Alternative channels are far better organised now

DHL Supply Chain is one of four divisions within DPDHL Group, the world’s leading logistics company. Whether breaking into the emerging markets or growing existing territories DHL Supply Chain has the network, expertise and the resources to help its customers achieve them. With 1,400 warehouses and offices, 11,700,000 square metres of storage and a presence in more than 55 countries and territories, DHL Supply Chain can deliver excellence simply.

The pandemic continues to impact the revenue growth and for the first half of 2020 DHL Supply Chain had its revenue drop by 9.2 percent to €5,959 million. The company attributed the revenue drop due to business disposals and temporary, pandemic-related location closures and currency losses of €62 million. In the first half of 2020, DHL Supply Chain added contracts worth around €437 million in annualised revenue with both new and existing customers. The retail, consumer and auto-mobility sectors accounted for the majority of the new business.

In an exclusive interview to STAT Media Group, Oscar de Bok, board member of DPDHL Group and global chief executive officer of DHL Supply Chain, shares insights on the current challenges of the supply chain division, including the Covid-19 vaccine distribution. He adds that even though the automotive and fashion sectors have nosedived during the pandemic, e-commerce kept the business running. Besides, DHL Supply Chain is investing in data analytics, to get quick data for customers on how to optimise the supply chain.

Oscar de Bok was appointed to the DPDHL Supply Chain Divisional Board in 2019 as CEO DHL Supply Chain and Member of the Board of Management of Deutsche Post DHL Group. Previously, he was CEO, DHL Supply Chain, Europe, Middle East and Africa, covering 25 countries. He has 25 years of expertise in the logistics industry and his qualifications include a master's degree in corporate law and private law.

It is learned that DHL Supply Chain will work with Manheim Logistics to develop a more holistic transportation management system. What technologies are you planning to deploy at Manheim?

Manheim is just one of the many contracts what we do. We are using a modular standardisation of the systems that we use around the globe. When we talk about our transport system, it is a combination of off the shelf transport management systems. For instance, the systems that we use for lead logistics provider, where we provide an end-to-end supply chain management, last mile planning, actual network optimisation, and route planning for customers.

Detail on your service offering to Thailand’s Shopee.

I think it is a great example you picked up on overall growth in e-commerce because as DHL Supply Chain about 33 percent of our new business in retail consumer sits in e-commerce and that comes as direct fulfillment from B2C, one such example is Shopee. But for instance, we also see a lot of omni channel. Here, we would manage one stop point for various channels be it a traditional or B2C. It is a very important trend for our customers because not only you can optimise the stock points but also make it available to various channels within both ecommerce and physical channels. Specifically, during the Covid period, it has been very important as people do not want to go to stores. So creating an omni channel solution for our customers has been essential. We could create new sales channels for them through ecommerce and migrating to omni channel solutions within weeks.

One of the major verticals you handle is automotive. How this segment has been impacted during this crisis?

I would say that the automotive sector was already impacted before the Covid as it was undergoing a major transition due to electrification. All our customers have to shift and change their supply chains from new factories, make investments to change their production, etc. While that was in pipeline, Covid-19 hit and the number of orders collapsed. Obviously, it even made tougher for the sector and it responded by reducing the production drastically affecting some of our facilities. At that time, we have closed certain facilities in collaboration with our customers and have decided to freeze some operations in order to start it again – this was the scenario in April.

Today, situation has changed. There is an actual growth of sales in the automotive sector. The customers have been able to accelerate and change some of the parts of their supply chain. Of course, automotive had its impacts, at the same time we are large players in the consumer retail and healthcare, the sectors where major growth is witnessed. So for the Q4, we still have to build up to cope with the higher volumes.

During the Covid period, it has been very important to create an omni channel solution for our customers.

DHL Supply Chain contract logistics unit has posted a $61 million year-over-year decline in Q3. Which other segments of your business have been impacted?

On one hand, we had businesses that reduced drastically, like what we just discussed on the automotive sector, and another one was fashion. At the same time, consumer sector volumes are going up. Talking about grocery retail, we really have high volumes. But at the same time, if we talk about high street retail, where fashion and luxury products come in, there is a shift of the supply chain from physical stores to e-commerce. Here, we have been able to create those omni channel solutions to gear up their sales than what they had before.

In fashion, due to the shift towards online selling, they are better coping with the crisis at the moment. Compared to the first wave of Covid-19, the change which we have seen today is because the alternative channels are far better organised now.

The world is looking forward to vaccine logistics for Covid-19 and as the supply chain division of DHL how are you preparing to meet the demand of moving these vaccines?

Not only as DHL supply chain, but also in close collaboration with our other divisions as well, we have lot of interactions with governments to discuss and establish what infrastructure is needed for vaccine distribution. With McKinsey, DHL has published the White Paper on ‘Delivering Pandemic Resilience’ and one of the important criteria is maintaining temperature as low as -80 degree celsius, which is essential specifically in the first phase of the vaccine. We have discussions with pharmaceutical companies and few are quite in advanced stages. We are specifically investing to create regional hubs to act as storage points. In the beginning, there will be a lot of express shipments then it will start to stabilise. Here, collaboration will play a key role in helping how we can get these vaccines as soon as possible to the market.

The distribution of vaccine is not new to us. But the challenge is in a short period of time you have high quantity of a very low volume to be delivered.

Did the pandemic cease DHL’s $2.2 billion digitalisation ‘Strategy 2025’? What are the upcoming technological developments?

As DHL Supply Chain, we are investing in data analytics, to get quick data for our customers on how to optimise their supply chain. The bigger investments at the same time sit in our accelerated digitisation agenda which is in collaborative robotics in our facilities. In the past, somebody would invest in an automated facility and design or amortise for 10 years. Today, it is no longer the case as we all know that supply chains will continuously change and have to adjust to the requirements of the market, but also to pandemics, natural disasters etc. Investments that you make in digitalisation needs not only the possibility to analyse quickly, but also respond fast to react and be flexible. Collaborative robotics is the answer to this.

For instance, in India some of the construction of new facilities is delayed but the plan is still there. Our 2025 plans won't be affected. While our customers had to close down activities in Q2, we continued our investments.

What challenges the company faced during the pandemic and how are you planning to fix up the supply chain deficiencies post-pandemic?

As we are global, we could pick up the best practices from Asia and apply those in Europe, the Americas and it has proven that the sharing of these practices in a very short period of time has worked really well to keep our people safe which is one of the challenges. And another important aspect is how we keep our customers’ supply chain running. So we had to find ways in how we could optimise their supply chains and we succeeded there. What we learned from it is the importance of data and being able to make fast decisions. The whole standardisation agenda that we created over the past years has helped us tremendously to speed up, implement and set up new operations for customers in weeks.