They’re not always wrapped up in parcels
Maureen Gaines explains that, although people associate DHL with parcels, there is more to it than that - like helping the water utilities with their supply chains.
Mention the name DHL and most people would think of parcels. But while parcels is a major part of the group’s activities there is more to the company than meets the eye.
It is also a global leader in logistics – offering outsource freight forwarding, warehousing, distribution, transport and supply-chain management.
DHL Exel Supply Chain dominates in each of the sectors that it provides logistics services, whether retail, manufacturing or automotive, for instance.
So it is no surprise that the company is targeting the utilities market, and water companies in particular. The supply chain is an untapped opportunity for utilities to drive down cost and improve service performance, mirroring success in other sectors, like manufacturing and retailing.
Logistics and the supply chain is the new focus for utility companies seeking to eliminate waste and cut operating costs.
Having played a major part in transforming retailers’ supply chains into efficient operations, DHL Exel Supply Chain knows utilities have yet to adopt supply-chain management practices, proven in these other sectors, that can deliver significant cost and service benefits.
It believes that, with its help, there are opportunities for utilities to drive the next level of efficiencies through supply- chain management. In other words, the same benefits now accruing to Britain’s supermarkets could also benefit the multifaceted logistics requirements of utilities companies.
However, the company may have its work cut out.
A typical automotive or retail operation has a supply chain cost of 5%, with key characteristics of cost transparency, end-to-end supply chain, early supplier involvement, optimised processes, and integrated solutions. This contrasts with the utility supply chain where supply chain costs are 30% and where costs are invisible.
Utilities, typically, have silo supply chains, duplication, fragmented processes and inefficiency.
So having created efficient, money-saving, supply chains for other industry sectors, how does DHL Exel perceive those of the water companies?
“In supply chain terms, they’re absolute laggards,” says Grant Robertson, business director of DHL Exel Supply Chain’s infrastructure unit.
He continues: “There are some that are more dynamic than others, but if you compare them to the automotive industry, retail or consumer, they’re light years behind.” The reason for this, according to Robinson, is their capability to plan and forecast what it is they are really going to do inhibits their ability to understand the benefits they can get from good supply-chain practice.
“It’s understood by people like Nirmal Kotecha [formerly head of Anglian Water’s supply chain] but we see him as an individual swimming in a mass of politics that prevent him properly applying best practice.”
Robertson continues: “And some of the good people in the industry are finding it difficult to change the culture of the very technical approach to what’s important to the industry.
“Until that significantly changes, they will always be struggling to take full advantage. That’s not to say that organisations like us can’t help them.”
Robertson says the company is talking to and has had relationships with virtually every water company. It is associated with most of the CEOs and supply-chain directors in these organisations.
DHL Exel has operated in the utilities sector since 1992. This was as Exel, which was bought by DHL parent Deutsche Post World Net in 2005.
In terms of DHL as a brand, the company has had to articulate that it is not just a parcels carrier, but also provides end-to-end supply-chain solutions. “We are not a logistics company in this arena,” Robertson stresses. DHL Exel is aware that the dynamics around the water industry’s supply chain, in the commercial sense, are historic, and are driven by the poor visibility of demand. This, says Robertson, means they have supply-chain solutions that rely on corner shop supply at premium cost.”
Robertson says that DHL Exel’s value proposition – “we call it an elevator pitch” – is that the industry is probably paying 30% more for materials, at the point of fitment in the ground, than is necessary.”
The company has been emphasising this message for the past 18 months, through seminars and forums.
The company now has contracts in the sector worth £50M a year, which does not include the value of the stock. “If you included that it would be several hundreds of millions.”
These contracts are with major blue-chip companies, such as United Utilities, Network Rail and National Grid. The company is also actively talking with the contractors who operate in the market to work with them as co-partners in principal utility organisations’ supply chains, or independently where it will take the cost of the materials out and they will then do the work.
The company is also in talks with merchants and manufacturers to establish, in the same collaborative way, “if there are different ways we can do things”. This is an area that Robertson believes DHL Exel comes into its own, saying: “Our traditional logistics competition only focus on the manufacturing and merchants side.”
However, Robertson believes the market is ready to change – “a fantastic opportunity for DHL”.
The company has been involved with sector having inherited “some legacy contracts” that were operating in this sector, purely on a logistics basis. “I and my team over the years have evolved a proper business strategy from the intelligence and knowledge that we’ve gained in the market.
“It’s not a market you can walk into overnight and lay claim to, but what we have established is a huge opportunity, and an organisation with the capability and size to assist in the supply chain.”
Robertson adds that the sector is complementary to the fact that the automotive, retail and consumer markets are now “pretty mature. But this market’s immature”.
To transform the water industry’s supply the company will develop partnerships, develop its own intelligence, and offer that back in, from a supply chain perspective, as consultancy information.
Robertson adds: “We will also be aware and respond to ascetic OJEC tender opportunities that come along, but that is not our lead. It’s about relationships, intelligence-building and our presence in the market place.”
DHL Exel is working with Severn Trent Water on its supply chain management. It also has contracts with United Utilities, Scottish Water, Southern Water, South West Water and Thames Water. “At some time, we’ve been involved with all 13 [major UK water companies].”
So what do the water companies need to do if their supply chains are to become efficient?
Robertson says: “I believe the current commercial models that they engage their supply chain partners on are worth reviewing, to look for new ways of doing things. Arguably, they say they’re doing that, but the truth is that they are not addressing the main issue of gaining visibility of what is happening in the supply chain.”
DHL Exel will work with the industry to establish what the main issues are and to find “sound propositions that would enable us to improve from where they are to potentially where they could get to within the technical constraints of the business”.
Robertson concludes: “We wouldn’t conspire to change them overnight, but our approach is pretty standard. What’s the risk in changing?”