Delivered. THE GLOBAL LOGISTICS MAGAZINE

ISSUE 02/2013

SOLUTIONS Tactics for transformation How you can survive and thrive in changing markets

BUSINESS Making the most of CSR You can do well by doing good

FOCUS Learning from Caterpillar All you need to know about global reach and people power

COVER STORY INDUSTRIAL EVOLUTION Can logistics help shape Engineering and Manufacturing? CONTENTS | 3 2 | WELCOME

FOCUS BREAKING NEW 08 GROUND WITH E&M

Dear reader, The first quarter of 2013 has brought us a BUSINESS raft of interesting global events – among them a change in Chinese leadership, HEALTH MEETS a second term for the US president, contin- 20 AUSTERITY IN UK ued unrest in some parts of the Arab world, David Cameron’s call for referendum on Europe, and the Dow Jones at a surpris- ing all-time high. The economic climate remains volatile, as a look at some key industry sectors confirms. The automotive industry is slowing down and technology companies are looking at ways to differenti- ate or drive turnarounds in a rapidly chang- ing market. Engineering and Manufactur- ing, our focus sector in this issue, is perhaps more diverse, operating in many segments, each involving some unique challenges that we can all learn from. Managers need to remain alert and agile VIEWPOINTS to win during these times when volatility reigns and change seems the only constant. SIMON BERRY This issue ofDelivered. may not offer OF COLALIFE all the answers but we do offer insight from 36 several business and thought leaders - Caterpillar’s Ed O’Neil for example, who discusses why people power is so important 04  NEWS 20  BUSINESS 30  SOLUTIONS 36  VIEWPOINTS during global expansion, and Ron Ashkenas from Schaffer Consulting, who offers three 20 Health in hard times 30 Tucking into transformation 36 Delivered. thinks www.delivered.dhl.com 08  FOCUS: ENGINEERING & strategies against complexity. Social entre- New efficiences for the NHS Strategies for changing markets inside the box with… ONLINE preneur Simon Berry and DPDHL’s Christof  MANUFACTURING 22 SMEs go global 32 Yellow is the new green Social entrepreneur Ehrhart meanwhile explain how businesses 08 Breaking new ground New study reveals Carbon-efficient delivery Simon Berry can do well by doing good – for the environ- How logistics is shaping international activity 34 Automotive at 38 What’s the story, ment, people, and the planet. the E&M sector 24 Doing well by doing good End-of-Runway Mr. Amatsu? 14 Making tracks with Caterpillar CSR considered as pragmatic DENSO expands from Japanese fashion comes Enjoy your read! Logistics head Ed O’Neil business strategy Leipzig hub to Berlin on global heavy lifting 27 Size does matter 35 UAE connects the dots Our cover story, 39  NEXT ISSUE Sincerely, 18 Trust is everything New Triple-E container ships Logistics hub of the Arab world digitally delivered Partnerships in aerospace 28 Three strategies against 35 Cool in Caracas www.delivered.dhl.com/engineering- 19 MRO: Maintenance, repair... complexity New Venezuela cold store manufacturing ...and opportunity Simplicity expert Ron Ashkenas www.delivered.dhl.com WEB LINK VIDEO LINK QR CODE The icons to the left indicate additional online /archive Bill Meahl ­resources. To get more information or view a video, Chief Commercial Officer, DHL Cover photo: Geoff Manasse/Getty Images; this leaf: Arnd Wiegmann/Reuters, Jean Goldsmith, Andreas Kühlken, Sturti/Getty Images type the link into your browser or scan the QR code. NEWS | 5

