Deutsche Post DHL unveils new five-year plan

Claiming group ‘need not reinvent ourselves; we will digitalize ourselves’, CEO highlights greater automation, improved transaction processes, applying data analytics, and ‘bundling our technological capabilities’ to ‘centrally develop key technologies like IoT and then provide them to our divisions’.

Deutsche Post DHL (DP DHL) Group today unveiled its new five-year strategy, promising to focus “even more consistently” on its core logistics businesses and spend around €2 billion on digitalization, claiming the latter was “expected to lead to yearly benefits of at least €1.5 billion by 2025”.  

The group highlighted “four trends that have been impacting logistics in recent years, which will continue to do so in the future: Globalization, E-Commerce, Digitalization and Sustainability”, saying that the company’s Strategy 2025 “is the group’s answer to these and the next logical step from the previous strategy”.

Claiming that the company does not need not reinvent itself, but instead to “digitalize ourselves”, DP DHL identified the “individual profitable core” areas of its five divisions: Post & Parcel Germany (P&P); Express; Global Forwarding, Freight (DGFF); Supply Chain; and eCommerce Solutions. One of the main drivers for growth within each core will continue to be e-commerce, the company said, adding: “The divisions benefit from dynamic growth opportunities for their solutions along the entire logistics value chain, from inbound logistics to fulfilment, delivery and returns.”

Group CEO Frank Appel said: “We are the only company that is able to offer single elements as well as the entire e-commerce supply chain on a global scale. This is our key differentiator.”

In addition to focusing on the profitable core, the group said it “sees systematic digitalization throughout its businesses as a lever for achieving significant progress. The pace of the digital transformation that has already been triggered within the group will be stepped up. Until 2025, the Group will be spending roughly €2 billion on initiatives which are designed to enhance customer and employee experience as well as improve operational excellence.”

It said the group will be “comprehensively modernizing its IT systems, integrating new technologies, offering its employees targeted advanced training to enable them to use these technologies and, thus, steadily improving its services, processes and standards between now and 2025”.

It continued: “Efficiency will be improved by greater automation and improved transaction processes, for example through warehouse automation and robotics programs. Data Analytics will be widely applied – for example, to foster routing optimization through advanced algorithms, operational volume prediction and with this optimized resource planning.”

Appel added: “Moving forward, we will bundle our technological capabilities as a group in global Centres of Excellence. Here we will centrally develop key technologies like Internet of Things (IoT), and then provide them to our divisions. This way we can leverage the strength of our group to push forward our digitalization.”

The group described the profitable core of Global Forwarding, Freight (DGFF) as international transportation via Air Freight, Ocean Freight and Road Freight, including customs clearance and related value-added services such as warehousing and cargo insurance. DHL Supply Chain’s profitable core is warehousing and transportation, bundled with products around Service Logistics and Packaging.

DHL eCommerce Solutions’ profitable core is centred around domestic last mile parcel delivery in selected countries outside of Germany (Europe, US and selected Asian emerging markets) and non-TDI cross-border services primarily to, from and within Europe. And the profitable core of DHL Express is described as the Time Definite International (TDI) service for premium, cross-border delivery of time-critical parcels and documents. And finally, the profitable core of Post & Parcel Germany (P&P) is transporting, sorting and delivering documents and goods in Germany plus the export business from Germany.

The company said that with its ‘Strategy 2025 – Delivering excellence in a digital world’ five-year plan, the group was “laying the foundation to continue its successful growth trajectory beyond the horizon defined by its previous ‘Strategy 2020”, adding: “The company will be focusing even more consistently on harnessing the sustained potential for profitable long-term growth contained in its core logistics businesses.

“Furthermore, it will be stepping up the digital transformation of the Group that is already underway in all business divisions. Until 2025, the group will be spending around €2 billion on digitalization. The digitalization investment is expected to lead to yearly run rate benefits of at least €1.5 billion by 2025.”

Appel commented: “Deutsche Post DHL Group has never been in better shape. We are convinced that future growth will come from a consistent focus on our profitable core logistics businesses – and digitalization will become the greatest lever.

“We need not reinvent ourselves. We will digitalize ourselves.”

Reviewing the current ‘Strategy 2020’ plan, the group said it “has achieved leading positions in each market. It is therefore very well positioned for future growth. Beyond that, the group has gained valuable learnings to perform even better in the next strategy cycle.”

Appel commented: “Experience shows that we are particularly successful whenever we use our resources and innovative capabilities to drive forward our profitable core logistics business. For this reason, we have gradually disengaged non-core activities over the last few years and have targeted investment into boosting the profitable long-term growth of our core businesses, such as the quality of our networks and the modernization of our intercontinental fleet for Express.”

Over the past years, he said the company had already captured significant potential in terms of revenue and margin improvement, for example in its Express and Supply Chain division.

“Like many other industries, the logistics sector is undergoing rapid change, while geopolitical factors such as mounting trade disputes are contributing to heightened uncertainty,” the group noted. “With its balanced portfolio, the group is already very well positioned to achieve sustained profitable growth and to shape the future of logistics. With 550,000 well-trained and motivated employees and operations in more than 220 countries and territories around the world, it is the world’s largest and most global logistics provider.

“The group’s five divisions address the entire logistics value chain and the Group holds leading market positions in all its business activities. This is what makes Deutsche Post DHL Group more robust and resilient than others.”

By concentrating on its core logistics business and stepping up the pace of its digital transformation, Deutsche Post DHL Group said it “wants to appreciably enhance its overall efficiency over the long term”.

The group has set the following specific financial targets for the forecast period through 2022: Operating profit EBIT is expected to increase to at least €5.3 billion. That compares with €3.2 in 2018, expected to increase to €3.9 to 4.3 billion in the current financial year

The group’s capex is planned to be between €8.5 to 9.5 billion (cumulative) in the period from 2020 to 2022.

Source: Lloyd’s