Dhl Case Study

DHL is not entering the U.S. market lightly. From sponsoring the United States Olympic team to launching a full-scale advertising blitz on American television, the logistics giant is putting out the word that it is a viable third alternative to FedEx and UPS in the world's largest express market. Perhaps most significantly, DHL is investing $1.2 billion to consolidate its two air hubs to one site, add seven new regional sort centers across the country and generally upgrade North American facilities.

Consolidating its air operations from Cincinnati/Northern Kentucky International Airport to a primary facility in Wilmington, Ohio was a necessary investment that DHL says will allow it to operate more hours with greater efficiency. DHL owns the airport in Wilmington, which is 50 miles from Cincinnati, having inherited it as part of last year's Airborne Express acquisition.

And with trucking becoming an ever bigger component of the U.S. expedited freight market, the new DHL sort centers will increase the company's U.S. ground delivery capacity by 60 percent. "For anyone in the industry, it's clear that ground-based operations are part of the service express companies are now expected to provide," said DHL spokesman Jonathan Baker. "The difference between air and ground service has minimized considerably in recent years."

DHL Americas Chief Executive Officer John Fellows said the investment marks an "historic turn" that clearly announces DHL's intention to compete head-on in the United States with incumbents FedEx and UPS. The $1.2 billion upgrade will "fully integrate our network operations and solidify DHL as a competitive force in the U.S. marketplace," said Fellows.

The German-owned operator says it now has a 6-8 percent share, as measured in revenue, of the overnight and ground express small packages market in the U.S. "We would anticipate over the next five to seven, eight years to move that revenue share to a position in the 15 percent range and maybe even 20 percent, but that's an aspiration and not a statement that we'll get there," said Fellows.

DHL U.S. sub-service fliers ABX Air and AStar Air Cargo will both operate out of the Wilmington Air Park. DHL also plans to expand ramp space to enable the airport to handle widebody freighters, planes the company uses in a growing partnership with Lufthansa Cargo. The consolidated hub in Wilmington will allow for earlier arrivals and later departures of aircraft and "lead to the capture of linehaul efficiencies generating significant annual savings," claims DHL.

The migration of sort facilities from Cincinnati to Wilmington is expected