The US market is a notorious challenge for any logistics company or freight forwarder. Few can compete against the sheer magnitude of UPS and FedEx on their home turf, but if any company is likely to grab its fair share of the business, then DHL Express would seem a confident choice.
Through a combination of sharp market analysis and a prepared and direct business plan, DHL Express Freight and Logistics Middle East has initiated an ambitious attack on the US market. Hoping to capture the wealth of exports being delivered from the US to the Middle East region, the policy has so far ruffled a few feathers.
We have reduced our average transit period to two days instead of three, and in the case of New York, we are offering a next day service” Dirk van Doorn.
“In a nutshell, DHL has identified the US as one of the major trading lanes for the Middle East, in particular the UAE, and as a result has increased its service offerings to the region,” identifies Dirk van Doorn, commercial manager for DHL Express Freight and Logistics Middle East.
“Customers are continuously looking to sourcing products from locations such as Asia, Japan and China. Whilst the Euro has become progressively more expensive, the US has managed to maintain its hold on prices making it an obvious choice for customers. We believe this trend has actually increased, not just with the GCC countries but the Gulf in general,” he adds.
Focus therefore turned quickly to reviewing airfreight capabilities to match the demand. Prior to the launch of its plan, DHL operated a network concept much familiar in the Middle East. Offering an average three day transit for cargo sent between the two regions, freighters used to fly to DHL’s hub in Brussels before relocating to various US destinations. Now such a time scale has been significantly reduced.
“We reviewed our capacity; analysing how may aircraft were in operation and what type they were, and then set about reducing transit time, not just from the US to the UAE but vice versa. We have since reduced our average transit period to two days instead of three, and in the case of New York and the surrounding Manhattan area, we are offering a next day service,” says van Doorn.
Such a reduction was only made feasible through substantial investment and a major structural upheaval. A total of US$1.2 billion was invested by DHL in its US ground and air networks. As part of this, the company modernised and expanded three super hubs and six major gateways resulting in a 60% increase in ground delivery capacity.
Of such developments, DHL’s decision to operate direct flights from and to Bahrain to the US deserves immediate attention. Enabling direct flights from the Middle East to New York, through the operation of a Boeing 747, this transition strengthens accessibility between the two markets previously unexplored by the logistics giant.
However, the foundations for the project appear well judged. Targeting the export sector from the US to the Middle East, van Doorn seems clear just what sectors this encompasses. “In terms of items being imported, a large chunk derives from the automotive and spare parts sector. Supplied largely by what I call the big three; General Motors, Ford and Chrysler, there is an undoubted demand for such products in the Middle East.”
“In addition we are seeing a lot of demand for high end oilfield equipment being moved in from the US. These are high specialty items such as oil drilling equipment and oil analysis equipment,” says van Doorn.
Another perhaps more niche market DHL is examining is that of the aviation spare parts sector. Whilst the aviation boom engulfing the Middle East is renown worldwide, the technicalities this actually involves do not always immediately spring to mind.
“We are handling a huge volume of aviation spare parts, yet it is mainly from specialist manufacturers. Whilst many would assume that a large part of this comes from large aircraft manufacturers such as Boeing, demand for aircraft interior spare parts is particular high, for example cockpit equipment,” notes Doorn.
Identifying products such as Honeywell avionic kits, Rockwell Collins avionic kits and Pratt and Whitney engines, DHL believes such American manufacturers play an important role in the aviation scene. The time sensitive nature of the products is an important consideration to bear in mind; as any time an aircraft is out of operation on the ground it is effectively losing money, another valuable factor behind recent activities to reduce shipment intervals.
Adjacently, attention remains on the import prospect the US has to offer the Middle East. With a Gross Domestic Product (GDP) of $13 trillion and estimated total imports of $1727 billion in 2005, the USA is the world’s largest economy and number one import country. Commodities exported in the greatest volume from across the Middle East region to the USA, includes fuels, clothing, textiles, aluminum, chemicals and fertilisers.
Presenting a more global vision of DHL’s history in the US, the company has had a presence in the region for over 40 years and operates to 560 destinations nationwide, amounting to an annual shipment handling of over 450 million. The recent investment policy has involved the $300 upgrade of the Wilmington hub in Illinois, which has since witnessed a growth of capabilities to over 120 aircraft providing 127 flights per day.
“To start with we were a small player in the US market and our focus was mainly export, but as the economy was growing, we had to gear up to meet the domestic demand. Recent market analysis from Wall Street also provides evidence that our services have improved, which has been great news for DHL,” smiles van Doorn.
A mutually beneficial relationship for each region, a new approach to customs clearance has also evolved onto the scene. As part of the enhanced service, DHL is operating a large network of inhouse customs brokers to support clearance of all dutiable shipments, provide effective tracking of shipments and ultimately help reduce transit times.
“We have an electronic data interface with US customs, so when goods require delivery to the US from the Middle East, the authorities will already have the necessary information. This works both ways, we have the same system implemented with relevant Middle East custom authorities,” confirms van Doorn.
Developments on this scale, of course, require a change in personnel to match. DHL has therefore created the position of trade lane manager to oversee the wealth of new business predicted from the improved service. Based in Dubai, the manager will act as an intermediate between customers in the Middle East and operation colleagues in the US, and is hoped to further smooth and coordinate operations.
Finally, to cement the last phase of its US project, DHL will run an advertising campaign to ensure customers are aware of its new services. “There will be a number of incentives for our customers to utilise the new services. We will optimise our sales force across the Middle East and ensure our customers understand the improvement we have brought about and how we differentiate ourselves from competitors.”
Creating a buzz of excitement in DHL’s Middle East offices, the significance of the project is conveyed by van Doorn’s optimism for its impact in the market. Turning to the future, he also clearly points to DHL’s next target.
“With the US market predicting a strong year on year growth of roughly 20% primarily from the Middle East, the figures very much speak for themselves. By the same token, we are starting to see interesting developments between Asia and Dubai. We forecast this trend to start experiencing a 15% to 18% annual increase for the next four years, so we will be investing according to this growth,” says van Doorn.
Follow us on
