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DHL case

90% of all Europe shipment and 10 % of all shipment worldwide


Good location at heart of Europe
Award highest Germany pm award within estimated budget
300euro million investment
Natural resources and convincing people to accept the flight operation and
company focus on the other hand
Building excellent facility and sustainability issues
This could operate 24 hours a day and seven day per week and 60 flight per day
and 1500 ton
Global leader in express shipping overland transport and air freight as well ocean
freight and contract logistics
April 2011 cove 220 countries and territories in 120000 destination many award
Express sector is one of the major driver of global trade to capitalize on customer
requirement domestic and international anywhere around the world
DHL was successfully capitalize on it knowing the customer and solving the problem
expanding business and crating win-win for all stakeholder
Leipzig/halee was based on this formula
While deciding for plant optimally locating long term future
Economic growth of the region and envoeirmental steps
Special place for future of company, driving force in the region win-win situation

Company background
1970 law student university of California little money courier service
Between San Francisco and Los Angeles by personally picking from source and
dropping at destination
After study own business
Fly bill to San Francisco to Honolulu
Because flying the documents ahead of the freight would save a lot of time, with the
processing of the documents taking place even before the vessel arrival.
Hillblom, along with two friends Adrian Dalsey and Robert Lynn, started the
company in 1969
Under the name DHL (taking the initials of their names) using a portion of his
student loans
They bought a 1969 Plymouth Duster for driving around San Francisco to personally
pick up the
Documents, then sprinting to the airport for booking flights using the corporate
credit card.
New employee Max Kroll and Blanche Kroll, whos dwelling in Hawaii was frequently
used as a makeshift flop house11 for their couriers. In the 1970s, the company
expanded to East Asian countries like the Philippines, Japan, Hong Kong, Singapore,
and also to Australia.
Success of us FedEx corp, DHL started overnight marketing express.
In 1983, DHL opened a major distribution hub in Cincinnati
.
In 1985, a European hub opened in Brussels.
Within three years, DHL managed to almost double its customer base by starting
operations in close to twenty new African nations including Chad, Mozambique, and
Morocco. During this period, it also started its operations in China and the Middle
East.
By 1990, the company had expanded its operations to several Baltic States like
Latvia, Estonia, and Ukraine. In 1996, DHL opened its Asia-Pacific hub in Manila, the
Philippines.
Ownership
In 1998, Deutsche Post AG became a shareholder of DHL International with the
vision of
Aligning its European ground-based services with DHL.
Deutsche Post became the majority shareholder by the end of 2000 by acquiring
51% of DHL shares.

In 2002, the remaining 49% was also acquired to complete the acquisition.
Deutsche Post absorbed DHL into its Express division and started using the DHL
brand name in its other divisions, business units, and subsidiaries.
DHL Express shared its renowned DHL brand name with many other Deutsche Post
Business units notably DHL Global Forwarding, DHL Freight, DHL Global Mail, and
DHL Supply
Chain. The company also formed DHL Airways, Inc. for its operations inside the US.
In 2003,
DHL Airways was renamed as ASTAR Air Cargo.

Competitor
The majority of DHL Expresss business operated under the umbrella of DHL
International
GmbH. For DHL, the most notable competitors were FedEx, United Parcel Service,
Inc.15 (UPS),
TNT NV16 (TNT), and also national post carriers like the Royal Mail17 and the United
States Postal
Service18.
Partnership
However, DHL enjoyed a minor partnership with the USPS, which allowed it to use
the USPS
Network for delivering small packages to the recipients. DHL also acted as the sole
provider for
USPS mail operations in Iraq and Afghanistan.
Besides, it expanded its business to Myanmar, Cuba, and North Korea.
Being a German-owned company, DHL was not affected by the embargos or
sanctions imposed by the US.
However, as the headquarters of DHL was situated in Germany, it was considered to
be a foreign company in the US. Hence the US Government did not allow it to
operate inside the country using domestic flights.
In 2010, DHL had its operations in around 220 countries and territories via over
32,300 service points.
Its customer base was close to 2.8 million and customers were served by over
62,000 Vehicles owned by DHL.
Its six major operational hubs19 were located at Hong Kong, Leipzig, Bahrain,
Lagos, Miami, Cincinnati/ Northern Kentucky Airport.

