The number 1 express carrier
A DHL case study

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Page 2: A gap in the market

Dhl 2 Image 2There was therefore a distinct gap in the market for a fast, reliable and cost effective method of distribution and it was the recognition of this fact which lay behind the foundation of DHL by Dalsey, Hillblom and Lynn in 1969 in California. Initially express distribution companies, like DHL, focused primarily on emergency document delivery. However, with the maturing market, this rapidly developed to include consignments of all sizes. Far from being just a quick fix solution in a crisis, express distribution was to become an integral part of a company’s planned distribution strategy.

During the 1970s, banks and financial institutions, by virtue of the nature of their business, were the most prolific users of express services. Since this time however, demand has expanded to all industry sectors, including manufacturing and service industries, in line with the development of world trade and multinational corporations.

The consolidation of the market

By the 1980s it had become the norm for companies in some industries to use air-express services, with larger and larger companies investing heavily in their logistics strategies. In 1982, the total world-wide air express market was worth only $0.5 billion; by theend of the decade it had risen in size to $4.5 billion.

Increased demand encouraged air express companies to supplement use of existing commercial flights with their own fleet of aircraft and to set up their own sorting depots in order to be in a position to offer greater flexibility to their customer. In the UK, for example, DHL International (UK) Ltd took the lead in 1980 by creating a hub at Heathrow Airport, followed by a second hub at East Midlands Airport in 1989, which today has become the third largest air cargo airport after Heathrow and Stanstead.

New technology also became an important force driving change and enabling greater speed and efficiency. In 1981, DHL became fully computerised with considerable investment taking place in automated equipment and processes throughout the organisation. This in turn heralded the advent of total logistics solutions, with customers looking to express distribution companies as partners to assist them in reducing costs and overheads by reducing stock holding and warehousing.

It is in the last ten years that we have seen the most dramatic changes in the express distribution industry. A number of factors have driven these changes:

  • Changing Expectations. The globalisation of trade and new approaches to the manufacturing process have shortened consumer lead time expectations. In Europe, the relaxation of trade barriers and emergence of developing markets and economies such as Eastern Europe, have increased the demand for a high standard of reliable service.
  • A Fresh Perspective on Distribution. Distribution is now seen as a powerful business tool with direct implications to the bottom line. As a result, efficiency in this area plays a vital role in maintaining competitive edge. By being able to offer far more than just an express delivery service, companies such as DHL, have become an integral part of their client’s distribution strategy, servicing the needs of the world’s largest multinationals through inventory management, mailroom management services and direct distribution services.
  • Technological Advancement. Technology began to have a major impact on added reliability in the 1980s, causing large scale investment on the part of the leading distribution companies. Computerisation allowed organisations such as DHL to offer completely integrated solutions, so that multinational organisations could rely on just one air express carrier to fulfil all of their requirements. Technology simplified administration, reduced the margin for error and made it easier to cut down on costs.
  • Changing shipping trends. Air express in the UK is growing in popularity at the expense of air freight. There is also a growth in heavier parcel weights in all markets.
  • Growing emphasis on exports. In the UK in particular, it is argued that increasing exports has helped to move the country out of recession. Increased export levels have in turn led to a greater demand for express services.
  • Environmental pressures The growing importance of environmental and social responsibility has affected all businesses regardless of industry or size and has put pressure on all express distribution companies to improve their distribution methods to ensure minimum impact to the surrounding environment.

DHL | The number 1 express carrier