Fleet News

DHL to deliver global revamp

January/February 2002: Global courier giant DHL now plans to move forward globally after signing a major pan-European fleet contract for 13 European countries.

The group's strategic cost director Peter O'Brien, who is responsible for DHL's overall procurement programme, declined to reveal exactly how much those savings are worth. However, when you consider DHL operates close to 20,000 vehicles globally the potential figure no doubt amounts to a significant number.

O'Brien explained that DHL has experienced dramatic growth since it was founded in 1969. 'In this environment the management of costs was not therefore as much a priority as it would be in a business with less growth'.

DHL's global, entrepreneurial and decentralised structure previously ensured that country management was responsible for making its own independent decisions, including those for fleet purchasing. However times have changed and there is greater opportunity to go to the market leveraging requirements across a number of countries.

DHL executives recently decided the group should aggressively seek cost-savings and O'Brien was asked to lead an overall procurement programme within DHL with the aim to 'maintain or improve the quality of what DHL buys, and service levels it receives, while reducing the cost of its externally purchased goods and services'.

In short, drive down costs but keep the same, or achieve better, service levels.

A native of Australia and based at DHL's global headquarters in Brussels, Belgium, O'Brien had previously worked for companies such as PricewaterhouseCoopers and TNT.

'When I joined DHL,' O'Brien said, 'the company had next to no focus on sourcing at global or regional levels. We therefore went about exploring what could be done to better leverage our spend at these levels.'

In early 2000, DHL embarked upon a 'health check' review of it's operations, focusing on 18 key entities across the globe, making up to 80% of its total spend.

'It confirmed we had a huge amount of work to do,' O'Brien said, 'at one stage we brought three procurement executives from three different countries in Europe together in one room and they had never met before. In some cases, countries were using the same suppliers but hadn't negotiated any deals leveraging joint spend.'

DHL engaged the services of consulting firm AT Kearney to help it highlight potential fleet savings. O'Brien added that such a marriage of expertise was the only way forward for companies seeking procurement savings.

'Companies will only successfully secure savings if they use procurement experts and also specialists in the field in which they hope to achieve savings,' he said. 'It is very important to have someone who has a detailed understanding of the industry.'

The first step in the whole process was to gather together all of DHL's fleet data – giving DHL the right ammunition to present to potential suppliers.

'We had to be fully informed about our fleet before we went to the marketplace,' O'Brien said. 'It was difficult gathering all of the data together but it was vital that we did so.'

Each manufacturer was given an equal chance to quote for the business and O'Brien found that while some were ready to implement a pan-European deal, others were not. DHL wanted to offer all manufacturers a fair and equal opportunity to quote for DHL's fleet business as many are DHL customers.

After careful consideration and, what O'Brien called 'tough negotiations', DHL chose three suppliers for its fleet of commercial vehicles.

Renault won the contract to supply small commercial vehicles, Ford to supply medium commercial vehicles and DaimlerChrysler will supply large commercial vehicles.

Its new fleet arrangements also appoints LeasePlan as its international leasing supplier.

Despite having no previous fleet experience, O'Brien will admit he quickly learned about the difficulties of implementing pan-European fleet deals because of country peculiarities, such as loyalty to domestic manufacturers.

The vehicles involved so far are commercial vehicles used for pick-up and delivery purposes, and even though the many DHL drivers are emotionally attached to the brand of the vehicle, it is unlikely that it is as sensitive an issue as those whose vehicles are provided as part of their salary package.

DHL is currently sourcing suppliers for its perk company cars and O'Brien believes all options need to be considered, including manufacturers that own other marques and can offer a range of solutions.

'Company cars can naturally be an emotional issue, where in some countries it is a status symbol for employees so we do need to be sensitive to this when choosing suppliers,' he said. 'However at the end of the day a practical and pragmatic solution must be put in place that best serves the company as a whole, and this what we intend to do.'

'Of course driver sensitivity and country preferences are important,' O'Brien added, 'but it is also important that DHL reduce supplier costs. I'm not naïve though – I'm sure we will meet some resistance.'