Developing the hub at Leipzig


In 2005, Deutsche Post approved the decision to construct a new operating hub in
central Europe
DHL could not further expand its night-flight operations at the existing DHL hub in
Brussels,

New hub in 2004 its previous Brussels base when night-time flights were banned.
Two options -- Vatry and Leipzig airport
Fairly equal option both
Leipzig regional government offering an attractive package of grants, incentives,
and fast approvals, DHL opted for the latter.22

Acquisition
The company bought approximately two million square meters of land near the
village of
Schkeuditz, located to the west of Leipzig in Germany.
Construction work commenced in February 2006 under the supervision of the
project manager Michael Reinbooth
In mid-2007, the hubs operative headquarters as well as the aircraft hangar and
the office tract
Neighboring the warehouse were transferred to DHL.
By that time, the 3600 meter long southern runway construction was also finished.
The hubs operating launch was originally planned for fall 2008, but due to some
technical difficulties, it was delayed till spring 2008.
In May 2008, Appel officially announced the opening of the hub for business The
new hub became one of three important centers in DHLs global express network,
the others being Hong Kong and the US.24

Four phase transition


1. Phase
In summer 2007, when the hubs core structural and technical elements were
completed, the basic test operations were done at the Leipzig hub.
During this phase, the testing of the technical equipments was done to reduce the
chances of faults and other start-up problems. Also the normal operations with
70,000 test parcels were tested during this phase.
2. Phase
After successful completion of all the tests in three months, trials of the distribution
operations
Were initiated in fall 2007.
For testing the distribution operations, DHL increased flight operations in stages.

In late October 2007, it transferred about 20 aircraft to its base from the
Cologne/Bonn
Airport. At the end of March 2008, 30 more aircraft were shifted to the Leipzig/Halle
base from
Brussels.
As of January 2009, more than 60 daily flights26 were able to fly DHL's intra-Europe
and
Intercontinental express air routes from Leipzig, covering around 100
destinations.27
The increase in the number of incoming and outgoing flights dramatically increased
the amount of
Shipments handled.
By September 2008, the volume of express items transshipped had risen to about
1,500 tons per night from a mere 500 tons per night in early 2008
By 2012, DHL expected this figure to climb up to 2,000 tons.

Sorting, hiring, training


The company had to undertake the challenges involving the installation of the
automated sorting
Facility as well as the everyday planning and coordination between the individual
operational levels Processes. It also had to employ and train a huge number of new
personnel.
By the end of June 2010, around 2,500 new employees, qualified for their tasks,
were operating at the hub.

Location advantages
Located in the heart of Europe and equipped with outstanding transport facilities,
the Leipzig hub
Offered the ideal logistics launch pad for companies operating internationally.
The location had innumerable direct connections to the emerging markets in
Eastern Europe and
Asia.
International express business had been growing steadily
Leipzig/Halle site had developed the potential to become a crucial junction for the
express and logistics specialists

At the same time, DHL considered an additional starting and landing capacity in
Central Europe to be necessary, as the companys existing European hub in Brussels
had reached its threshold limit.
Given this scenario, the establishment of a new hub at Leipzig/Halle would not only
increase the
Flight capacity of DHL30, but would also remove the restrictions on night time
flights.