GOGREEN PROGRAM PUSHES THE ENVELOPE THE STORY JENNIFER LOPEZ: Every day, companies all over the world part of the GoGreen program, the environ- THRONE TOURS THE send out millions of letters and documents. mental agenda set by DHL’s parent company, WORLD And even though sustainability is increasing- Deutsche Post DHL. GoGreen aims to cut ly important to them, they may not always emissions across the group by 30 percent by NEWS have considered the carbon footprint of these 2020. By 2011, there was already an im- routine, everyday activities. This year, DHL provement of 10 percent – one year ahead of Express is extending a carbon-neutral offer schedule. to anyone using the DHL Express Envelopes – and it’s free of charge. tinyurl.com/DHL-gogreen The service is now available to custom- JENNIFER LOPEZ wouldn’t dream of ers in 110 countries. Urgent non-dutiable going anywhere without her new throne. documents weighing up to 300 grams will hit the road in recyclable packaging. Then, after If anyone should be sitting on

calculating the CO2 emissions that the jour- a plush red throne, it’s J.Lo. ney of the envelope creates, DHL This dancing queen is well known will offset the carbon impact as a woman who gets what she by investing in climate wants. So when Jennifer Lopez saw protection projects. a chair she loved in a Turkish hotel “By offering % during her world tour, she just had carbon-neutral 30 to have it. The actress and singer, shipping we are IMPROVEMENT whose list of dressing room must- haves includes baked cookies, roses, building once IN C02 EFFICIENCY Asia’s fast again on DHL’s BY 2020. and perfumed candles, ordered a industry leadership in similar seat from Turkish set and environmental sustain- interiors designer Safak Çak. The ability,” says Roland Thomas, awesome armchair, 195 centimeters Vice President Service Quality tall and 85 centimeters wide, was Shanghai & Customer ­Operations. It’s all modified for Lopez and journeyed link to Africa from Istanbul to Melbourne in time Dubai Luanda for her to pose on it for the press. Abidjan DHL CONNECTS 41 Asian Trade between Africa and Asia is growing fast. Kinshasa points of origin to as many Later, the throne joined her on stage as 26 African destinations for seven more shows. Its next stop Luckily DHL’s SEAIR service is now available in via its SEAIR service. MARCH was Puerto Rico. 26 African locations. AIR FREIGHT SECURITY It’s DHL Express that has been AS OF MARCH 25, 2013, ONLY GOODS making sure the sumptuous seat 25 FROM CERTIFIED KNOWN CONSIGNORS gets to the party on time. Çak, who’s also worked with It’s faster, more cost-effective, and environmen- vast network of offices and operations, expert staff, CAN TRAVEL WORLDWIDE WITHOUT A Beyoncé Knowles tally friendly. Combining the use of ocean and air pre-determined routes and secure handling. Custom- and Paris Hilton, was freight services allows customers to optimize their ers will also be able to rely on stable supply chains PHYSICAL SECURITY CHECK. only too happy to see supply chains. Happily for customers on the Asia- throughout the year; the SEAIR service is also an his creation getting the Africa trade lane, DHL has made its SEAIR service excellent alternative during peak seasons when traffic DHL service it deserved. available in eight new African destinations, including is congested. “It is a great pleasure Luanda in Angola, Abidjan on the Ivory Coast, and DHL SEAIR is a powerful “Trade between Asia and Africa rose more than to work with a combination of air and ocean Kinshasa in the Democratic Republic of Congo. The freight services. This solution 400 percent in the past decade,” says Leung. “Main- NEW OFFICE FOR KAZAKHSTAN company that employs service will see shipments mainly forwarded through has attractive time-saving taining this momentum is key. The need for speedy wonderful people who Dubai, then flown into pre-booked air cargo space and cost benefits. Find out and cost-effective connectivity between the two Strategically connected to the key logistics hubs of are experts in their more at: on to Africa. “With 26 destinations in Africa now regions has never been greater.” Europe, Russia, and Asia, it’s also the location of DHL fields,” he said. tinyurl.com/DHLafas connecting to as many as 41 points of origin in Asia, On average, the DHL SEAIR service is up to 50 Freight’s new office. DHL offers more than a thousand point pairs across percent faster than ocean freight and offers savings Situated at the crossroads of two major transport DANCING QUEEN the two continents,” says Kelvin Leung, CEO Asia of up to 60 percent when compared to standard air routes in the former capital Almaty, the office opens up Her Dance Again World Pacific, DHL Global Forwarding. freight. It is also the more environmentally friendly further road freight options, aids economic development, Tour earned more What this means is a high-quality service operat- option as sea going transport saves fuel and causes a and ensures faster delivery times, says Stefano Arganese, DHL FREIGHT IN ALMATY offers a range of than $52 million.