He said one method of winning country support was to ensure involvement by country operations, and therefore the decision was to have country managers take on sponsorship roles for certain categories covered by the overall procurement programme. For example, the Managing Director for DHL in France was the sponsor for the Fleet initiative.

O'Brien added that the manufacturers chosen to supply its fleet had been selected on the basis of total cost of ownership, including acquisition cost, residual values and maintenance figures.

But although it was predominantly a case of 'best price wins', it was conditional upon the right service levels being met of course, O'Brien views DHL's relationship with its supplier as a 'partnership'.

Those suppliers, he added, including LeasePlan, must work with DHL to continually highlight cost-saving potentials.

'I don't think there is a manufacturer we didn't use across all of our regions,' O'Brien said. 'Now we have just three giving us better control and understanding of our fleet costs and allowing us the opportunity to ensure they remain competitive in the marketplace.'

O'Brien is now in the process of recruiting a pan-European fleet manager to oversee DHL's fleet but there will also be an employee charged at each local country entity with the responsibility of managing the local fleet in accordance with the regional fleet policy, and in some cases it will be a dedicated fleet manager.

It will be the country co-ordinators' role to ensure DHL's new fleet guidelines, including a standard vehicle specification, are met in each country.

Explaining DHL's short-term plans for fleet, O'Brien said: 'The next stage of the fleet cost reduction programme will be to address all other major country markets, starting with the roll out of the new fleet deal to all entities within the Europe, Middle East and Africa (EMEA) region. We are also now looking at addressing the same requirements in our other two regions of Asia Pacific and the Americas. This will be huge challenge but we are confident that the excellent results delivered in Europe can be replicated elsewhere.

'We have about 50 countries that account for 80% of our global fleet volume of nearly 20,000 units and these markets are where we will focus our efforts,' he added.

DHL hopes to conclude negotiations for its other two regions by June this year, as well as have rolled out the new fleet contract across the rest of the EMEA region.

'However at the end of the day a practical and pragmatic solution must be put in place that best serves the company as a whole, and this what we intend to do.'

'Of course driver sensitivity and country preferences are important,' O'Brien added, 'but it is also important that DHL reduce supplier costs. I'm not naïve though – I'm sure we will meet some resistance.'

He said one method of winning country support was to ensure involvement by country operations, and therefore the decision was to have country managers take on sponsorship roles for certain categories covered by the overall procurement programme. For example, the managing director for DHL in France was the sponsor for the fleet initiative.

O'Brien added that the manufacturers chosen to supply its fleet had been selected on the basis of total cost of ownership, including acquisition cost, residual values and maintenance figures.

But although it was predominantly a case of 'best price wins', it was conditional upon the right service levels being met of course, O'Brien views DHL's relationship with its supplier as a 'partnership'.

Those suppliers, he added, including LeasePlan, must work with DHL to continually highlight cost-saving potentials.

'I don't think there is a manufacturer we didn't use across all of our regions,' O'Brien said. 'Now we have just three giving us better control and understanding of our fleet costs and allowing us the opportunity to ensure they remain competitive in the marketplace.'

O'Brien is now in the process of recruiting a pan-European fleet manager to oversee DHL's fleet but there will also be an employee charged at each local country entity with the responsibility of managing the local fleet in accordance with the regional fleet policy, and in some cases it will be a dedicated fleet manager.

It will be the country co-ordinators' role to ensure DHL's new fleet guidelines, including a standard vehicle specification, are met in each country.

Explaining DHL's short-term plans for fleet, O'Brien said: 'The next stage of the fleet cost reduction programme will be to address all other major country markets, starting with the roll out of the new fleet deal to all entities within the Europe, Middle East and Africa (EMEA) region. We are also now looking at addressing the same requirements in our other two regions of Asia Pacific and the Americas. This will be huge challenge but we are confident that the excellent results delivered in Europe can be replicated elsewhere.

'We have about 50 countries that account for 80% of our global fleet volume of nearly 20,000 units and these markets are where we will focus our efforts,' he added.

DHL hopes to conclude negotiations for its other two regions by June this year, as well as have rolled out the new fleet contract across the rest of the EMEA region.

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