Express services underpinning stable economic recovery

DHL express business contribute to overall group business growth
Russia’s economic rebound is providing robust demand for Russia’s express parcel deliverers. Business RT spoke with Adrian Marley, Managing Director of DHL Express CISEE, about the demand outlook and factors shaping the marketplace.

RT: How strongly has the Russian parcel delivery market rebounded out of economic recession?

AM: “The global economy definitely made a strong recovery last year from the severe recession of recent years. The first half of the year in particular saw high growth rates; the trend was more moderate in the second half of the year. The Russian market and other emerging markets demonstrated robust growth. Signs of recovery were also prevalent in most of the industrialized regions, although they varied widely from region to region. Global trade made a significant recovery, with a gain in 2010 of approximately 12 %. Our Russian express business has seen double digit growth in our international and domestic shipment volumes.”

RT:How did DHL manage to overcome the crisis while keeping its service quality at a high level?

AM: “In times of economic difficulty, companies feel increased pressure to reduce costs and streamline business processes. This means that more companies look to outsource activities not considered part of their core business. In addition, there has been a general trend of logistics operations becoming more complex and more international in nature. We have benefited from this trend all over the world and particularly in Russia due to our leading positions in the express, freight forwarding and contract logistics markets. When the downturn began, the only option we had to keep our business on track and comply with our commitments to our clients was to act quickly, anticipate the changes, and ensure that we had the right resource in place to meet the demands of the market. We unfortunately had to part with some employees to realign our workforceto the new business requirements, but some have already joined us once again as we reemerged from the downturn. Many companies inevitably turned to salary and benefit reductions. However, my preference remains with the idea of sustainable motivation, which means that benefits and conditions offered earlier should not be taken away, as this can be very de-motivating and can lead to negative consequences.The key drivers of our business success, whether the economy is declining or growing, are satisfied customers and dedicated employees.”

RT: Are you forecasting strong growth in the Russian parcel delivery/logistics market?

AM: “Yes, definitely. For the next couple of years we expect tremendous volumes of trade. Several promising improvements in trade conditions and the creation of the Russia-Kazakhstan-Belorussia customs union should open up a number of new business opportunities as well as make already existing trade flows more efficient, bringing added value for customers and for our industry. Russian customs have an opportunity to review their processes and to look at possible areas for simplification, particularly for trade within the union.”

RT: The internet continues to fundamentally change the way in which information is exchanged. How big a challenge does this pose for DHL’s document delivery business?

AM: “We welcome technological evolution and always look to apply the latest innovations in our business to create additional services or enhance our offering for our clients. Physical communication channels are without doubt being replaced increasingly by electronic communication, which is leading to a decline in volumes and revenues in the traditional mail business. On the other hand, the internet brings dealers and customers closer together and creates new demand for the transportation of goods, advertising materials and contract documents. We are still seeing growth in document deliveries, and Russia is no exception. The internet revolution is really taking off, and logistics is becoming increasingly important as a facilitator. There will remain a strong need for the delivery of corporate documents as long as original documents are still a component of the security of businesses. Demand for secure, confidential and reliable electronic communication is growing. Furthermore, we expect to be able to take advantage of increasing digitalization in our other businesses. It is an exciting time in Russia for DHL Express to activate modern services for internet shoppers and our partners.In this time of rapid technological evolution, with growing demand for the latest gadgets, people want them in their hands as soon as they come off the production line.”

RT: What are the advantages of opting for express delivery?

“International, time-definite express shipments are our core business. Our Time Definite and Same Day services offer a choice of delivery at either a specific time or as quickly as possible – you have to separate the two things. We are involved in time definite deliveries, other DHL divisions offer slower deliveries, Day Definite deliveries, and all those services are necessary, but with express you predetermine that the product is probably a bit more expensive, for example electronic goods, which have a high value and require security and speed. Another sector which relies a lot on the express industry is the automotive business, where demand for spare parts and the distant location of production and storage sites for spare parts necessitate express delivery, which reduces the time frame of supply to one day in some cases.”

RT: In what ways does DHL Express cooperate with the other DHL divisions in Russia?

AM: “We are working as an entire logistic chain whereby the transportation of cargo can involve intermodal transportation solution as well as a whole range of services, including storage, kit assembly and repair and return, among others. As a group, we offer a seamless chain of services. We are committed to letting our clients have the benefit of our time definite express combined with the economy options of air freight, road freight and other logistics services from our sister divisions.”