Photos: © JD Dallet/arabianEye/Corbis, Michael Blann/Getty Images, DHL, Scott Barbour/Getty Images, Jason Merritt/Getty Images, DHL Merritt/Getty Images, Jason Scott Barbour/Getty Images, DHL, Michael Blann/Getty Images, © JD Dallet/arabianEye/Corbis, Photos: logistics options including container services. ing at a level of reliability that is assured through DHL’s lot less CO2 emissions. CEO, DHL Freight for Central Eastern Europe. 6 | NEWS NEWS | 7

CALENDAR COMMISSION PROPOSES MODIFICATIONS TO ACTIVE APPS: EVENTS AROUND THE WORLD JUNE EUROPEAN EMISSIONS TRADING SCHEME BOOKING IN A 11-12 In November 2012, the European Commis- ternational credits, and introducing a price

Miami. DHL’s 13th annual Life sion proposed several changes to the Eu- management system for CO2 allowances. MOBILE WORLD Sciences & Healthcare Conference ropean Emissions Trading Scheme (EU ETS). The next step will be a formal stakeholder brings together leading companies Faced with a decreasing CO ­allowance price, consultation, which the Commission is in pharma, medical devices & clinical 2 It’s the new fast-moving frontier in trials from around the world to the Commission proposes to postpone the intending to launch. information technology and it is chang- share best practices and exchange auctioning of 900 million allowances until The last proposal to modify the EU ETS ing the way we do business. No wonder views and knowledge on global and the end of the Emissions Trading Scheme concerns a “stop-the-clock” for aviation. company heads are dreaming up clever local supply chain challenges during (2019–20). The proposal is generally referred As a result of opposition by third countries two days packed with specialist and innovative ways for their staff and workshops and plenary sessions. to as “backloading” allowances. Some con- (threatening to retaliate against European clients to use mobile technology. A June 2012 tinyurl.com/DHL-lshc sider this a necessary measure to support carriers or manufacturers) and progress survey of 250 CEOs by consulting firm McKinsey emissions reduction initiatives (which risk achieved at a November meeting of the found that almost all those surveyed – a whop- JUNE not materializing if the carbon price is too International Civil Aviation Organization ping 95 percent – planned to introduce at least 11-12 low), whereas others consider backload- (ICAO), the Commission is proposing that 25 mobile applications, or apps, to their busi- ing an unjustified regulatory intervention intercontinental flights in 2012 are excluded nesses within the next two years. Paris. Now in its 16th year, the Au- in a system that was designed as a market from the obligation to comply with the EU Deploying mobile applications is often seen tomotive News Europe ­Congress mechanism. However, proposing to intervene ETS. The Commission will evaluate after the as technologically complex, requiring significant remains the most important English- midway in a system for which the rules were ICAO General Assembly in September/Octo- language automotive conference changes to existing systems. But mobile technol- in Europe. set long ago seems to erode the fundamental ber 2013 whether further adaptations should ogy can make things easier and bring real value. www.ane-congress.com principle of regulatory predictability. The be proposed. The “stop-the-clock” will allow With the DHL ACTIVEBOOKING app, cus- institutional process has started but is already ICAO to come up with a global mechanism tomers can manage European road deliveries even JUNE taking far more time than initially envisaged and/or framework for aviation emissions. It if