And the pouches, tubes and parcels while you're at it. DHL Express wants your domestic small package business. And it's willing to spend big bucks to get it.
"Would you DHL this for me?" The question doesn't quite roll off the tongue, but if DHL Express has its way, "DHL" will someday be shorthand for overnight delivery. As anyone with a television is aware, the carrier burst upon the scene last year with a land and air assault on the U.S. domestic package delivery business. Not only does the carrier seem unfazed by the prospect of taking on two titans, Federal Express and UPS, it appears to be enjoying the attack. DHL's TV ads depict FedEx and UPS drivers slack-jawed with amazement at their competitor's rapidity and omnipresence, even style. One print ad emblazoned in DHL's signature yellow and red proclaims: "Yellow. It's the new brown." Another screams: "The Roman Empire. The British Empire. The FedEx Empire. Nothing lasts forever. "Clearly, the gloves are off.
Challenging FedEx and UPS, which together own upwards of 75 percent of the domestic express delivery market, may sound like madness. But there's a method in it. DHL, which was founded in the United States but is now part of the Germany-based Deutsche Post group, has long been the market leader in international express shipping (and international air freight). But to achieve true world domination, it needs a strong presence in the United States, which is the world's busiest parcel market. And it's willing to spend well over a billion dollars in that quest.
DHL may actually have a shot at it. As Dick Metzler, DHL Americas' executive vice president of marketing, is fond of pointing out, the battle for package delivery dominance is about more than the United States alone. "We think it's not just a U.S. issue, it's a global issue," says Metzler, who was formerly CEO of APL Logistics. Though DHL casts itself in its ads as a cheeky upstart with something to prove ("Fat and happy. Meet lean and hungry"), the company, which dominates overnight package delivery everywhere else on the planet, is more Goliath than David. "We're the global player who's always been the UPS and FedEx to the rest of the world,"Metzler asserts. "I like the prospect of taking on one much more homogeneous market like the United States better than their prospects of taking on all the other countries in the world."
Gaining ground?
For all of Metzler's saber rattling, his new boss, John Mullen, who became DHL Americas' new chief executive officer Jan. 1, won't find this an easy market to crack. Not only does he face formidable competitors, but the domestic parcel delivery market itself is a market in transition. Over the past seven years, there's been a steady shift toward ground as opposed to air delivery for all but the most urgent packages. Figures from The Colography Group, an Atlanta-based transportation industry research firm, show that since UPS and FedEx introduced ground delivery guarantees in mid-1998, the proportion of U.S. expedited cargo moving via ground service has risen to just under 60 percent from 52 percent (and is expected to keep rising). Air, by contrast, has slid to 38 percent from 44 percent (and is expected to keep falling).
That's not the most auspicious of openings for DHL, which has always been firmly associated with air service in the public's mind. DHL's main bid to grab a bigger share of the U.S. parcel market, in fact, was the purchase, finalized in August 2003, of Airborne Express, which, as its name implies, largely gave DHL leverage in the air delivery market. And the markets where DHL dominates—Asia and Europe—are ones that remain largely geared toward air delivery of urgent packages (just try driving fast through rural China or urban England).
So, is DHL ready to be a ground delivery company? Absolutely, says Metzler. "To compete, we've just finished our 19-hub road network, and that gives us the ability to interconnect the continental United States by road."
DHL has publicly announced it's investing $1.2 billion in infrastructure over the next two years. October '05 should see the opening of its 300,000-square-foot West Coast air and ground hub in Riverside, Calif. Once that hub opens for business, says Fred Beljaars, executive vice president of operations for DHL Americas, the carrier will no longer have to route packages traveling from, say, San Francisco to Seattle through the company's hub in Wilmington, Ohio. "The ground network is completely built out. As a consequence, we can move 50 percent of all we do, whether 2nd day or conventional delivery, by ground, playing to the everincreasing demand for ground services," Beljaars says. DHL has recently opened seven new ground delivery sortation centers, bringing the U.S. total up to 19, if you include Wilmington.
But at least one stock analyst isn't so sure DHL can catch up with its well-entrenched rivals anytime soon. In its thirdquarter 2004 shippers survey, stock analyst Bear Stearns estimated that DHL had 10 percent of the U.S. domestic air market (by revenue), but only 1.5 to 2.0 percent of the ground market. And although analyst Ed Wolfe predicted in that report that DHL would be able to build up that share quickly by steep discounting, he cautioned that it would take "many years to implement the necessary ground infrastructure to compete and grow in order to take material market share."
Does size matter?
Naturally, DHL's much-vaunted expansion is a mere bagatelle if you listen to FedEx and UPS. "UPS isn't responding to competitors. Competitors respond to us. We lead the industry," says Steve Holmes, a UPS spokesman. "Compared to their $1.2 billion over the next two years, during that same period UPS will invest $4.8 billion in infrastructure, technology and operations."
FedEx Ground, too, downplays the threat, pointing out that though DHL may have 19 regional centers, it has 26 hubs and more than 500 local terminals in the United States and Canada. The company also notes that it's in the middle of a $1.8 billion expansion plan of its own, announced in October 2002, which involves building nine new hubs and expanding 22 others by the end of 2010.
Sheer physical size is one thing. End-to-end supply chain management capabilities are another. And just as Metzler insists the U.S. package delivery market can't be looked at in geographic isolation, so UPS's Holmes counters that you can't look at package delivery without considering other aspects of the supply chain.
"We at UPS try not to look at it in a fragmented way.We try to look at it holistically, especially in terms of what we're doing for customers through our supply chain solutions and technology, "Holmes says. "Those have all been successful and we're expanding our relationships with customers. For example, when we engaged with Home Shopping Network and Williams Sonoma, right from the start it was about much more than getting small packages to their customers."
Metzler, of course, counters that UPS isn't the only one with affiliate divisions, pointing to DHL's brotherhood of service providers under its owner, Deutsche Post AG—the old Danzas network, which the company bought in 1999—plus a newly grown DHL Logistics arm. But he's aware that becoming a major player in the United States means big changes for DHL.
"There's no doubt that to optimize our global position in the long run we needed a more scalable and robust infrastructure," Metzler says. The sheer size and scope of UPS's and FedEx's networks in the United States have driven their cost per package down "significantly below DHL's," Metzler admits. "Plus they were bundling their international services with domestic services and that was putting us in a difficult situation, much as we do with our services in Europe and Asia, which is difficult for them." So the only way to genuinely compete is to scale up too. And bundle up.With a $52 billion parent behind DHL, that's entirely possible.
Meanwhile, will DHL's market assault prove, as its ads suggest, not just bad for the competition, but great for you? "It's going to be much more apparent to people like distribution center managers that they have a choice," says Metzler. Within the 10 percent of shippers' supply chain spend that goes to ground parcel, express and export, they only have two choices, he says (though the U.S. Postal Service might take exception to that statement). If they're using truckers, they've got thousands of choices, he says. If they're shipping via LTL or air or ocean containers, they've got hundreds of choices, which gives them negotiating leverage. "So, the whole idea was to tell distribution center managers that they do have a choice," Metzler says. Market research has shown that shippers would welcome another player in the market, he notes. "They need a DHL in this market—is what one guy said—to keep the other two honest."
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”