Realigning Service Operations Strategy at DHL Express

Abstract

This paper describes the approach that DHL used to respond to aggressive revenue and profit targets set by its Asia-Pacific regional management board. DHL's reaction to these targets was to redefine its strategic service vision by systematically aligning its internal support functions with distinct buyer behavior structures. Specifically, we developed a model based on the tangible and intangible factors that directly influence a customer's choice of a third-party logistics provider. Next, we reverse engineered the service provider's delivery system to align with each customer's preferred buying behavior. DHL's share of wallet and profitability immediately improved, enabling the company to maintain its leading position in the market. Quantitative and qualitative results show an improvement in DHL's market share, customer satisfaction scores, and employee opinion survey results.

Modeling the operational capabilities for customized and commoditized services

“…Thus, we make no claim to model the actual success of the 3PL tender process because customers (not managers) determine the value in a service exchange (Vargo and Lusch, 2004). It is important to note, however, that the managers sampled in this study represent a global market leading 3PL firm, and that anecdotal evidence exists to indicate that the systematic alignment of internal operational capabilities with distinct buyer behavior structures has led to improved performance (Coltman et al, 2010, 2011b). This work allows us to speculate that the sample of managers studied are able ex ante to make better choices concerning the level of operational capability required to create and capture value and that these choices should be close to the ex post realized resource value as determined by the customer.…”

Best-Worst Scaling Approach to Predict Customer Choice for 3PL Services

“…True to the spirit of Drucker (1974), the key issues for 3PL providers today are not products, but benefits. These benefits include helping customers to achieve reliability levels high enough to create inventory cost savings, or to provide complete visibility and transparency throughout all aspects of the supply chain to meet rising expectations for customer service (Coltman et al. 2010).…”

“…True to the spirit of Drucker (1974), the key issues for 3PL providers today are not products, but benefits. These benefits include helping customers to achieve reliability levels high enough to create inventory cost savings, or to provide complete visibility and transparency throughout all aspects of the supply chain to meet rising expectations for customer service (Coltman et al 2010). The increased focus on service benefits implies that a deeper investigation of customer value is required to enhance our understanding of the factors that influence customer demand in the logistics industry.…”

One size does not fit all: an approach for differentiated supply chain management

“…Hilletofth (2011) states that advanced market segmentation capabilities are a key for a demand-oriented SCM approach. Coltman et al (2010) describe how an analysis of customer requirements and a later segmentation were employed as the basis for a following realignment of DHL's Asia-Pacific operations. Agarwal et al (2006) Value-based customer segmentation methods are very popular customer segmentation approaches.…”