they’re on the road themselves. The app is free 18-20 by the Commission. also avoids a potential trade conflict that was and based on DHL’s online Intraship platform. It allows registered users to create standardized Shanghai. The third DHL Global freight shipments using their mobile devices Technology Conference offers when they’re out of the office. a platform for knowledge sharing among key decision-makers and “Customers expect mobile solutions and flex- ­industry ­experts. ible services,” notes Henning Goldmann, Senior tinyurl.com/DHL-tc2013 Vice President Business Process Management, tinyurl.com/DHL-tcLinkedin DHL Freight. And this particular app “is a major benefit for companies which manage just a hand- US AND EU START ful of shipments every day, particularly small and FLEXIBILITY & MOBILITY FREE TRADE TALKS medium enterprises.” DHL ACTIVEBOOKING allows users to create The United States and European standard freight shipments while on the road. Union aim to finalize a vast transat- Customers can book freight and then print packag- lantic trade and investment partner- ing labels, either directly from their mobile devices or ship by 2014. The agreement is after forwarding by email. Orders can also be prepared expected to boost economic growth offline. The new ACTIVEBOOKING app works well with and spur job creation on both sides ACTIVEBOOKING APP: ACTIVETRACING, a mobile extension of DHL Freight’s of the Atlantic. operating on iOS and web-based Track & Trace. Android smartphones. “A THRIVING TRANS- ATLANTIC MARKET- PLACE WILL BRING The backloading proposal was followed likely to arise from May 2013 when airlines BENEFITS BEYOND by a wider report on the carbon market would have had to surrender allowances for THE BORDERS OF EUROPE AND that includes options for more fundamental 2012 emissions and no global ICAO agree- AMERICA. IT WILL ULTIMATELY reform of the EU ETS. The Commission ment could have been reached. DHL has NATURAL-GAS- Fewer emissions, reduced noise, and gas or gasoline. They are also the first DRIVE TRADE AND GROWTH proposes the structural reform start as from always been in favor of emissions trading as 2016/17. The options include: increasing the the most cost-effective market-based instru- POWERED VANS lower costs. No wonder DHL Express natural-gas-powered vehicles in operation IN EMERGING MARKETS Mexico was happy to take delivery of 15 in Mexico and assist the company’s com- EU reduction target to 30 percent in 2020, ment to address aviation emissions, but has DELIVERED TO AND REVITALIZE THE ENTIRE new Mercedes Benz Sprinter 316 NGT mitment to the environment. The new vans increasing the annual emissions reduction favored a solution at global level. DHL’s fleet DHL EXPRESS IN vans. NGT stands for “natural gas technol- are just part of a $10.5 million revamp of GLOBAL TRADING SYSTEM.” factor, permanently withdrawing a number investments into the B777, B767, and A300- MEXICO. ogy” and the vans use either natural DHL’s Mexican fleet. Frank Appel, CEO Deutsche Post DHL of allowances, extending ETS to other sec- 600 make it well prepared for a market-based 15 Images/Getty Images Ikon Andrew Dernie/Getty Images, Photos: tors not yet included, limiting access to in- instrument to address aviation emissions. FOCUS: ENGINEERING & MANUFACTURING

Breaking new ground with E&M

For engineering and manufacturing companies, the future is increasingly global and increasingly complex. Can logistics deliver the solution?

BREAKTHROUGH: Miner and giant drilling machine in the NEAT Gotthard Base Tunnel through the Alps. 10 | FOCUS: ENGINEERING & MANUFACTURING FOCUS: ENGINEERING & MANUFACTURING | 11

