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  - March 26, 2008 -  

Logistics News: US Market Needs DHL to Keep Parcel Shipping Costs in Line, Industry Expert Says


Impact on Costs would be “Profound” if Carrier Left US Market, ex-DHL Executive Gerry Hempstead Believes



SCDigest Editorial Staff

SCDigest Says:
Having DHL in the game dramatically affects the dynamics of what a shipper will pay, either with DHL or with one of the other players, Hempstead says.

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Earlier this year, there were reports that DHL might possibly leave the US parcel shipping market, after a couple of Wall Street investment firms recommended the move for DHL parent company Deutsche Post, and company executives made some statements saying that all options were on the table in the face of a slumping stock price. (See Are Reports of DHL’s Possible US Exit Premature?)

Since that time, Deutsche Post named a new CEO, Frank Appel, after the resignation of former CEO Klaus Zumwinkel, who resigned in a tax scandal. There has been little news pro or con on DHL’s US strategy in the month since then, presumably as Appel reviews opportunities and options.

One industry expert, however, believes US shippers need a continued strong DHL presence – and should take some steps to ensure DHL remains a player in the market.

Gerry Hempstead is a former DHL and Airborne executive who now runs Hempstead Consulting, a firm that helps companies develop parcel shipping strategies and negotiates with the carriers.

DHL has used price to enter the US market, Hamstead told SCDigest – and that helps shippers in several ways.

“It was my experience as a peddler [for DHL] that the reason people used our service was because we offered a significant cost savings - significant enough to motivate shippers to entrust to an unknown commodity some of its most important transactions,” Hempstead said.

“The fact that DHL handles 1.5 million domestic transactions a day should be some testament that there is a degree of elasticity between price and performance,” he added. “I would often ask shippers “How late is late?” There really is little empirical performance difference between carriers on raw, correct day performance,” he added.

(Transportation Management Article - Continued Below)




Hempstead said that in his experience FedEx and UPS post better performance "numbers" because they take far more exceptions on shipments, exonerating themselves from the failure though a myriad of "non-controllable exception codes."

Would DHL Exit Mean Rapidly Rising Parcel Rates?

“I believe there would be a profound impact to carrier pricing offers and shipper cost if something were to dampen or eliminate DHL from the USA competitive landscape,” Hempstead told SCDigest. “Today, DHL sets the benchmark for the bottom thresholds of pricing. There are deals out there that Fed and UPS just would not handle at the price DHL offers. From a competitive marketplace point of view, I know that when DHL is in the game and the other carriers are aware of it, the pricing is significantly better from the competitors”

Having DHL in the game dramatically affects the dynamics of what a shipper will pay, either with DHL or with one of the other players, Hempstead says.

“To me shippers must act now to keep DHL strong and viable and keep them in the game. Shippers will rue the day that DHL left the competitive marketplace if that happens,” he said.

Do you think a DHL exit of the US parcel market would have a big impact on what shippers pay for parcel service? Would you give DHL business in part with a goal of keeping a third provider in the game? Let us know your thoughts at the Feedback button below.

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