Other advantages
Long term Contract

Not only opted for a site equipped with the necessary settings.
To effectively control the ever-escalating amounts of shipments and the rising
competition in the
Global express business, but also, more importantly in 2005, DHL signed the
contract with the Leipzig/Halle Airport and Mitteldeutscher Flughafen AG
For obtaining all the rights and obligations of the location till 2035.
ECONOMIC ATTRACTIVENESS OF THE REGION
Experts predicted that the European air express business would grow at around 8%
per annum.
The DHL aviation hub had adequate capacity to handle the amplified volume of
shipments due to the growth of the industry. This capacity acted as a logistics
calling card, and enhanced the regions overall economic attractiveness.
Different types of companies from growth sectors like IT and telecommunications to
the manufacturing sectors -- automotive, chemical, and pharmaceutical industries
were expected to benefit from the presence of a high-performance air freight hub in
the vicinity of their premises.
The time-critical goods and documents produced by those companies
Often thrived on late acceptance of outgoing shipments as well as international
delivery within a
Short transit time, which would be operationalized by 24-hour functioning of the hub
with takeoffs
And landings every day throughout the year.
HUB AND SPOKES NETWORK
DHL offered its express services to approximately 220 countries across the globe
using an
Extensive transport network.
Nevertheless, to connect all the airports in all the countries directly would not only
involve a huge number of flights,
But would also create capacity utilization Problems as the volume of goods for
transport would vary for different routes.

So DHL pooled the Items at certain nodes, re-sorted and consolidated them into
reasonable loading units, and transported them onward to their final destinations.
In this mechanism, known as the hub and Spoke mechanism, the central nodes
could be compared to the hub of a bicycle wheel while the Attached spokes stood
for the incoming and outgoing freights.
Leipzig/Halle, located in the heart of Europe, served as the main hub connecting the
complete network. In a nutshell, flights from across the globe congregated at
Leipzig/Halle with their shipments for delivery across Europe and shipments from
across Europe congregated here for delivery across the globe. Around 50 airports
each in Europe, Asia, and the US could be directly connected to the new hub via
regular scheduled flights.

TRANSPORT FACILITIES
The hub at the Leipzig/Halle airport was exceptionally well connected with different
regional and
Intercontinental locations.
The growth markets in Central and Eastern Europe were easily reachable from the
site by air, road, or rail.
Economic and eco-friendly connectivity with the closer destinations was achieved
by combining these three key modes of transport, making Leipzig/Halle a trimodal
hub.
Moreover, DHL expected the railroad connectivity of the location to be enhanced
further by the opening up of a new freight train station at Leipzig/Halle.
Also, from winter 2008/2009, DHL started using Deutsche Bahn freight trains for
transporting cargo between Leipzig/Halle and the Frankfurt airport. These trains
connected the Leipzig/Halle hub to one of the most significant airfreight sites in
Germany.

EMPHASIS ON TECHNOLOGY
DYNAMIC ROUTE PLANNING: TELEMATICS SOFTWARE

Dynamic route planning was commonly regarded as complex problems in which the
delivery
Situation evolved intensely.
Adjustments in route planning might become necessary due to new or abandoned
deliveries or modified environmental circumstances.
DHL used road-transport telematics to help it to optimize its transportation system.
In Germany alone, about 14 billion liters of fuel each year were unnecessarily
consumed due to highway traffic problems.
Thus, this problem not only damaged the economy by wasting work time, but it also
affected the
Environment heavily.

The DHL Innovation Center, helped by different business and scientific


communities, tried to
Develop software which could significantly improve the scheduling of company
vehicles.
DHL started using dynamic scheduling supported by the latest data for traffic to
optimize routes and stops for the vehicles.
For route planning, DHL used satellite-based navigation systems. The company
planned to improve the system by including and analyzing more information
concerning terms of traffic, traffic lights, and construction sites.
Also, as the vehicles in Europe were right hand-drives, left-hand turns were
expensive in terms of both time and fuel. Hence, while route planning, DHL tried to
avoid left-hand turns as much as possible.
Another particular potency of this dynamic telematics software was its capability
to organize probable meetings of delivery drivers.
An omnipresent real time observing system was used to determine the distances
between two vehicles.
If a path could be optimized by creating a meeting between two drivers at which
they could exchange parcels, the routes would be merged. This would not only save
fuel and time but would also significantly reduce the emission of greenhouse gases.
The system also used a feedback network which helped in working out the optimum
routes when the database was increasing continuously.
DHL planned to launch the first prototype at the end of 2011

