DPWN makes changes to Logistics division

Jeff Berman, Senior Editor -- Logistics Management, 3/5/2008

BONN, Germany—Deutsche Post World Net, the parent company of express delivery and logistics services provider DHL, said that its Supervisory Board has made changes to its Executive Management Board.

These changes include separating its Logistics corporate division into two operating units: Supply Chain and Global Freight and Forwarding. DPWN said both these groups have annual revenues of more than $19 billion—or $13 million euros—and comprise the largest division at DPWN in terms of revenue and number of employees.

Bruce Edwards, former DPWN Global CEO since March 2007, will serve as CEO of the company’s Supply Chain unit. And Hermann Ude, whom had most recently served as CEO of DPWN Freight and has been with DPWN for 18 years, will serve as CEO of the Global Forwarding and Freight business unit. DPWN’s Logistics unit was previously overseen by Frank Appel whom was recently named DPWM Chairman and Chief Executive Officer.

DPWN said in a statement that “the decision to split Logistics into two separate units is a structural move without any immediate costs or gains associated with it, and there will be no changes to the Group’s reporting structure for the time being.”

While splitting the Logistics group up may drive efficiencies internally for DPWN, chances are it will not have a significant impact on shippers, according to Richard Armstrong, Chairman of Armstrong & Associates, Stoughton, Wis.-based supply chain consultancy.

“This is not going to make a significant difference for [shippers],” said Armstrong. “What is really does..is positioning the individual parts of the company to stand much more on their own….so they are more transparently and publicly reviewable with regards to profitability. It is not likely to impact pricing practices or change service offerings in any way. The units were awkward when they were together, and they are different enough so that they can stand alone financially.”

He added that the possibility remains the DHL may need to trim some operations if they are not profitable, based on its recent news of DPWN taking an $874 million non-cash writedown on DHL Express operations in the U.S.

DPWN is scheduled to hold an analyst meeting in Germany tomorrow, which is expected to address possibly selling or restructuring of DHL Express U.S., according to a research note written by Ed Wolfe, Bear Stearns transportation analyst. Wolfe’s report also addressed DHL’s U.S. market share and its overall U.S. performance since acquiring Airborne Express in 2003. He also raised the possibility of DHL closing approximately 85—or 20 to 25 percent—of its U.S. terminals, but he added that these closures are probably unlikely due to DHL’s pending Teamster contract ratification.

While DHL has lagged industry bellwethers FedEx and UPS for market share, it does have positives in its U.S. business, said Doug Caldwell, executive vice president of ParcelPool, an Orem, Utah-based small parcel delivery and services provider.

“There is some speculation that DPWN’s losses are just limited to its U.S. operations, however there are some bright spots in those operations that I believe are making money,” Caldwell told LM. “It is not all bad news for DHL in the U.S.”

Caldwell cited its DHL@home program as a success volume-wise, since its inception as Airborne@home in 1999. And he added that DHL does not have a direct competitor in this market.

 DHL@home is a partnership with the United States Postal Service geared for business-to-residence shippers that provides secure and cost-effective shipping services, according to DHL’s Website. In this service, shipments are picked up by DHL and delivered directly to consignees by the local post office.

Another area where DHL is doing well in the U.S., said Caldwell, is in major metropolitan areas, as evidenced by the high number of DHL trucks visible in these markets that are on par with the number of UPS and FedEx trucks in metropolitan markets. In these markets, Caldwell explained that DHL has been successful—and is probably profitable—in the financial, insurance, and real estate industries, often referred to as FIRE, which is comprised of shipments going to businesses. The delivery of packages to residential homes is another strength of DHL, noted Caldwell.