Rather than shy away from risk, DHL Express, the Germany-based express logistics company, has built a reputation as one of the hardiest logistics operators around, with a presence in some of the most hostile environments in the world.

Long before emerging markets were in vogue in the West, DHL Express built up its expertise around managing supply chain risk in unpredictable frontier economies. Indeed, in 1979, three years after the assassination of Nigerian president Murtala Mohammed, and in the same year as its first elections, DHL Express set up its operations in the country. A year later, the company began operating in the former Soviet Union not long after it had entered into conflict with Afghanistan. 

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World class

At a time when most European corporations perceived developing markets as either highly unstable or too fragmented to set up any meaningful operations, DHL Express developed its shipping and tracking supply chain networks within these regions to serve local and international business needs. Today, its red and yellow logo is ubiquitous across mailing and delivery rooms the world over, and Ken Allen, the company's CEO, maintains that it is DHL Express’s commitment to serving client needs in both developed and developing markets that has led it to become a global market leader. 

“DHL is the world’s most international company – we have unrivalled experience in most of the world’s emerging markets,” says Mr Allen. “We entered Malaysia in 1973, Saudi Arabia in 1976, South Africa in 1978, Nigeria in 1979 and China in 1980... Everyone is supported by, and operates according to, the standards of a global network. You get the same quality of service in Libreville, Saigon or Riyadh as you do anywhere else in the world.”

For Mr Allen, part of the company’s success has stemmed from the first-mover advantages it enjoys from operating well ahead of the demand curve. Despite its small beginnings in 1969 in San Francisco and Honolulu in the US, DHL Express’s international expansion has partially been aided by the company’s access to its owner’s deep pockets, following the takeover of DHL by the German conglomerate Deutsche Post DHL. This enabled the company to consistently grow through investing in supportive infrastructure that was largely missing in developing countries.

“We have put a world-class global network in place, investing millions in capital expenditure to build the infrastructure. For example, [we invested] $175m in our north Asia hub, which we opened in Shanghai in July 2012,” says Mr Allen. “We are also the only express company to operate our own airline in Africa.”

Reaping the rewards

While the company maintains a strong focus on its European and North American operations, in recent years emerging market revenues have been a key factor in DHL Express's ongoing growth. While Asia accounts for 30% of the company's global turnover, its revenues from the Middle East, Africa and Latin America are all growing fast.

Yet another reason for the company’s success in developing countries is down to what Mr Allen calls a “decentralised execution in a centralised network”. In other words, the company incorporates local teams into its delivery networks, as they bring a refined understanding of local needs, as well as business insights and customer relationships, all of which enable DHL Express to identify needs and gaps in new markets.

“We have local teams, certified by our company as international specialists, with the strongest local expertise,” says Mr Allen. “These teams are empowered to run their businesses in the way that is most effective for their market. But everyone is supported by, and operates according to, the standards of our global network.”

Yet he is also quick to add that while margins in more mature markets, such as Europe and North America, are constantly being squeezed, these regions remain a central part of the company’s focus. “All of this has no impact on our business in Europe or North America,” says Mr Allen. “In terms of the market environment, North America and Europe are different. They are much more mature and the competition is more intense. But we are the outright market leader in Europe, and we have grown our market share in the US in recent years.”

Market maker

Yet DHL Express still represents a relatively niche market. While the global logistics market is a $1000bn market, according to data from research firm Research and Markets, the express logistics market represents just $25bn. In addition, the express logistics industry’s performance is directly impacted by global economic performance. Thus, with GDP in Organisation for Economic Co-operation and Development countries expected to rise by just 1.2% this year, according to the OECD itself, demand from the company’s main market may decline in coming months. 

Conceding that such global economic headwinds are a concern, Mr Allen maintains that the company is accustomed to consistently “punching above our weight”, and he predicts that DHL Express will slightly outperform world trade this year.

“The uncertainty we see throughout the world is a continued challenge, but it is out of our control,” says Mr Allen. “However, our industry should continue to slightly outperform [the global economy]. We are in the top percentile within that industry, in terms of growth. Our growth usually trends at one and a half to two times the rate of global GDP. If we are 'best in class' in managing our own business, we will outperform whatever the market conditions are.”