Sorting facility
Every sortable item arriving at the Leipzig/Halle hub was arranged by the
warehouses fully
Automated sorting facility which reduced sorting errors to the minimum.
The capacity of this sorting facility was approximately 100,000 parcels and
documents per hour. As of July 2010, around 150,000 items were re-sorted and
transshipped within a couple of hours each night.
Average handling time was less than 120 minutes, with the offload to reload process
taking just seven minutes.
The system was primarily governed by four sorting belts with a total length of 6.5
Kilometers running together through the distribution center.
The sorting system from Vanderlande Industries was installed at a cost of 70
million and was said to be the largest single investment in the hub.

The basic operations of the sorting facility were:


1. Apron to the Hub
After an incoming flight landed at the Leipzig/Halle airport, the approximately
150,000 parcels
Handled at the hub each night started their movement through several stations. A
mobile hoisting
Platform was used to lift the containers weighing about seven tons out of the
aircraft and to place
Them onto small trailers. The employees then drove these trailers to the sorting
center and shoved the containers over the steel floors imbedded with rollers to the
Offload Section on the ground floor.
In this area, hazardous goods and the bulky items that could not be inserted into
the sorting system were automatically sorted and separated from the rest. The
sorted items were then carried by a forklift to the adjacent Reload Area for onward
transport.
2. Sorting Section
The sorted items were then carried forward to the Reload Section using conveyor
belts. First they were scanned using one of eight six-sided scanners and
automatically divided into parcels and documents and then they were placed on
four main conveyor belts to be transported to the upper floor of the warehouse.
The initial scanning procedure also included the programming of the route which
every individual item had to follow inside the labyrinth of conveyors in the
distribution center. This programming was such that the items were guided through
the shortest path to their destination containers.
Typically, the maximum time taken for this process was seven minutes per item.
The fully automated sorting process had a few remarkable technical features
including a cascade-like arrangement of conveyor belts and small parking
schemes which prevented the parcels from knocking into one another.
This procedure protected against damages. Also, DHL had a pull-out conveyor belt
extension manufactured and patented especially for the hub. To avoid lifting
parcels which could weigh up to 31 kilograms, employees could use the red
telescoping conveyor belts and load the parcels there.
3. Flyer Sorting
Then, documents (termed as flyers) were separated from the parcels and sorted
using the Flyer
Sorter. The documents were later automatically placed in red bags containing the
appropriate destination information. These red bags were transported to the Bag
load Section. The capacity of the fully automated Flyer Sorter was about 36,000
items per hour and on an average, it sorted documents for 500 destinations
worldwide.

4. Reloading the Parcels and Documents


After the parcels and the document bags were passed through the final section of
the conveyor
Belt, they were sent along the yellow slides to the Reload Area In this section, the
containers for different destinations were loaded again.
Here, a concluding control scan was executed on the items to check that the
intended destination and the data necessary for the corresponding shipment
tracking was saved in the DHL data processing system.
Similar to the offload procedure, the loaded containers were again lifted onto the
trailers waiting
Outside the warehouse building to be driven to the outgoing freight planes. To
guarantee optimum
Loading, there was an in-house hub team positioned near the aircraft to place each
container
Carefully inside the aircraft based on their weight.
Also the containers bound for destinations Within 300 kilometers from the hub were
kept aside to be transported by truck or train.
5. Customs and Hospital Sections
In addition to unloading, sorting, and reloading, the Leipzig/Halle hub offered two
special
Treatments for the items if required. One of them was for items which were required
to clear
Customs processes. These items were appropriately pre-marked and were sorted
out for individual
Checking by customs inspectors on site depending on the documents provided.
Once the Customs approval had been obtained, the items were then put on a shelf
which showed a green light. The items were then rescanned and returned to the
normal queue for further
Processing.
The other specialty of this sorting facility was the Hospital area where damaged
parcels or documents were treated separately. After the repairs were done there,
the items were brought back to the normal sorting process.
TECHNOLOGY TO PROTECT THE ENVIRONMENT
The Leipzig/Halle hub was the first Deutsche Post World Net facility which was
almost self-sufficient in meeting its energy demands for electricity, heating, and
cooling.
For this purpose, the DHL authorities installed a high-tech cogeneration unit with
a highly competent block heat and power plant running on natural gas. The unit
could be operated simultaneously with the public power grid as well as separately.

