Everyone knows that Neil Armstrong recognized his first small step on the moon as “a giant leap for mankind.” But when Adrian Dalsey, Larry Hillblom and Robert Lynn launched DHL a few months later, did they have any idea that their “leap” into the world of air express would spur enormous global economic growth, allow medical goods to be delivered more safely, and bring education to the most remote areas of the world, just to name a few?
As the world’s leading logistics company, DHL delivers more than 1,164,000,000 (yes, billion!) parcels a year to more than 220 countries. As business grew to this volume, scope and complexity, it became increasingly difficult to understand costing and profitability. Why? Manual systems and processes were disjointed, and standard costing relied on things like very old time and motion studies. Adding to the complexity, regions, and even countries, did things differently. People couldn’t agree on cost or customer profitability numbers let alone take meaningful action on them. Enter the desire for financial transformation. No small initiative for this global shipping giant.
In a recent conversation, Graeme Aitkin, VP of Business Controlling, talked about the steps DHL Express took. He says, “The reason we rebuilt or redesigned our costing system was simply to bring it into the—well first, the 20th century—and then the 21st century to actually create live links to real operational data. If you think about what DHL does, we move a shipment from A to B, and every step along the way, that shipment gets a scan. The courier scans it when they pick it up. When it goes through any facility, it gets a scan. It goes through hubs. It goes on planes. We deliver it. We probably collect about 150 pieces of information as the shipment moves through our network, and that’s what we wanted to use for costing. But we couldn’t do it the old way.”
That’s why DHL Express created INSIGHT—an advanced costing system that captures the operational data from all those package scans and links it to revenue information such as what the customer was charged and for what kind of service. The data is then linked to cost information to produce a very accurate picture of cost, revenue, and profitability for every shipment. That kind of granular detail gives DHL Express knowledge to make decisions that will improve business outcomes in multiple areas!
DHL Express decided on a big bang approach. As Graeme explains, “The key thing was that we had the trust of the boards. The CEO believes in the project, the CFO believes in the project, and we had the money to continue. ... The original plan was that we would do this country by country and we’d build up to the whole world, but we actually did it the other way. … we did a big bang deployment, we got every country on Day 1.”
That decision has really paid off. According to Graeme, “What we've done with INSIGHT is that we've become pretty brilliant at explaining the recent past. We understand very granular costing and profitability of every shipment, and because it's at the level of the shipment, we can aggregate it up to trade lanes, countries, products, customers, and then we can start to take action on pricing, revenue management, capacity management, and so on. If we have a problem with profit, if we have a problem with cost, we can really be very specific about how we fix it.”
So, what’s possible?
1. Reducing “Failed” Deliveries
Unlike other carriers, DHL Express does not drop packages without a signature to prove delivery. That means some packages—as many as 25% in certain countries—cannot be delivered on the first try. That’s bad for the sender, bad for the recipient, and terrible for DHL who must invest more time, money, and resources with every additional attempt. INSIGHT has allowed the company to work with both shippers and recipients to increase the number of first-time deliveries.
“... We have a service called on-demand delivery. What we now do is if you have a shipment coming, we’ll send you a text message the day before or an e-mail and give you a link to a website where you can tell us what to do with it. So, if you know you won’t be at home tomorrow, you can either tell us to leave it, you can say, ‘Leave with neighbor,’ you can say, ‘Hold it,’ you can say, ‘Deliver it to my office, change the delivery address, on vacation, keep it for week’. So, we just send you a link, and if you respond, we can actually influence what we do with our shipments.” —Graeme Aitken, VP of Business Controlling.