Delivering Destiny: Interview: DHL's Frank-Uwe Ungerer
The ancient Roman proverb “fortune favours the brave” certainly appears to hold true for global express delivery firm DHL Express. The company’s bold approach - from its bright red and yellow striped logo to its recent sponsorship deal with Manchester United – continues to pay dividends.
Parent company, Deutsche Post, said in May that first-quarter net profit had jumped by two thirds to US$664.43m, exceeding analysts’ expectations. While revenues generated between April and June rose 7.3 per cent to $17.71b.
In the UAE alone, DHL reveals it holds more than 40 per cent of the market share. “The Middle East is such an important market for DHL Express and ever since we first began operations in the UAE back in 1976, we have grown from strength to strength, reaching double digit growth in 2011,” says Frank-Uwe Ungerer, country manager for DHL Express UAE.
“The first half of 2012 followed this exceptional double digit growth pattern and we expect this potential to continue to grow by the end of the year, as we welcome increasing numbers of new customers, including a large number of SMEs that are now relying on DHL for their shipping needs.
“As the International Specialists, we aim to lead the logistics industry in terms of quality, efficiency and customer satisfaction to ensure that we provide unique and tailored logistics solutions for each market we operate in. As part of this, we pride ourselves in making the whole process as simple as possible for our customers: three simple steps - one call, one price and one invoice - is all it takes to ship anything from the USA to the rest of the world, and vice versa.”
DHL’s bold public image runs deeper though; it is part of the core of the firm, says Ungerer. For example, he adds: “At DHL we follow the ‘first in and last out’ philosophy. This means we pride ourselves on being the first logistics company to enter a new market and we continue our operations for as long as possible, pending service conditions, hence we are the last to leave.
“This is why, throughout the Bahrain unrest, DHL operated its hub without interruption and it was the only logistics operator to do so. We were also the only logistics company to continue operations over other conflict countries, such as Egypt and Yemen, where we continued to provide delivery services as well as customs clearance with minimal restrictions in place. DHL also continued to provide services in Libya via Benghazi to service the needs of its customers. This all goes straight to the heart of what DHL is about,” he adds.
Also embedded in its heart is a strong customer service model. Ungerer pinpoints the effort the firm puts in to promote customer loyalty as a key factor in DHL’s success. “We differentiate ourselves through service leadership to achieve customer loyalty,” he says. “In the UAE, this is measured daily through a sophisticated matrix system called Net Promoter (NPA). The system is globally recognised as both a loyalty metric and a discipline for using customer feedback to fuel profitable growth in the business.
“DHL first introduced NPA two years ago, with the aim of maximising customer loyalty and, ultimately, increasing market share. This is driven by empowering every employee with ownership of their NPA score, resulting in a personal commitment to improve customer satisfaction and implement improvement processes for failures or dissatisfaction.
“Consequently, NPA has changed the way DHL does business. For example, as a result of customer feedback, we have made it easier for customers to pay by introducing an e-billing payment process, which has achieved more than 80 per cent take-up rate to date. Empowering the customers to self-complete the required paperwork has reduced the need to print paper, which also supports GoGreen, DHL’s global environmental strategy.”
It is through these well-researched, yet simple policies, strong investments as well as brash brand advertising - a policy that Ken Allen, CEO of DHL Express, says “is really so the small to medium-sized companies see our name and when they need to import or export, they call us first” - that the firm has continued to grow strongly.
But logistics in the Middle East is not always simple as DHL would like it to be, as the firm found out when the Arab Spring unrest swept across the region last year. CEO Allen says it is DHL’s experience in crisis management which is now the key to recovery. He reveals business in Egypt and Bahrain, both of which saw widespread anti-government protests, is bouncing back.
“In our business — we are in every country in the world except for Turkmenistan — we deal with crises every day; aircraft can go technical, new regulations introduced, a strike in air traffic control or a problem with the gateway, so I think we are quite good at scenario planning and making sure we keep going in any kind of situation,” he explains.
Another difficulty to logistics businesses in the Middle East is the different set of customs laws present in each country. Ungerer, however, says he is proud of the firm’s side-by-side work with Customs securities across the Middle East, particularly in the UAE where DHL has played a role in supporting the migration to a new customs clearance programme, ‘Mirsal 2’, which was launched by Dubai Customs.
Although Allen admits he would be “pleased” with the introduction of the long-awaited GCC customs union, which would significantly ease the transport of goods. The union, which has been talked about for several years, was given a significant boost last October when the UAE’s Ministry of Finance issued a statement confirming that a “number of recommendations pertaining to the finalising of the GCC Customs Union” were made at a meeting of regional finance ministers. Plans to introduce a union would effectively establish a trade-free bloc amongst the six GCC states.
“We are big supporters of a breakdown in customs barriers,” says Allen. “We’re not saying it in order to reduce the customs duty; we’re saying it for people to trade globally with other
countries and for the world as a whole, so any kind of customs union [is helpful].
“When customs barriers came down in Europe, it was a massive boost for business; all that paperwork, all that additional overheads that you have to conform with, all of those regulations just goes away, so it makes it cheaper for the manufacturer and consumer. I don’t think it’s an issue of tariffs necessarily. I don’t think people mind paying tariffs, they just don’t want it stuck for no reason, so I think that anything that assists global trade is something that we are very supportive of,” he adds.
DHL might be supportive of growing its business organically but it isn’t likely to be making any acquisitions any time soon — unlike rival United Postal Service (UPS). The Washington-based firm announced in March that it would acquire TNT Express for 5.16bn euros, the biggest purchase in the company’s 105-year history. The deal, which is currently under regulatory review by the European Commission, will vault the firm to equal footing in Europe with Deutsche Post.
If he is concerned about the competition the merger will pose, Allen is good at hiding it. In an April interview with German newspaper Handelsblatt, he claimed he would rather “swallow razor blades than take over larger competitors” when asked if DHL had missed an opportunity in not participating in the TNT sale.
“I think that if you do an acquisition it’s a massive drain on resources. For years, you try to build up an affinity to a brand, like working for DHL, and you get everyone fired up about working for DHL and saying what a great company it is. And then you get taken over and maybe the name disappears – this has a massive impact that the consultants who are doing these spreadsheet exercises sometimes don’t take into consideration,” he explains.
“I think it’s a well-known fact that most acquisitions are not really creative and I think the bigger they are, the more complex they are. I think if you are a $2bn company taking over a $10m firm, I think that’s probably fine, but anything bigger than that is a problem,” he adds.
DHL Express, he states, will continue to invest in itself by launching additional routes, boosting investment in its IT systems and focusing on improving its customer service. In July, it opened its $175m North Asia hub at Shanghai Pudong International Airport, and announced plans to invest a further $132m on eight dedicated aircraft to service high-demand routes between Shanghai and North Asia, Europe and the US, by 2014.
The company is also currently securing new facilities at Cairo airport in Egypt to boost its capacity in the North African state, says Allen.
“Everyone looks at our business as moving a package from A to B or moving it to Dubai from Ras Al Khaimah. But it’s really about moving it from Caracas via another point to Dubai. Along the way we’ve got 20-odd tracking points, automated invoicing and quality control centres that are making sure that it gets through, so the investment in IT infrastructure, in people training [is important].
“Our annual growth figures have reached double figures except for a couple of recessions, so facilities are always out of date, so you have got this consistent capital review. And then you need a new plane: each one of those is quite a considerable investment. Our capex is around about $600m a year,” he adds.
*With Claire Valdini (arabianbusiness.com)