A&A DHL Site Visit Report 5-2004

DHL’s “End of Runway Logistics”

A Major Express Value-Added Service

Wilmington, Ohio USA

May 26, 2004

Richard Armstrong

Key Personnel:

Mike Heilman, VP & GM

John Robinson, Director, Logistics Operations

When DHL acquired Airborne, it got several things that needed fixing but logistics wasn’t one of them. The logistics operation, now called DHL Logistics, was and is a profitable niche specialist. Its main ‘end of the runway’ logistics operations are adjacent to the ABX hub. ABX is the contractor who provides the airplane lift capacity for DHL. It was the biggest part of Airborne Express.

The ABX sort and DHL logistics facilities are at the Wilmington, OH airport (ILN). The DHL (ABX) sort at this location has 1.7 million square feet and handles over 1 million packages a night. About 60% are express packages moving on 120 flights a night and a dozen or so every day. There are about 4,000 employees at the hub and DHL is the town’s major employer. The two runways at the airport are long, and the operation has a foreign trade zone.

The Wilmington logistics facilities are primarily in two buildings (9 and 10) adjacent to the airport and the sort. Building 10 is 300,000 square feet with 30 principal clients. They include Gambro, Siemens, Bell & Howell, W. L. Gore and others. What DHL handles for them are high-value/low-inventory originals and spare parts. Put differently, this high security operation handles stuff that can support airfreight costs and needs fast service to customers. The services are labor intensive with small part (bin) picking of one item per order as the prevalent mode. About 90% of the orders move to the DHL sort each night.

DHL also does customization for computers, print logistics and any other value-adds customers need at building 10 and other facilities. Building 9 next door has the Cole Vision pick and pack. The 1,500 stores supplied include Sears, Target and Pearle. Five labs send in eyeglasses for reshipment.

In Grove City, OH (Columbus) DHL maintains an optical center with Wal-Mart as the anchor customer. The customers include Essilor, a blank lens provider for companies using the optical center. The local junior college has instituted optical technology courses to supply trained personnel. All of the components have come together to make Columbus a logical hub for contacts and glasses with DHL benefiting. It’s a good niche market.

DHL Express operates a hub at the Cincinnati airport (in Erlanger, KY). This 30,000 square foot facility is used by DHL Logistics for international shipments. DHL has limited growth opportunity in Erlanger. It would be logical for its North and South American growth to use Wilmington.

Most of DHL Logistics’ value-added services take place between 10 PM and 4 AM. (It seems that half the town is up all night working and listening to the hum of DC-8 airplanes). Orders are fed to DHL Logistics by EDI and a robust WMS, LOGIC does an excellent job. LOGIC ties all the DHL Logistics locations together. It has a very workable web-based dashboard and allows for good inventory control. DHL’s inventory accuracy is so tight (99.9%+) that little manual inventory activity is needed. Cut off time for next day orders is 1 PM EST.

Despite its functionality, DHL cannot carry Logic forward. It is working with Yantra and SAP to come up with a company-wide WMS platform and internet overlay. The Yantra version 7.0 alternative has done well in trials. SAP is the ERP for DHL and parent Deutsche Post World Net. The IT group now centralized in Scottsdale, AZ will make its final recommendation soon. DHL now supports 120 WMS systems globally and rationalization is necessary.

Other logistics operations that need to be integrated under the DHL Logistics banner are DHL Express Logistics (Americas), DHL (Danzas) Solutions, based in Europe, and occasional warehousing operations scattered around the globe.

DHL Logistics is expanding its return logistics operations. An important innovation for this business is a set of return cartons. One of these, now carried by all DHL Express pick-up trucks, is a portable computer return carton. DHL does repair work for Dell, HP, Compaq, Gateway, and IBM as part of this service. About 20% of DHL Logistics revenues are in returns/repairs.

The Wilmington and Columbus locations have good employee pools and turnover for DHL Logistics is low. A major part of this is location, but John Robinson, Director of Logistics Operations, is an important factor. He’s a good guy to work for, and employee morale is high. His boss, Mike Heilman, is a good strategist and salesman who lets his people use their talents.

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