are now shifting more and more production (and its ufacturers who are able to get the right product to the related risks) to 1st and 2nd tier suppliers. They also right place at the right time – with reliability, visibility, depend on 3PL companies, such as DHL, which pro- flexibility, and efficiency also viewed as essential mea- vide their supply chain expertise. Those providers sures of success. who can integrate supply-chain know-how with cus- tomers’ business requirements have the possibility of LOGISTICS AS PROCESS ENABLER becoming trusted partners who improve the process For logistics companies, this means evolving to meet of manufacturing. In addition to offering a variety of these new changing needs. They must cope with many capabilities, strong 3PL providers have the capacity to new interfaces and complex global processes. Supply integrate with lower levels of product suppliers. chain service providers are now taking on more of the “enabling” processes for customers, via operational ERA OF TRULY GLOBAL MANUFACTURING tools such as control towers and order/shipment visi- The E&M Sector is set to experience outstanding bility and tracking, and strategically positioning both growth. According to MRSC Business Research, the production and repair parts. turnover for aerospace and defense, construction Challenges can be significant and occur with equipment, industrial equipment, and non-energy minimal advance warning. Caterpillar, for example, mining is likely to soar from €5.2 trillion in 2012 to had to respond quickly when a recent surge in oil pric- NEW POWER GENERA- €7.7 trillion by 2015. A survey by McKinsey on the TION: One of two gas turbines es resulted in the need for many new production sites future of industrial production suggests that large and recently installed by Siemens around the world, typically in hard-to-reach locations. complex capital goods might make up around 17 per- during modernization of the In just two years the company had to double the num- cent of worldwide industrial production. McKinsey Kirishi power station in Russia. ber of its massive “797” dump trucks in operation at Worldwide industrial energy expects an “era of truly global manufacturing, marked use will grow by about 30% by Canada’s Alberta oil sands (to over 200 units). That by highly agile, networked enterprises.” 2040. Growing demand in turn meant moving huge quantities of out-of-gauge goods Against this background, supply chain operations raises the need for new power- (OOG) to the remote Canadian wilderness (see page have evolved from being merely a “necessary evil” to a generating equipment. 14 for more on Caterpillar). key factor in achieving competitive success – every bit as important as product or price. “Any company that does not pay attention to its supply chain management might not survive, and it certainly won’t prosper,” says Nada R. Sanders, an advisor with consultancy Ernst&Young. Supply chain management can “lead to profitability, lower costs, and greater agility.” Mistakes are no longer allowed. Business today is going to man-

Bremerhaven needed to increase its capacity, the new gantry cranes arrived fully assembled – from Shanghai. “ANY COMPANY THAT DOES NOT This comparison illustrates how global supply PAY ATTENTION TO ITS SUPPLY processes and relationships in the heavy machinery CHAIN MANAGEMENT MAY NOT sector have evolved from fairly simple supply chains to complex networks – a change that is still evolving as MOVING MOUNTAINS: A SURVIVE, AND IT CERTAINLY wo anecdotes, 130 years apart, illustrate new “management technologies” are also being devel- huge excavator shovels coal at WON’T PROSPER. SUPPLY CHAIN the evolution of Engineering and Manufacturing oped in parallel. Up to the end of the 1990s, European the Jaenschwalde open-cast mine near Cottbus in eastern MANAGEMENT CAN LEAD TO (E&M) business models and supply chain processes, and American companies in the E&M Sector mostly Germany. It can be tricky for while the end goal has remained the same – maxi- manufactured products and goods for customers in mining companies to remain PROFITABILITY, LOWER mum competitive focus. In 1879, Siemens received industrialized countries, with relatively less focus on nimble and flexible in a time of COSTS, AND an order for “lighting machines” from the port emerging economies. Since the primary growth mar- increasingly complex challenges. of Shanghai. The German company delivered a kets are now in those same emerging economies, the GREATER AGILITY.” 10-horsepower generator for port lighting, which more simple supply chains of the past have been large- Nada Sanders, enabled loading, unloading, and stowing operations ly replaced by continuously evolving and increasingly Ernst & Young to take place round the clock. more complex global networks. And the next stage of evolution has already be- Today China is an incredibly important market gun. As costs and risks have become ever more com- for companies such as Siemens as for other custom- plex, the industry is reducing the proportion of in- ers in the E&M sector. And when the German port of house manufacturing and production. Manufacturers AG Siemens Reuters, this leaf: Wiegmann/Reuters; Arnd previous leaf: Photos: 12 | FOCUS: ENGINEERING & MANUFACTURING FOCUS: ENGINEERING & MANUFACTURING | 13

