. Customer needs change over time, so any new company strategy is an opportunity to reflect those developments. A new strategy is also an opportunity to rejuvenate the spirit in your company, to reassess the environment we’re living in, and also to readdress areas that weren’t developing as we might have thought five years ago. For example, in 2014 when we were developing Strategy 2020, it was common knowledge that growth in emerging markets would be significantly higher than in the rest of the world. It turned out that, with the exception of China in particular, that growth wasn’t as high as first thought. On the other hand, advances in digitalization have happened even faster than one could have forecast back then. Our new strategy, any new strategy, provides the opportunity to conduct a reality check, to see if the trends you saw in the past are still the same.
And are the trends of some five years ago the same ones we see today?
Yes and also no. As part of our new strategic development, we identified four megatrends that are not only relevant for our industry, but which we could also act on. I’ve touched on two already, globalization and digitalization. The other two are e-commerce and sustainability. Now, none of these trends is new, but what is new is how quickly they are developing and how much impact they can have on our business and the business of our customers. This has been more noticeable in some areas, less so in others.
And how will these trends affect your business?
I guess it’s pretty much a no-brainer that, as the world’s biggest global logistics company, we continue to see globalization as an important trend. What we see today, though, is that logistics as a whole is likely to grow in line with global GDP. A few years ago it tended to grow above the global rate. At least in the near future, logistics demand will be driven more strongly by three economic centers: North America/Mexico, Europe and China. That’s actually excellent news for us, as we’re quite strong in all those markets – and between those markets. I suspect it’s also clear that a logistics company sees e-commerce as a real growth opportunity. Parcel deliveries continue to grow and grow. Even if we look at quite mature markets for online shopping, such as the U.S., we see that retail sales for online are still only about 10% of all retail sales. That means there’s still a lot of upward potential in markets everywhere. And today, most of that growth is still happening within countries. But we definitely see cross-border e-commerce as a strong growth market too, and one which will expand more than twice as fast as domestic e-commerce. There are also many developments driven by customers that will change the face of e-commerce as we know it today. For example, brands establishing themselves more strongly online and selling directly to consumers, the entrance into e-commerce of an ever-growing number of smaller companies as technological and financial barriers continue to fall, as well as the rise of more and more B2B business. The list could go on and on.
Globalization and e-commerce are trends that are traditionally clearly associated with logistics. But what about the other two: digitalization and sustainability?
Well, I’d certainly hope that customers and consumers already associate us with sustainability. We’ve been setting the benchmark for our industry for a few years now, I’d say. Our GoGreen program is over 10 years old. Just recently we presented our 10,000th StreetScooter, our electric delivery van. But of course sustainability isn’t only about climate- friendly operations or green solutions. It’s also about ethical business practices and social awareness. If you want to be taken seriously as a company nowadays, you need to see sustainability more holistically, and your approach must reflect that.
A huge opportunity for us, a massive opportunity. It’s also quite a challenge for our industry, which is somewhat of a latecomer to digitalization. There were good reasons for that, but I believe the coming years will definitely see huge advances in logistics, including at Deutsche Post DHL Group, as we use digital technology to optimize operations or improve the customer experience. We’ve been driving automation forward in all our business units, be that in sorting centers, mechanized parcel centers or warehouses. Automation is as much a topic on the shop floor as it is in the back office, and we’re seeing huge efficiency gains because of it.
What specifically does the new strategy plan in regard to digitalization?
First – and this is something we started before Strategy 2025 was launched – we are modernizing the IT backbone in all our divisions. This is the prerequisite if you really want to reap the other benefits of digitalization. A lot of what we are doing here can be understood as creating more standardization, in order to scale up on other digitalization plans easily. We are also working hard on creating a good AP landscape at our company, which should make it easier, for example, to integrate our solutions into web shops and other logistics solutions. We’re looking at cloud solutions that make it easier to scale capacity up or down, for example during the peak season. Data, be it a data lake or data analytics, is another area that could potentially radically improve our processes. Just imagine what we could do with improved route planning: quicker deliveries, lower emissions, novel delivery solutions. We have achieved quite a lot in the area of innovative solutions in the past few years, but I believe that the really massive improvements will come in this next wave of digitalization.
We’ve taken a look at the trends and how they could affect logistics. In what way will your customers benefit from them?
Of course, all these trends are the result of a customer need in one way or another, so our strategy is naturally based on fulfilling customer requirements. Just one example: As part of our Strategy 2025, each of our business units is developing an e-commerce strategy that will help unlock the potential of e-commerce even more for our customers, like the brands or the SMEs I mentioned earlier. We’ve built up a lot of expertise, and with our broad portfolio we can offer our customers solutions that are unique to our industry. Just recently, for instance, we created a B2B solution for a Canadian spare parts distributor in the E&M sector. This solution actually uses our Packstation (parcel locker) technology, which was originally conceived for last-mile delivery to consumers in Germany.
You speak about the opportunities of digitalization, and e-commerce and sustainability, but in DPDHL Group’s new strategy I see that one key element is that your business units will “strengthen their profitable core.” That actually sounds like focusing on less rather than more.
Not at all. In fact, exactly for the reasons I just outlined, we see great potential for growth in our core business. This isn’t just about us growing our top and bottom lines. It’s not just “business as usual.” It’s about being exceptionally good partners to our customers. Where would a customer want you to focus your attention, your resources, your investments? Not in a sideshow, but in those services you provide to them regularly. Focusing on the core means that you also focus your innovative drive on improving that core. You make your business easier to use, you provide new ways of doing things, you improve your quality. Our customer promise is “Excellence. Simply delivered.” – and that goes for our new strategy as well. And a clear focus on your core business is the prerequisite for that. It’s how we’ll deliver excellence in a digital world. — Eske Wright
Published: October 2019
Images: Andreas Kühlken; DHL