RT: What sectors of the economy are driving DHL’s growth in Russia? Which regions of Russia are significantly expanding for DHL in terms of express delivery?

AM: “The strongest demand right now is from the automotive, life science, financial services and textile sectors. The potential for the retail sector is tremendous in Russia and it continues to expand, driven by demand for quality. Therefore, as I have mentioned, electronics is also one of the fastest growing business sectors for DHL. One other area of interest is that Russia is a growing market for cinema, and we see that media companies are accelerating their business here, which inevitably requires express delivery. Above all, these markets are expanding heavily in the Russian regions. Most of our growth is happening in the North-West and Central regions of Russia. On a daily basis, we operate on over 240 domestic flights a day. To some places we use more than one flight a day. Our business to all regions is expanding. For example, take places like Kaluga, which depend heavily on the automotive sector. The kind of growth that we are seeing there is very encouraging. The Far East continues to show great potential with its growth in trade, with material from Korea, China and Japan arriving from the east on the Trans Siberian railway.”

RT: Do you have any expansion plans in Russia? Are you planning any new facilities and services in Russia and in which sectors?

AM:”We always have an eye on future challenges and opportunities. DHL established its Russian business in 1984 and our physical infrastructure in Russia is pretty well established. Expansion will depend on what our customers require us to do. We have certain customers with whom we have been continually expanding in terms of service coverage and operations. Our square meters of warehousing are growing all the time. Our express infrastructure encompasses more than 150 cities in terms of office locations. We are always looking at extending and improving our existing facilities and building additional facilities where needed. However, it is not always possible, given the shortage of quality offers, in terms of both office and warehouse facilities, on the real estate market.”

RT: How big an issue is real estate for a logistics and express delivery company such as DHL?

AM: “Real estate is a very important component of our operations. It is important for us to be located in an area which is convenient for international and domestictransportation operations, while providing ready transport access for our customers.”

RT: How significant an issue is Moscow’s notorious traffic for a company with drivers who must work in it every day?What special measures do you adopt to counter it?How does it affect customer deliveries in the city?

AM: “It is one the most important issues, and needs to be managed and evaluated constantly.It impacts the strategic location of the warehouse and delivery facilities, and dictates the operations process and the routing of shipments, as well as employees’ working schedules. You need to be located in the right place in the city to ensure you can get shipments to your customers or from your customers in time. We look to use all possible means of transportation to meet our deadlines; we have even examined the possibility of using the Moscow city express train system which is designed for passenger transportation. But there is no physical ability for us to use it, due to the large volume of shipments. We have to be very quick to get the delivery from the airport when it arrives. But, thanks to the way in which we have organized our network, with couriers spending the maximum amount of time on their routes, you can arrange the deliveries on time and in accordance with customer preferences. If you look down on Moscow from above, it is a perfect city for transport thanks to its ring roads. The problem in Moscow seemis mainly in the management of traffic. Most of the problems occur because the side streets are completely blocked with parked cars. I think a lot can be achieved through better management of the traffic”

RT: How does DHL compare Russia with other emerging countries where it does business? What are the upsides and downsides?

AM: “Every country has its pros and cons of doing this or any other business. First of all, you have to examine the environment and the resources available for you to run your business. And in Russia there are plenty of resources. Beginning with human resources, the people here are so passionate about doing their job and at some points are addicted to the idea of achieving better results. If you provide job security and fair conditions, their response will be sincere loyalty. Russians are very enthusiastic and have a great level of professionalism and tenacity. Their quality of performance is exceptional. And that’s the real plus for our company’s business in Russia. Russia is an emerging market and a country of huge potential. The rate at which things are moving here is tremendous.”

RT: Has it become easier to establish and run a business in Russia for international companies?

AM: “For the last 27 years, we have observed and understood what is required in this market. Right now, we are operating comfortably here, doing business successfully and helping other businesses to improve their performance by providing solutions and consulting on the way the market is changing, as well as an effective channel to market for their products. But there are still concerns about transparency and the uneven application of some legislation, so the climate for business still certainly has room forimprovement. I always encourage customers who operate through rep offices to come and immerse themselves more fully here because doing business remotely is not the same as when you’re on the ground and seeing how the market moves.”