Paul Dyer, chief executive of DHL Supply Chain, explains why the company is moving into designing police uniforms and running airport ground handling operations to Malory Davies.
Tough targets for growth and profit margins at DHL Supply Chain mean the pressure is on – particularly in the huge UK business, where Paul Dyer took over as chief executive following the retirement of Perry Watts at the beginning of 2017.
The company turns over some £3 billion in the UK, making it almost three times the size of its nearest competitor. And maintaining its growth rate means finding new areas of activity as well as a constant focus on the efficiency of its operations.
Dyer has been with the group for some 27 years most recently heading DHL’s global automotive sector where he was responsible for shaping the long term growth and strategic direction of the Automotive business globally, a sector comprising 230 operations around the world with over 25,000 automotive supply chain colleagues.
The past 18 months has seen the company implementing a programme named “Focus, Connect, Grow”. This underpins what DHL does all around the world, says Dyer.
The key is standardising ways of operating and sharing best practice to maximise operational efficiency across the group globally.
Central to the strategy is the Operational Management System (OMS). DHL Supply Chain started rolling this out across its UK sites about 18 months ago, says Dyer. So far, it has been implemented at some 75 of the company’s 400 sites and work is well underway at the other sites.
Implementing the OMS is a six-month change process, says Dyer, and can involve a significant cultural change.
DHL Supply Chain was created through a series of mergers and takeovers starting back in the 1980s with the National Freight Corporation. It grew significantly as a result of the merger with the Ocean Group which created Exel, and then again with the takeover of Tibbett & Britten. And finally the purchase of Exel by Deutsche Post resulted in a merger with the existing Deutsche Post logistics operations.
“We need to be a simpler more standardised business – uniting businesses in common cause,” says Dyer.
“Connect” is the part of the strategy that is focused on employee engagement and developing talent within the organisation. DHL now has its own “Certified Supply Chain Specialist” qualification that recognises skills developed within the businesses.
The final component of the strategy is “Grow”. Dyer points out that transport and warehousing is core to what the company does, but it is also looking to exploit new opportunities for growth outside traditional areas.
Such areas include catering, hotels and fast food; ground handling operations; and e-commerce.
Last month DHL took over ground handling operations for easyJet at Gatwick from Menzies Aviation. It is responsible for more than nine million departing easyJet passengers.
Dyer described the contract as “transformational”. “It will see us support easyJet in delivering core customer service and logistics operations including passenger arrival and bag-drop, baggage sortation, boarding, gate marshalling aircraft, loading and unloading, as well as management of other service providers,” he said.
DHL has also been growing its business in the airline catering market and its customers now include United Airlines, and Sri Lankan Airlines as well as British Airways and Qantas.
Dyer sees more scope in the airports sector, pointing out that supply chain is an untapped area. “We can bring something fast,” says Dyer.
In the foodservice sector, KFC recently appointed DHL and QSL (Quick Service Logistics) to manage the supply and distribution of food products, packaging and consumables for more than 850 restaurants throughout the UK.
DHL is managing the physical warehouse and distribution service, while QSL handles demand planning and stock management, with dedicated IT solutions. Dyer says it is now seeing interest from other foodservice groups.
One of the most unusual areas of growth is the design and delivery of police uniforms. In September last year, DHL won a seven year contract with the Metropolitan Police to implement National Uniform Managed Service (NUMS).
To carry out the design part of the contract, DHL invested in a team of specialists to lead the NUMS Design Council. It’s activity in this area increased in September when West Midlands Police awarded it a six year contract under NUMS.
Focus, Connect & Grow is part of Deutsche Post DHL’s “Strategy 2020” and its impact is evident from the group’s most recent results. Deutsche Post DHL recorded the strongest quarter in its history increasing operating profit to €834m from €755m in the third quarter of 2016.
Operating profit in DHL Supply Chain globally climbed by eight per cent to €148m for the quarter, reflecting not only growth in new business, but also the impact of the division’s optimisation programme aimed at improving the EBIT margin to between four per cent and five per cent by 2020. At 4.2 per cent, the third-quarter margin was within the target corridor.
Revenue in Supply Chain increased by 2.3 per cent to €3.5 bn in the third quarter. Organically, revenue grew by 6.1 per cent over the prior-year quarter. The division concluded additional contracts with a total volume of €415m with both new and existing customers during the third quarter.
This article first appeared in Logistics Manager, December 2017