Success in the Far East is a matter of orientation
The rewards for whoever gets logistics right in Asia are going to be huge.
For DHL, which already boasts regional revenue of US$2bn, the challenge is to present one name, one colour scheme, but many local faces to current and potential customers.
Klaus Zumwinkel, chairman and CEO of parent Deutsche Post World Net, spells it out clearly: "The future of our group lies in integrated, global logistics services. With DHL Express, DHLFreight, DHL Danzas Air & Ocean and DHL Solutions we are systematically orienting our business towards the needs of our customers and establishing a global, uniform customer image." Critics claimed it would be hard to communicate the right message under a single überbrand, submerging Danzas, AEI and an earlier generation of forwarder names under a blanket of red and yellow.
Wouldn't customers think DHL was still just about parcels?
Would they buy into the onestop shop?
"We have to be in all businesses, for the customer who wants more offerings, " says Frank Appel, DPmanagement board director responsible for logistics and corporate services.
"But big customers would feel over-dependent if they gave us all their business. It's not necessary to meet our growth ambitions." The one-stop shop is "not real" for everyone, Appel recognises. "The customer may say, 'I have a preferred supplier. Do you still want to work with me?' Of course you do." Global success is a question of staying flexible, he says. "We have common values – we're one company, and quality is defined everywhere the same way. But it's always with a local flavour. You've got to be able to serve the market as well as a small local player can." In the Asia Pacific region, the rebranding has been hailed as a "classic". Customers there were less familiar with Danzas or AEI and, perhaps helpfully, do not see DHLas a European or American company.
Internal leverage – and full customer benefit – will take two or three years while "new DHL" develops software that will enable express and logistics customers to share a technology platform.
"We are dealing in information, " says Appel. "There is still too much paperwork. We are trying to industrialise and professionalise the process." DHLclaims a 40% share of the t20bn Asian express sector and DHLDanzas Air & Ocean (DDAO) a top-three position in the Asia-Pacific ocean freight and air freight league tables, shifting 430,000teu and 465,000 tonnes respectively.
Logistics customers in the region include HP, Nokia, Bosch, Tyco, Ciba, Kellogg's, Caterpillar and Adidas. The company designed and built a vehicle distribution centre for BMW in Korea, while tailormade logistics solutions for Osram include consolidation in Malaysia, air freighting to Frankfurt and delivery to customers across Europe.
DDAO offers the widest range of logistics services in China thanks to the many operating licences it holds, and saw a 50% increase in first-quarter revenue. DHLexpress growth rates have averaged 40% for several years in China – "figures we can only dream of in Europe, " says Zumwinkel.
He acknowledges risks, but predicts double-digit growth in the key regional markets for several years to come. And a service provider can stay lighter on its feet than a manufacturer, he points out. "It may be difficult for a car maker to get a return on investment in Asia, but in the service industry, although investment is high, you can easily reduce your cost structure." Express accounts for 60% of DHL's regional revenue, air freight 26%, sea freight 10%, express logistics 3% and warehousing 1%. John Mullen, CEO of DHLAsia-Pacific, says the "small but exciting" express logistics slice could grow to 10%.
Even in relatively mature logistics markets such as Japan, Taiwan, South Korea, Singapore, Australia and New Zealand, where competition is fiercest from multinationals such as TPG and Exel as well as local players and post offices, growth is still running ahead of Europe.
In mid-ranking countries such as Thailand, the Philippines, Indonesia, Malaysia and India, competition is steadily increasing, but there is enough business to sustain everyone.
DHL claims clear market leadership in developing markets such as Vietnam, Cambodia, Laos and Myanmar, and some of its competitors are not yet present. But infrastructure is poor, there are still foreign ownership issues and customs can be difficult.
China sits completely off the chart. "You only get one China in your business life, " says Mullen. But it now presents some interesting challenges.
Local companies will be increasingly willing to outsource their logistics, but will not be obliged to work with multiple providers as provincial regulations move into line with international standards, says Peter Landsiedel, Asia-Pacific CEO for DDAO.
Increasing local purchasing power will see 30-40 main cities adopt the consumption patterns of China's five most cosmopolitan cities, forcing companies to adopt a different distribution strategy, he predicts. However, while it will become easier to gain or renew forwarding licences under liberalised foreign ownership rules from 2006, trucking will still be restricted.
Another inhibitor is that other areas have been slow to follow Shanghai's lead on electronic customs declarations.
"It's not as easy as in other countries, but the government is making every effort to meet WTO requirements, " says Landsiedel.
Coverage is key. Amajor importer wanting a delivery time of 48 hours across China must have a reliable network, he emphasises, although the goalposts can move rapidly. For example, DHL Solutions started working for Heineken in China in early 2003, importing all the product through six ports. Now, the company is brewing locally in Shanghai – but still requires cost-effective delivery to more than 250 locations across the country.
DHL already has four express logistics centres and 100 strategic parts centres in Asia and is focusing on new segments of the market, such as time-critical spare parts logistics, where the barriers to entry are highest.
The region's second strategic "must" alongside China is India, where DDAO set up a JV last year with freight forwarder Lemuir. "It has started well.
The potential's huge, but we've got to expand our customer base, " says Landsiedel. "And the Indian government has got to make it easier to do business, or investors won't come.
"Facilities are not state of the art, but the infrastructure is improving. It's like China was 10 years ago."
