DHL’s supply chain division is boosting revenue with cross-sector strategies and lead logistics services in the automotive industry. Marcus Williams looks at the company’s development in Europe.

DHL Supply Chain is the world’s largest contract logistics company, and one of the more advanced in providing lead logistics provider (LLP) services, particularly for the automotive sector. In Europe, especially, carmakers including BMW, Jaguar Land Rover and, perhaps most extensively, Ford have relied on DHL to design and procure large parts of their truckload networks.

Despite the current difficulties in the Euopean automotive sector, DHL Supply Chain has credited a large share of its growth in 2012 – revenues were up nearly 10% in the first three quarters of the year to €10.6 billion ($13.76 billion) – to ‘organic growth’ in automotive.

Part of that growth has been down to the company’s latest innovations in global delivery services, more cross-sector amalgamation and the development of its LLP services, which feed into both.

Europe offers some recent examples of new delivery services, including a new ‘end-of-runway’ facility at Leipzig/ Halle airport in Germany that includes an ‘Integrated Solutions Center’, which the company has geared toward spare parts handling across a range of industries. The company has confirmed that its first customer will be from the automotive sector.

While a confidentiality agreement prevents DHL from discussing exactly which company that is at the moment,Holger Tillmanns, vice-president of business development for automotive, engineering and manufacturing for Europe, Middle East and Africa (EMEA), confirms that it will benefit from the warehousing and special services provided by the centre, including late configuration, customisation and repair and returns services.

The 15,000-square-metre centre, which complements the DHL Air Hub at Leipzig, caters for the warehousing and value-added services that the automotive industry relies on and is central to DHL’s European Express network. This means customers can benefit from time-definite delivery services, with orders received by 23:00 picked, packed and processed into the express network for delivery across Europe by 9:00 the next morning.

Another good example of where delivery services have advanced is with the company’s ‘Door-to-More’ multimodal service into Europe from Asia, which combines intercontinental air freight with its European ground distribution network. For the automotive industry, Tillmanns says manufacturers can cut end-to-end delivery time and supply chain costs because the service bypasses regional warehouses and provides direct delivery to customers in more than 50 countries in the EMEA region.

Cross-sector reorganisation
DHL has also been striving to link its services in automotive to other sectors. Through a reorganisation at DHL Supply Chain in the UK, which took place at the beginning of last year, automotive has been brought together with the industrial sector.

“In 2012, we have seen great benefit from taking LLP/lean manufacturing knowledge into industrial and vice versa,” says Paul Dyer, managing director of automotive, industrial and LLP. “There are some very interesting MRO [maintain, repair, operate] solutions, which are well developed within the infrastructure and consumer manufacturing space, that could improve UK automotive manufacturing efficiency. This w ill be a major focus in 2013.” (See ‘In Profile’ on p62.)

DHL says it is developing opportunities where it believes its expertise in automotive can assist supply chains in the industrial sector. “It’s not just about the inbound operations where we believe we can uncover value,” add s Tillmanns . “Midway through [last year] we began transporting products for a leading utilities provider on our automotive collaborative platform, reducing cost and environmental impact.”

Tillmanns is referring to how the company delivered Smart Meters for British Gas through its overnight spare parts transport network for the automotive aftermarket.

“Wherever possible, we are trying to leverage our operations to bring sustainable benefits to our customers,” said Tillmanns.

Inbound efficiency
This British Gas meter example is part of a general move across DHL’s activity in Europe that involves inbound and shared-user models for warehousing and distribution in the aftermarket.

According to Tillmanns, DHL has been able to make its inbound networks more efficient for automotive customers while collecting from suppliers all over Europe, including higher density ‘milk runs’, more flexible cross-dock capacities and higher vehicle utilisation during line hauls.

The company spent 2012 adding volumes to the networks in Spain, the Czech Republic and Turkey, according to Tillmanns. It has also strengthened its “4PL pipeline” in automotive.

“More and more companies with vast supply chains and complex structures are seeing benefits in reorganising their inbound supply chains,” says Tillmanns.

A good example of this outsourcing trend is to be found in a five-year global contract DHL signed with construction-equipment manufacturer JCB in 2011 to provide logistics support for global manufacturing inbound supply and aftermarket.

DHL Supply Chain implemented control towers within the UK, India, Hong Kong and the US within the first 18 months of the contract with JCB. The provider has introduced logistics strategies that include ex-works conversion, transport procurement, carrier management and freight bill audit and payment. Over that period the company has delivered a number of savings for JCB, including 35% savings in expedited transport, 16% in standard transport, 11% in warehousing and 25% of material spend (from the old ‘delivery duty unpaid’ to ex-works incoterms).