This allowed the hub to have power even when the public power supply system
went down.
In addition to power generation, the cogeneration unit was also used to facilitate
heating and cooling, e.g. heating the operating facility in winter or cooling the
storage Rooms in summer.
The hubs photovoltaic system added another dimension to its environmental
Protection activities. Close to a 1,000 square meters area of the warehouse roof was
wrapped with
Solar cells to generate electricity from solar energy. These could generate 100,000
kilowatt hours
Of electricity a year.
This electricity was fed into the public grid, and in accordance with the German
Renewable Energies Act, DHL received energy credits in return.
In comparison to the conventional technologies, the usage of the cogeneration
system and solar cells effectively restricted approximately 3,000 tons of CO2 from
being released into the atmosphere each year.
In Leipzig/Halle, Deutsche Post World Net decided to go in for the Go Green climate
protection
Program in 2010, and as its long-term objective, it was set to improve the
companys CO2
Efficiency by 30% by 2020.
Also, two cisterns with the capacity to collect around 3,000 cubic meters of
rainwater each year were constructed underground for storing water to wash the
DHL aircraft.

TRANSPORT FACILITIES
AIRCRAFT AVAILABLE
Ever since DHL had transferred most of the workload from its previous European
hub in Brussels
To Leipzig/Halle, the new hub had been in full operation. Between 00:00 a.m. and
4:00 a.m.,
Approximately 60 aircraft took off and landed every day, taking the toll to
approximately one
Machine every five minutes.
DHL predominantly used Boeing 757-SF carriers for its flight operations at the hub.
Over the course of the past several years, DHL had invested around 1.3 billion on
the high-tech B757-SF aircraft, which showed the importance it placed on superior
environmental safety in the international express business. In addition to Boeing
757-SF aircraft, DHL also used several Airbus A 300B4-200F, McDonnell Douglas
MD11F, and Antonov 26 and 12 aircraft.

The Boeing 757-SF aircraft not only met EU noise protection standards by a
reduction of 77%
Noise compared to its predecessor, the Boeing 727, but also reduced fuel
consumption per ton of
Freight by around 20%, resulting in a significant reduction in CO2 emission per
flight.
Also, at night, it flew its aircraft at lower speeds compared to day time.
Moreover, authorities at the Leipzig/Halle airport took several precautions to reduce
noise pollution by making extensive use of soundproof windows, ventilators, and
other noise-insulating precautions. The area covered under the noise-control zone
was more than twice that of the existing requirements under German regulations for
fortification against aircraft noise pollution.
OPTIMIZATION OF TRANSPORT FACILITIES
The transport efficiency of the Leipzig/Halle hub was enhanced by the presence of
the crossroads
Of Europe, which gave the hub a strategic advantage. The practice of using
combined transport
Also helped preserve energy resources.
The selection of the mode of transport for the rapid movement of goods and
documents was decided by the customers quality demand as well as the cost factor
and the amount of emission by the carrier.
This concept was further enhanced by coupling the airfreight hub with the new
neighboring freight train station.
The optimization of railroad connections to Frankfurt with the main airport and other
destinations was expected to result in the shifting of freight traffic from road to rail.
As an increase in daily flight operations results in an increment in stress and
hazards both for
Humans and the environment, DHL tried to optimize those operations. For instance,
it optimized
The transport room in the aircraft by eliminating empty and half-loaded flights or
short-distance
Flights as they were both economically inefficient and ecologically unsound.
For short distance deliveries within a radius up to 300 kilometers, it used the road
whereas between 300 kilometers and 600 kilometers, it used the railways as the
transport medium.
Moreover, DHL always tried to identify the particular type of aircraft best suited for
a particular route.
As of mid-2010, the facility at Leipzig airport, manned by about 2,500 people,
handled 90% of all