building up internal logistics divisions and also hav- THREE ing to compete for talent in this area, E&M companies QUESTIONS can concentrate on their core products and services. FOR Logistics operations are transitioned to a trusted part- ner-provider as soon as they have defined and agreed Reg Kenney service requirements and terms. PRESIDENT DHL ENGINEERING The competitiveness of many E&M customers is & MANUFACTURING impacted by both governance of internal processes and geographical alignment. An example is the US manufacturer, Emerson Electric Company. Emerson recognized that it had supply-chain misalignments and unnecessary costs created by a decentralized pro- “FOR ME, CUSTOMER ALWAYS cess for Latin American distribution. Each unit of the STARTS WITH A CAPITAL C” company managed its own shipping. After a DHL-as- sisted reorganization, Emerson Electric now bundles What are the unique a China outbound shipments from its various production units in Asia, challenges facing network, with supplier Europe, and the United States and transports them to Engineering & shipments by rail to a central logistics hub in Panama’s Colon Free Trade Manufacturing consolidation points and Zone. From there, finished and semi-finished goods customers? They must subsequent intercontinen- are distributed around South America, substantially sustain high levels of tal shipments by Ocean or cutting the cost of warehousing, transportation, and competitiveness while Air Freight or Express; a carrying inventory. overcoming two main Latin America distribution The process was set up with a cross-divisional challenges, expanding into hub in Panama which alignment of DHL’s business units. It draws on cal- new geographies and reduces inventory, delivery culated analysis to resolve conflicting priorities re- increasing penetration of times, and costs. lated to high capital costs versus high-value stock “aftermarket services”. HEAVY LIFTING: An Airbus A380 fuselage inventories versus the need to respond quickly to These require a compre- What is your USP? section is loaded at the French port of St. Nazaire hensive transportation Customer for me always (left), while a full-scale model of an Airbus customer orders. “We help customers define where component leaves the harbor at Langon, France they keep inventory and how much they keep,” ex- network with a wide starts with a capital C. We (above). The commercial aircraft sector is experi- plains President Reg Kenney, a task that is best ac- range of options for both have maintained long and encing a long and unprecedented up-cycle. complished when processing experts team up with shipping and INCOTERMS, loyal Customer relation- experts in DHL’s divisions. strategically located ships, with some existing The result doesn’t have to be as game-changing warehousing facilities, since the Napoleonic era, And the situation is still evolving. “Thanks to the cant opportunity for both DHL shareholders and the as the installation of a generator to power light bulbs extensive geographical and several others strong development of emerging markets, completely aerospace customers. in the port of Shanghai some 130 years ago – but it access, and Customs sustained since early 20th new freight passageways are appearing on our world The main trend for aerospace and aviation is a ris- can be. — Henning Hinze expertise. century. Our Customer $5.7 map, passages between Asia and Africa, between Asia ing demand for capacity in both passenger and air car- Management Teams are and South America, and within Asia. The expected go. More complex changes in aircraft manufacturing What special solutions highly skilled, with TRILLION relative weight of the flow of goods between the conti- are being implemented by both, Boeing and Airbus, have been developed in-depth knowledge of The estimated size of the for the E&M sector? their Customer’s strategic global engineering and nents will shift considerably,” confirms Heiko von der as well as many of their suppliers. As the first aircraft manufacturing market in Gracht, Director of the Center for Futures Studies and which is largely produced and assembled by lower We have strong solutions direction and logistics 2011. The fastest growing Knowledge Management at the European Business tier suppliers, Boeing’s new 787 Dreamliner is a chal- THE FUTURE LOOKS BRIGHT - such as: strategically needs. This enables us to region is Asia Pacific. School in a study for consultancy firm of Pricewater- lenge for its entire supply chain. Additionally, Airbus GROWTH FORECAST IN E&M SUB SECTORS located “Control Towers” move forward with Source: DHL houseCoopers. is moving some production operations to China and with visibility and Customers in a way that the USA, which also requires new logistics solutions. “Best-Fit” mode selection; our competition cannot. TRENDS IN ENGINEERING AND MANUFACTURING So, in the constant struggle of companies to improve In preparation, companies such as DHL have started competitiveness, outsourcing logistics is a key tech- to undertake extensive research into the future needs nique for reducing non-core management complexity. of companies looking for strategic competitive ad- This situation also applies to other subsectors of CHRIS DEDICOAT, President, vantage. In the E&M Sector, solutions have started E&M. For example, manufacturers of industrial and Europe, Middle East, Africa, Russia at Cisco, is responsible to reach a high degree of consistent alignment – that construction equipment have started to evolve into $92 40 34,000 for EMEAR sales, operations, is, economies of scale – allowing DHL to anticipate business models which align with those in the aero- BILLION PERCENT AIRCRAFT growth initiatives and invest- needs of customers and subsectors, such as aerospace. space subsector, as noted above. ments in strategic alliances The world market for mining Demand for power drives Will be produced for the SECURE CANAL: The Panama DHLthroughout Express Hub the was region. recently The company’s E&M regards aerospace and aviation Even though the E&M sector has come a long equipment is projected to demand for generation. About commercial sector over the awarded the prestigious TAPA “A” security certification. as a priority subsector. This is due to a large-scale, way, there remain some internal, non-core processes climb 8.5% annually through 40% of industrial demand next two decades, according 2015 to $92 billion. growth is driven by electricity. to market forecasts. available and addressable market, which is a signifi- which are not always easy to standardize. Instead of DHL (2) Reuters, picture-alliance/dpa, Photos: 14 | FOCUS: ENGINEERING & MANUFACTURING FOCUS: ENGINEERING & MANUFACTURING | 15

