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Business – Q&A DHL’s global CEO Frank Appel

Rashmi Pratap

Express and logistics major Deutsche Post DHL is keenly waiting for the implementation of Goods and Services Tax (GST) in India. The move will
boost the global giant’s business, with India expected to contribute more to DHL’s kitty in the years ahead. ET caught up with DHL’s global CEO Frank Appel , who spoke about the impact of the global slowdown on the industry, changing dynamics of international trade and the importance of supply-chain management for India Inc. Excerpts:

How has the slowdown impacted DHL and the global logistics industry?

I think the sector suffered from the slowdown. We support the view that we can’t escape the global slowdown, but we have reduced our cost positions around the world. This helped us to have a reasonable second quarter. We have not seen so far (in July – August) a very strong recovery in the economy. At least it is not reflected in our numbers.

Once things start looking up, what will it translate into for DHL? It is still going to be a slow recovery.

In December I said we will have a ‘V’ shaped recovery, and I was the only one who said that. The downturn was so rapid and deep that if we have the first signs of recovery, everybody will run in the opposite direction. If that happens, we will see a steep increase. I think the predictability of the future is becoming less and less possible. So, you have to prepare the organisation for permanent change. You have to take the costs out as much as you can. There are signs that there might be a fast recovery.

What kind of “permanent changes” are you preparing DHL for?

First of all, you should honestly tell the organisation that predicting something is very difficult. That apart, you train your people by challenging them on their day-to-day job and move them around, so that they are used to a different environment constantly. That prepares people for change.

In large export-focused economies like China there is an increasing focus on domestic markets. How would it affect you?

First of all, if domestic demand is going up, it’s a strong signal that wealth is spread more evenly… more and more people can afford to buy goods. We want to be a part of that and China and India are huge countries. If you compare the size of India, it has more population than Europe. These are huge continents and we would be crazy not to try to participate in that domestic growth.

What growth opportunities you see in India? And how important is India for DHL?

Our operations in Europe and the Americas are still larger than that in Asia. We earned $6 billion in revenues from Asia, but that will change in the next few years. We see a huge growth potential in India, be it warehousing and distribution, or even freight business or express business. We are in a leading position in India already. Implementation of GST will help India enormously. There will be an enormous demand for high-quality, reasonable-cost services in the logistics sector, if tax legislation changes. That will give us huge opportunities to leverage our global skills in logistics.

Any investments planned for India? Who are the biggest users of your services?

We don’t have a clear investment outlay, but we are following the needs of our customers. If there are changes in legislation, consumers will consolidate from small warehouses to large facilities. And we are prepared to make the investments required. If we see more growth for Blue Dart business in India, we are definitely prepared to extend our fleet. Whatever is needed, we will do that and there is no financial limitation to doing it. But it does not mean we will globally increase our capex after we reduced it in the past 12 months.

Indian companies require improvements in supply-chain management. How do you see it?

The relative spend on logistics is high in countries like India because infrastructure is a key constraint. India’s airports, roads and ports are very busy already. But the government has understood that there is need to invest in infrastructure. And that is why we say that we can bring a lot of value.

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October 14, 2009 - Posted by | Uncategorized |

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