Q&A: DHL Express U.S. CEO Ian Clough

Earlier this month, global express delivery and logistics services provider DHL announced it invested $21 million to expand and modernize its Hub and Aviation facility at the Miami International Airport. Company officials said that this new 140,000 square-foot facility will function as a DHL shipment processing hub for global shipments from countries throughout the world to Latin America and the Caribbean and the Caribbean for shipments from those regions to the more than 200 countries and territories DHL serves.

The company also announced that it inked a new Global Buyer Initiative (GBI), which is part of a series of partnership programs of the U.S. Government’s National Export Initiative—a multi-year effort to create more U.S. jobs by increasing the number of companies exporting and expanding the amount of markets for U.S. companies that currently export their products, in Mexico, Colombia, Panama and Canada. This agreement complements the existing New Market Exporter Initiative partnership between DHL and the U.S. Department of Commerce’s International Trade Administration (ITA), according to DHL.

LM Group News Editor Jeff Berman recently spoke with Ian Clough, CEO of DHL Express, U.S., about these developments. A transcript of their conversation is below.
 
Logistics Management (LM)-How long has the expansion of this facility been planned/in the works? What specifically drove the need for it?
Ian Clough-We have been in for Miami for a long time, going back the last 25-to-30 years and have had many different facilities there. It was around 12 months ago when we started discussing and looking into upgrading the facility, with work beginning at the end of the first quarter of this year.

LM-What are the biggest benefits of this facility expansion for DHL customers i.e. shippers?
Clough-First and foremost it is capacity. We have seen significant growth—both inbound and outbound—from Latin America and the Caribbean—into the U.S. and points north. Second is enhanced reliability as it allows us to increase ability to meet morning delivery times and early cut offs. And we are also increasing our automation capabilities, which will improve delivery flow so we can be more effective in terms of providing information to customers in regards to where their shipments are and also integrating with key authorities like Customs in the U.S. or in other countries, which provide manifest data in advance and we can be even better at clearing customs data in Latin America.

LM-How many packages will this facility process when the expansion is complete?
Clough-This entire facility was set up for growth. We are currently processing around 31,000 packages per day, with 16 major daily flights—eight in and eight out—and we connect to a lot of other commercial outlets. The sorting capacity of the building will more than double, increasing by 123 percent and there is significant space to grow.  The facility upgrades cost $21 million and serves both our express and aviation sides. We also operate some charter business out of it, which allows us to leverage our aviation assets. The aviation and express facilities are now combined and sit next to each other. This investment brings real positives for both sides.

LM-What are some of the other benefits?
Clough-We have increased the number of dock doors from 11 to 27 and that allows for better handling space and storage space like dry perishables and things along those lines.

LM-How many employees work out of the Miami facilty?
Clough-We have about 400 people working there out of the airport facility.

LM-In regards to LA and Carib. Market has that always been an active market?
Clough-DHL has been active there for nearly 30 years and it has always been an area where we are seeing some significant growth, particularly into Latin America. And we expect to see increased activity via the Panama Canal with its close proximity to Miami. Over the last few years in those markets we have seen double digit growth rates both inbound and outbound for express traffic for customers in the lifesciences arena like Boston Scientific and Apple Repair which is a major return and repair vendor for Apple products based out of Miami. There is also activity in the housing sector and consumer related ones, which are bringing us a lot of business out of Miami.

LM-In regards to the GBI, what drove the need for it?
Clough-We started working with the Department of Commerce earlier this year in an effort to drive U.S.-based exports with American companies. This is based on leveraging Commerce’s knowledge regarding trade in many different parts of the world and paring it with DHL’s knowledge of shipping and clearance and customs and all the other related complexities regarding exports for SMB Exporting. The GBI is looking at this from the perspective of potential buyers in Latin America or the Caribbean and aimed at helping out potential buyers and potential suppliers in the U.S. to drive exports. 

LM-Let’s shift gears a bit. A little more than four years ago, DHL made the decision to cease domestic operations in the U.S. How are things going for the company in the U.S. now that it focuses exclusively on international-based shipments in the U.S.?
Clough-Since that decision was made in 2008 and took effect in 2009, things have gone exceptionally well for DHL in the U.S. and has exceeded everyone’s expectations. By the fourth quarter of 2009, we were fully running on the international platform operating our international business. This is really where our heritage is and what DHL is really known for. We built the platform around our international expertise as we believe nobody knows the world in the way that we do and that is why international is the pure focus of our business. It is also much more complicated than shipping U.S. domestic parcels. We have targeted and specialized services to help customers track their freight and have a certified international specialists program for every single employee in the U.S. and globally.

LM-What about the service side?
Clough-We have really focused on driving international service and continue to set records for our overall service levels, which are drastically improved. The U.S. restructure led to what I believe is our market-leading international service, which leverages our strong international network. The combination of those things has really translated into great growth, and this is the third year we have had double-digit growth. This type of growth has allowed us to make more investments like the one in Miami and Latin America, as well as other expansion efforts such as in Australia. These expansion efforts are based on customer needs. We now have a twice a week flight from CVG to Sydney that stops off in Hawaii to refuel, which has dramatically improved our service in Australia. Things like this show that we are using our expertise and are 100 percent focused on our international business. It is always tempting to look at the potential huge revenue routes that are sitting there in the domestic world, but we are focusing on the areas where we have the most experience and expertise, which is international.

LM-How do you view the U.S. market in general?
Clough-Like companies in other industries, we have been challenged by a tough economy. When I talk to customers, the number of customers who have been really not focused on the international market are now seeing opportunities to grow their international business. This is one of the areas where we have started to see positive growth. There, of course, is also a growing trend towards e-commerce purchases, too, and we have seen that on the international B2C side than in the U.S., where consumers and major businesses are concerned about their carbon footprint and sustainability. Those sorts of trends are happening, but I think we see more of it in Europe.

LM-Is e-commerce gaining traction in your business?
Clough-Yes, it really seems to be am emerging growth area. It is an area where we can leverage our international expertise as a number of the customers we deal with come from a U.S. domestic sort of background and are growing into other markets. We are expecting to see continued growth there. But there are also barriers, too, like sluggish consumer demand for certain products and stalled economies in certain areas. We expect to see e-commerce growth but have relatively low market share at about 10-to-15 percent.

LM-What is the current pricing environment in your business like at the moment?
Clough-The U.S. market is very competitive, especially for companies needing both domestic and international services. In terms of pricing, the market is pretty mature. It is driven by our growth projections and growth assumptions. We will aggressively price business with high profitability potential. There is nothing really ‘crazy’ going on that is impacting pricing in the market at the moment.