Q&A: DHL USA CEO Hickler shares his views on shipper service, express and logistics markets

Jeff Berman, Senior Editor -- Logistics Management, 10/11/2007

PLANTATION, Fla.—When it comes to understanding the many facets of global and domestic supply chain operations, few have DHL Express CEO Hans Hickler beat. With more than two decades of experience in the transportation and logistics industries—first at the NOL Group and its APL and APL Logistics subsidiaries—prior to joining DHL Express as Executive Director of Strategy and Business Implementation in 2004—it is fair to say that Hickler has a very good handle on what it is customers want: attention and service, for starters. And as the “new kid” in the country, with DHL having made its entrance into the U.S. domestic parcel market in 2004, Hickler, who replaced John Mullen as DHL USA CEO in September 2006, is charged with making sure the company is doing everything it can to increase customer awareness of its many express and logistics offerings to ensure that it is being considered as a viable entity by shippers in an extremely crowded marketplace. Logistics Management senior editor Jeff Berman recently spoke with Hickler about the steps DHL is taking to increase market share, the current freight transportation environment and related topics, and as the commercials say “putting the service back in shipping.”

LM:  Much has been made of DHL’s commitment to improving customer service in the U.S. How are things going on that front?
HH: The important thing to note is that we are not “claiming victory.” What we are doing is putting a stake in the ground. Our industry—whether it is 3PLs, supply chains, or broader logistics—does not have a Starbucks- or Ritz-Carlton-type equivalent that says “this company really gets the customer and is all about driving a better and unique customer experience.” That is what we are targeting.

LM: How are you doing that?
HH: By coming in with the realization that customers in general are not thinking that our industry is about the customer. But we think there is a place for that, and our customers are telling us that as well. Bain & Company surveyed 360 companies that said 80 percent of their customers described their experience as “superior.” That means there is a huge mismatch there, and we want to change that in our industry. It is a bold move, but I think that is what our brand stands for, and we have to do things to stand behind that.

LM: What steps need to be taken for DHL to stand behind that belief?
HH: We believe we need to shift from a performance paradigm to one of service. This industry—rightfully so—has been one that is all about incredibly high performance levels, whether it is express, package delivery, or overnight [among others]. And it is in relation to how our processes are engineered, its relation to the IT capabilities, or just how we can deliver the product. It is a very performance-oriented discussion, and that is so ingrained in the actual fabric of the product that the differentiation lies in the service paradigm. Those are the chips needed to get into the game; we need to be highly reliable across all dimensions, but that doesn’t really define anything that would “wow” the customer. That dimension is service.

LM: How is that being executed within DHL?
HH: We have a customer service initiative overseen by a board member that is accountable for customer experience, and he drives our “first choice” initiative, which is a global, company-wide endeavor for DHL Express and the entire Deutsche Post World Net (DPWN) group…focused on becoming the first choice. In our case, it is our ambition to be voted the first choice by our customers as the most responsive express company in the U.S. That’s a dream for us. Statistically, we know which of the 82 touch points we spent two years reviewing matter most to customers, and we scorecard that and review it weekly at our meetings. And we created a customer experience index which has one number we post throughout our network each week [that focuses on] how we did in comparison to five key touch points, which we are trying to build a company culture around and are somewhat maniacal about: pickup, delivery, track and trace/shipment visibility, billing, and first-call resolution and complaint management. 

LM: How long has DHL been using this metrics-based customer experience index?
HH: We started this initiative in November 2005, and about six months after that we focused on the math and customer correlations. So, we have officially been pursuing those touch points since about the middle of 2006. Our focus with this is to find out about the two percent of shipments that did not get where they were supposed to and not our 98 percent service levels, whether it is our error, a customer change or an act of God. Two percent of shipments are not doing what they were supposed to do, and our focus is all about that. So, we are not looking at percentages anymore; we are looking at discrete incidents. Within those touch points of pickup and delivery, we know by station why we did not achieve 100 percent on our 10:30 a.m. overnight express delivery product, for example, and how many envelopes per station need to be sent to reduce it by half a percent. That is how rigorous we are about this, and we are getting away from the average of averages that percentiles deliver and [instead] talk to discrete performance of the packages for everything from pickups to missed deliveries to attempted deliveries. This is all at an incident level instead of a percentage level.

LM: What are the biggest issues you see regarding augmenting customer service?
HH: There is a map that says “I need to know what matters to the customer” and the culture part that says “how do we become a more responsive organization?” and then the organizational component of structure following strategy. If you don’t restructure around the customer, not a whole lot is going to change around how you face them. And, frankly, this is a huge opportunity for [DHL], because we are a smaller company in the United Staes. A large customer for me is not a large customer for our competition. The ability to put this kind of attention and this kind of responsiveness around customers that typically does not happen in this industry in the U.S. is a huge differentiator.