Radical innovation for the future
Tillmanns says that the next step for automotive could be in combining inbound and aftermarket collection services. “The automotive industry can use the deployment of shared-user models on the inbound collection service as a counter piece to the bundling effects on the secondary distribution side within the consumer industry,” h e s ays.

Looking much further ahead, Tillmanns says the industry could also look toward the high-tech sector. DHL is testing a range of new ideas, including 3D printing, which removes ‘collection and distribution’ in the traditional sense altogether.

“DHL is currently analysing the feasibility of deploying 3D technology to create simple parts with automotive customers in a test phase,” says Tillmanns. “While this practice will never be able to fully replace all ‘real’ parts, it could certainly change supply chain and demand planning in the aftermarket area of the automotive industry, and is already being utilised by bodies such as the US military when time is critical.”

Restructuring at DHL Supply Chain - an interview with Paul Dyer
Paul Dyer is a 20-year veteran of the logistics industry. During his time with DHL, he has been responsible for inbound-to-manufacturing, in-plant, aftermarket and finished vehicle programmes in automotive. As part of a restructuring move at DHL Supply Chain’s UK business at the beginning of 2012, which saw the company combine its automotive and industrial sectors and create a multi-sector, transport-only business unit, he took on a new role combining industrial sectors across the EMEA region.

Marcus Williams: How has the restructuring gone and has it changed your day-to-day responsibilities?

Paul Dyer: It has gone well. Day-to-day responsibilities have changed through having a much broader spread of industry verticals and customers to manage. The challenge has come through juggling priorities as the automotive inbound to manufacturing sector in the UK has had a very dynamic year, with growth across all customers. This has meant major change management all through the spring and summer.

MW: Has the inclusion of industrial raised any new issues for you?

PD: The challenges are diverse; within the automotive sector, manufacturing has been strong all year, which has led to almost 2,000 new colleagues joining our business and DHL launching four new offsite manufacturing facilities. The aftermarket sector has been flat with the focus on improving collaboration and reducing our cost base within the industry platforms created in the tyres and spare parts sectors.

Our industrial business has experienced similar challenges to aftermarket, with customers primarily focused on the domestic market suffering static volumes. This has led us to develop some cross-industry solutions, the best example being delivering British Gas’s Smart Meters through the aftermarket spare parts ‘through- the-night’ transportation network. Other exciting developments have been taking the proven automotive solution sets of lean inbound to manufacturing and LLP supply chain management into similar industries such as aerospace, defence and general manufacturing sectors.

MW: Has the inclusion of the industrial sector with automotive proven to be a good strategy for DHL?

PD: The logic of integrating our automotive and industrial sectors remains a sound strategy. I would have liked faster progress in some areas but one has to recognise the massive change and growth programme that has been delivered in 2012 within the automotive inbound area. The best examples are still around transferring best practice, solutions and knowledge between relatively similar industry sectors. In 2012, we have seen great benefit from taking LLP/ lean manufacturing knowledge into industrial and vice versa - there are some very interesting MRO solutions [maintain, repair, operate] which are well developed within the infrastructure and consumer manufacturing space that could improve UK automotive manufacturing efficiency.

MW: Do you think the wider reorganisation at DHL Supply Chain has improved business?

PD: We are a complex organisation and are trying really hard to simplify our customer relationships. Many of our automotive customers are partners in multiple geographies and we’re trying hard to join up these operations by sharing best practice, KPI consistency and ensuring support in key emerging markets. This is a journey but we are making definite progress.

MW: Ta k i ng over responsibility for the EMEA region must have been a challenge given the various political and economic problems, not least in the car industry?

PD: It’s a mixed picture across EMEA with some countries at full capacity such as the UK, Turkey, Russia, the Czech Republic and Slovakia, while others, like Spain, France and Portugal, are facing reduced working. We have also had to contend with difficult industrial relations in some places like South Africa. Overall, our focus remains on meeting customer requirements, be this around supporting growth or lowering our costs in line with reduced demand.

MW: If you found yourself working outside the sector where do you think you would be?

PD: I have been in logistics for 22 years and would like to think I have gained broad general management skills that would assist me in most sectors. I’ve always thought teaching would be a very satisfying profession, but my children have told me that I’d be useless at this through lack of patience.

MW: What are your main hobbies outside of the job?

PD: Sport – rugby, golf, football – travelling, walking, trying to keep the wife and children happy!