DC Velocity - August 2018

distances of less than 300 miles, up from 29 percent in 2008. The weight of the average domestic shipment has declined by 17 percent over that time, according to SJ data. This reflects a migration to lighter and localized shipments triggered by more e-commerce activity, said Mark D’Amico, an analyst for the firm.

It also demonstrates a dramatic change in mix. For example, parcels today account for about 90 percent of DHL E-Commerce America’s shipments, according to Lee Spratt, CEO of its Americas operations. A decade ago, Spratt said in a phone interview last month, virtually all of the unit’s shipments consisted of large envelopes, newsletters, and magazines known in postal lingo as “flats.” To reflect the change, the unit was rebranded in 2014 from DHL Global Mail, which had been in the U.S. market since 2004.

To put the market shifts in perspective, e-tailer giant Amazon.com Inc. today handles four times the U.S. volumes per year that DHL Express did in 2007, according to SJ data. In another sign of the times, DHL Express manages Amazon’s daytime sortation operations at Cincinnati/Northern Kentucky International Airport, which Amazon is sharing as its temporary air hub until its own hub there is operational sometime in 2020.

“STRATEGY 2020”

Dominating global e-commerce logistics is one of the two core components of DHL’s broad mission known as “Strategy 2020” (the other component is expanding within developing economies). Given its mandate, and because e-commerce is broadening beyond the small-package segment to include heavier, more industri-al-type goods, all of DHL’s components will have to operate in sync in order to maximize its value. “We will need to be a full-service provider” to hit all of business’s e-commerce needs, said Spratt, whose unit moves 400,000 million parcels a year in the Americas, most of them in the U.S. through a partnership with the USPS, in a phone interview.

While offering end-to-end services
sounds good in concept, it could present a
challenge in the execution. That’s because
each business unit has its own culture, a
synchronized global growth, out-
bound U.S. revenues rose by 14 per-
cent over the prior year. U.S. daily
inbound shipments grew 16 percent
in 2017. Through May, inbound
traffic is up 14 percent relative to
the same period a year ago.

What may surprise those who perceived that DHL Express had abandoned the U.S. is that its footprint has expanded since it ended the domestic service. Today, the U.S. business employs about 10,000 people, roughly double its work force from 2009. It operates 4,300 vehicles, up from 2,500 in 2009. It has between 105 and 110 U.S. service centers today, compared with 95 in 2009.

Besides the improving U.S. and
global economies and a more
appropriate alignment with the rest
of the DHL network, the U.S. unit’s
express operation has benefited
from what would first be a nascent
and then a dramatic increase in
global e-commerce traffic. Today,
e-commerce accounts for 40 per-
cent of its outbound revenue. Six
out of every 10 total domestic ship-
ments it handles has a residential
component. That is a far cry from
DHL Express’s near-exclusive reli-
ance on domestic business-to-busi-
ness (B2B) traffic nearly a decade
ago.

If the DHL business units (besides Express, it has a large contract logistics business called DHL Supply Chain; DHL E-Commerce, a dedicated e-commerce operation that works closely with the U.S. Postal Service (USPS); and a freight forwarding and logistics service called DHL Global Forwarding) are to sustain their U.S. success, e-commerce will likely be the talisman. According to SJ Consulting, a transport consultancy, about 38 percent of all U.S. parcels today move in