EXECUTIVE VIEW MAKING TRACKS WITH CATERPILLAR

Ed O’Neil, Head of Logistics at Caterpillar, explains the supply chain challenges being tackled by the heavy equipment giant, and points to the importance of people power in the company’s relentless expansion.

hen Ed O’Neil is not managing logistics for “I love the way our products look,” O’Neil ex- Caterpillar, he is out on the water engaging CATERPILLAR’S plains. “But in my world it’s about moving a lot of big, in his favorite pastime, wakeboarding. “I love SALES BY REGION ugly iron. Our largest tonnage is on the outbound W Q3 2012 to fly through the air behind a boat,” he says, “even if side with break-bulk and railroad shipments. For ex- the landings are not always good.” ample, when we ship our largest mining truck out of An inelegant landing is something that the vice the North American facility across the world to places 26 president of Caterpillar Logistics Inc. and general 37 such as Indonesia or Australia, it weighs the equiva- manager at Caterpillar Inc. can allow himself only % lent of two fully fueled 747 jumbo jets.” in his time off. Managing global logistics in the twenty- first century is a challenging business, and at Caterpil- 23 THE IMPORTANCE OF VISIBILITY lar O’Neil heads operations that involve both some of 14 If the sheer bulk and weight of products and compo- the world’s most complex supply chains and some of nents in the engineering and manufacturing sector its most remote and difficult locations. Caterpillar Inc. n North America present enormous logistical challenges, so too does is the world’s leading manufacturer of construction n Latin America the complexity of the supply chain. “The main chal- n EMEA and mining equipment, diesel and natural gas engines, n Asia Pacific lenge in the industry is how to achieve the right bal- industrial gas turbines, and diesel-electric locomo- ance in a company’s sourcing, manufacturing, and “WHEN WE SHIP OUR LARGEST MINING tives. In 2012, Caterpillar Inc.’s sales and revenues Total Sales: $16,445 million distribution strategy. We’re always striving to improve TRUCK ACROSS THE WORLD TO PLACES totaled $65,875 billion. Source: Caterpillar product cost structure through reduced supply chain SUCH AS INDONESIA OR AUSTRALIA, IT O’Neil’s responsibilities include the design, pro- variability, minimum transit inventories, achieving curement, and overall running and efficiency of Cat- higher velocity, and above all by creating a high degree WEIGHS THE EQUIVALENT OF TWO FULLY erpillar’s logistics operations and networks world- of visibility in our shipments.” FUELED 747 JUMBO JETS.” wide. Inbound, this involves moving material and Achieving this visibility, O’Neil says, is crucial. components around globally within Caterpillar’s vast DHL alone handles over 400 inbound and outbound Ed O’Neil network of suppliers and manufacturing sites. Out- air shipments every day. Then there are land and sea bound, Caterpillar’s finished products must be deliv- shipments worldwide. ered safely, cost-effectively, and on time to its dealers “We employ advanced global materials manage-