LM: How much have DHL’s service capabilities evolved since first entering the U.S. market in 2004? What are you hearing from customers?
HH: When we first came into the market, what the customer wanted from us was proof that those chips to get into the game—the reliability component—were there. Things they needed to know [and asked] were: can you deliver it?; don’t lose it; don’t damage it; can I track and trace it?; can you give me an invoice? When we first entered the U.S. market, our unaided brand awareness was 17 percent. Now we are at 50 percent, but our competitors are at 90 percent, so we have a pretty big perception curve that is natural when you are a new entrant into a market that is not fragmented and comprised of a duopoly that is doing very well. One of the ways I measure how we are getting on the map with our customers is how is our brand doing and how are we getting out there, and we are really pleased with that.  When a company breaks into a duopoly market, it has to have a rational expectation around how to do that. And as our brand becomes more known, we have to pay attention to whether the average customer knows what we do. Unlike three years ago, we are now known for being more than an international company, because we now do international, domestic air, and ground. We are now getting that recognition, and that allows us to grow with our customers.

LM: With the U.S. economy reportedly on the verge of a recession and peak season volumes in all modes falling short for the second straight year, what is your general take on the freight transportation market at the moment?
HH: It has been a weak second half in the freight transportation market; we started seeing that in July. These conditions are likely to extend into 2008, and I think we will see the typical fourth quarter seasonality growth, but it will be based on what is happening from July through October. The same thing was discussed during the fourth quarter of last year, but overall it wasn’t that bad. We may be surprised, but everything I have seen indicates we will see the seasonal growth, but it will be on a slower pace because of the weakening economy. We suffer from those market conditions to the same degree that our competitors do. We didn’t see the growth we would have liked to see with our air product, but we will see the seasonal uptick.

LM: What is the impact of that heading into 2008?
HH: That means we will really have to plan for 2008, and I am not bullish on 2008. I am cautious about it from a planning standpoint, and we have to be aware of that. I think the impact of that is very similar to what you are starting to see, for example, with customers starting to think about mode shifts. In the air freight industry, [shippers] are starting to push towards ocean, and I think if this drags out we are going to see customers—especially the larger ones with better and smarter information systems where they can do some mode-shifting—and might make decisions to go from next-day to second-day and from second-day air to ground. And the economy and fuel prices are variables of that. That said, a lot of our customers ship express, because it has to get there over night and they don’t feel like they have that choice. I think there is a fairly significant segment to where the economy continues to weaken or stays weaker over a longer period of time, and we might see customers thinking harder about modal decisions.

LM: A lot of attention has been given to the state of our country’s transportation infrastructure, what with congestion hitting maximum capacity the majority of the time and politicians and industry associations calling for a “national transportation policy” to address these congestion and infrastructure issues head-on. What do you think needs to happen to get things moving in the right direction in terms of a policy?
HH: I think the issues are the same as they have been since the west coast labor strike occurred a few years back. The west coast can very quickly become a bottleneck to transportation throughput, be that port throughput or road or rail infrastructure. We continue to talk to our customers about contingency planning and how they can hedge that. In terms of national policy, understanding what the choke points are in how freight flows [for rail and trucking infrastructure component] is critical. From a customer standpoint, there is a lot of dialogue that is happening around how they need to adjust how they move goods and locate distribution centers and also look at locations on different coasts to hedge themselves against problems. This is as much about customers looking at their supply chains as it is about legislation. 

LM: What is your take on the industry consolidation that has been occurring among all modes of transportation, 3PLs, and supply chain technology companies? Does it help shippers benefit because of service gains or hurt them because of it limits the number of available service options?
HH: If you look at DPWN, we have undergone a lot of acquisitions to build the company into what we are today as the largest air and ocean, contract logistics, and express provider. I would certainly suggest that our customers have benefitted from the product that has come from that. I think that it is a little bit different by industry. The express industry is very consolidated, and there are not a lot of players. And we come from the mindset that a global network product is critical to our customers. Some of our other competitors probably have a different view on that, but we believe that offering a global product gives our customers more capabilities and that is how we grow as a global express company. We believe we have created more expansive products by [going global] in the express industry. My opinion on the 3PL business is that you will still see niche acquisitions, but the big stuff has been done, and the forwarding business is still very fragmented. I don’t believe the customer has less choice [as a result of consolidation]. I think there is still plenty of choice to go around, and the player that adds value wins. Also, there are different maturity curves in various logistics segments like 3PL, logistics, express, and forwarding businesses and different consolidation curves for each segment going forward. On the express side, the customer wins when you put a global product together that provides them with a full suite of products.