DHL to spend USD160 million to automate package-sorting operations

In a bid to match U.S. package-delivery rivals in efficiency, DHL Worldwide Express Inc. will invest USD160 million this year in technology that automates the package-sorting process.

The delivery and logistics company, owned by German mail carrier Deutsche Post AG, said it will upgrade automation by 2006 at its facilities in Wilmington, Ohio; Allentown, Pa.; and Riverside, Calif. Some jobs will be cut gradually, the company said.

The investment is part of DHL’s USD1.2 billion U.S. expansion and the company’s bid to become an alternative to United Parcel Service Inc. and FedEx Corp.

So far, DHL says it serves just a sliver of the U.S. market, around 6.8 percent.

“This is just another confirmation of the fact that DHL is a key player in the United States,” said Fred Beljaars, executive vice president of operations for DHL Americas.

“We are now able to provide customers in the United States with a real alternative to the other two that are out there.”

DHL’s new sorting technology rivals the massive automatic label readers and conveyer belts that delivery giant UPS operates at its Louisville, Ky., airport facility.

There, a large warehouse next to the airport holds miles of conveyor belts that whip more than 300,000 packages per hour into their proper bins.

A handful of employees keep watch over the operations and catch the occasional box flung astray.

Beljaars says that processing rate compared with the 455,000 packages per hour his largest facility, in Wilmington, Ohio, can handle with the new technology. Overall, he said, DHL will be able to process 25 percent more packages in the United States.

The company also anticipates cost savings from the new equipment. Beljaars said the three facilities will employ 1,290 people, but that number will drift down as the company slowly needs fewer sorters. The new system automates all mail sorting, and humans are only needed to load and unload packages from the sorting machines.

DHL first said last year it would invest USD1.2 billion in the United States to take on UPS and FedEx. According to The Wall Street Journal, the U.S. industry represents USD48 billion a year in business.

DHL is already large elsewhere in the world. The company’s 2004 revenue of USD32 billion exceeds FedEx’s USD24.7 billion, though it falls short of UPS’ USD36.58 billion.