European DHL Express shipments, and 10% of all shipments. 43 The hub had 52
aircraft parking
Spaces and also had plans to extend the apron to accommodate four more.

Problems
INITIAL HITCHES?
While many experts praised the new hub and said that it would serve the company
well, it was also the subject of some criticism.
The main problems related to the poor performance of the handling process
because of the lack of well-trained handling staff and too little manpower.
Critics claimed that it would take too much time to complete both unloading and
shipping. These delays would impact time slots, keeping planes on the ground and
increasing costs, they said.
These criticisms were a result of an investigation carried out and published by Die
Welt, a leading German newspaper, in 2008. This led to concerns whether the
company had implemented the project too quickly.
However, these criticisms were rebuffed by the company. According to DHL, the
delays experienced were due only to the weather conditions. It also clarified that
the additional flight that had been started in early 2008 from Brussels airport was to
cover seasonality-related volumes and not to compensate for the poor performance
in the new hub.
Later, with the Leipzig/Halle hub up and running, the company claimed that most
skeptics have been won over and business could not have gotten off to a better
start.

FUTURE EXPECTATIONS
As the European Union46 was continuously growing closer toward the Eastern bloc,
the
Importance of the Leipzig/Halle region also grew rapidly. As the region enjoyed
highly efficient
Connectivity with the rest of the Europe, the trimodal Leipzig/Halle hub allowed DHL
to lead the
Way in growing the freight express business in Eastern Europe as well as in Asia.
In addition, this hub had adequate capacity for an increase in volumes in future.
Owing to these, the importance of the Leipzig/Halle airport as an international
logistics hub steadily increased.
In 2007, DHL founded a freight company for commercial transport of mail and cargo
named Aerologic in partnership with Lufthansa Cargo.
In 2008, Leipzig/Halle airport ranked seventh among all the airports in Europe in
terms of total freight and mail carried and first in terms of growth during that fiscal

year. In terms of the total number of freight flights in 2008, Leipzig/Halle airport
ranked second only to the Charles de Gaulle airport in Paris.
In 2009, DHLs primary base was transferred to Leipzig/Halle.
Aerologic was expected to continue its operations in transporting both express and
freight goods between Asia (Bahrain, Hong Kong, India, Singapore, South Korea,
UAE, and Uzbekistan), Europe (Belgium, Germany, and the UK), and America (the
USA).
A hub located in the heart of Europe considerably amplified the plea of the
Leipzig/Halle region to
Become an industrial center. Considering the growth of the demand for the air
freight transport
Industry in that region, DHL also planned to increase the capacity of the hub in
future. During his
Opening speech at the Leipzig/Halle hub, Appel stated, We will exploit growth
opportunities and are already thinking about how to expand the hub. The property
has enough space for two other sorting facilities that are just as large as the first
one. These are ideal conditions we need to meet the worlds growing demand for
express services and to create a world-class logistics center in Leipzig/Halle.
The appeal of the region for companies was further enhanced by the proximity of
the Leipzig
Exhibition Center, the superior life-quality, and the huge market of close to seven
million people
Living near the Leipzig/Halle hub. Along with the motto at home in the world,
committed to the
Region.
DHL actually gave immense importance to simultaneously making the hub
flourish along
With the people and shared the responsibility of becoming a good
neighbor to them.