Photos: Tori Soper Photography Tori Photos: around the world. ment software for EDI, which allows us globally to 16 | FOCUS: ENGINEERING & MANUFACTURING FOCUS: ENGINEERING & MANUFACTURING | 17

to leverage close relationships in order to create an tools will be one part of the solution. Having talented optimum network. In another direction, collabora- people in place with a deep understanding of logis- tion is driven vigorously inside Caterpillar itself. For tics and the industry will be another. “A challenge in O’Neil, the challenge is achieving alignment – the the world economy is making sure we have the best perfect balance between being a product-driven orga- people to support where we’re going.” nization and using company-wide advantages of scale In a labor market that is characterized by high from a logistics perspective to arrive at effectively demand worldwide for skilled engineers and logis- priced products. tics people, Caterpillar is committed to growing and Caterpillar has certainly positioned itself as a refining the skills of its existing talent. One aspect highly product-driven company. This extends from of what O’Neil calls the company’s “multi-tiered ap- design and the procurement of material and compo- proach” is a “Cat University,” which has integrated a nents through to manufacture of a finished product. number of supply chain and logistics elements into “But there must also be the capability to deliver this its courses for employees. product cost-effectively to wherever it needs to go.” “In my world,” O’Neil continues, “distance is an CONTINUED DEVELOPMENT OF GLOBAL RELATIONSHIPS enemy. I’m moving material all over the globe, so I “Another tier is our continuing recruitment and reten- No.1 need to leverage the best possible cost structure and tion of talented people across the world,” says O’Neil. Caterpillar is currently ranked by Fortune Magazine as the 20th most admired velocity in terms of effectively consolidating and de- Caterpillar is well positioned to attract the best and company in the world, and as No.1 in the consolidating material. The question is, ‘How can I “A CHALLENGE the brightest. In 2012, Human Resources Executive Industrial and Farm Equipment category. The create the big pipes that are flowing globally and fill Online rated the company 16th among the world’s top company has a 30% market share in global these as effectively as possible?’” IN THE WORLD 50 companies on the criteria of best HR practices. construction machinery, several points ahead of its nearest competitor. ECONOMY IS “And then there’s our continued development EVOLVING TO MEET GROWTH of global relationships with key universities. This With Caterpillar’s current rapid expansion, leveraging MAKING SURE goes beyond the recruitment element. We drive col- scale in logistics – while reaping the rewards of being WE HAVE THE laboration by engaging back with the universities to a product-driven organization – is likely to become BEST PEOPLE help them design programs that meet the demands of even more crucial. The company has a footprint on six logistics today and tomorrow. We’re doing this right continents and is driving significant growth in South- TO SUPPORT around the globe – in the United States as well as in east Asia, China, India, Australia, and Central and WHERE WE’RE places like China and India.” South America. Caterpillar finds itself facing a chal- GOING.“ Over the past decade or more Caterpillar has suc- lenge that many other companies would envy: how cessfully extended its footprint worldwide, including to evolve and develop a logistics network to meet the Ed O’Neil in India, China, and Southeast Asia. While expansion, necessary increases in capacity and capability stem- especially into regions such as these, inevitably brings ming from this growth. new challenges, Caterpillar sees the journey ahead “Expansion means bringing new capabilities of itself and understands how critical it is to be well and processes into a region,” O’Neil explains. “This positioned in terms of technologies, partners, pro- can be done either through strategic partners such as cesses, and people. The company’s customer base has HEAVILY INTO CHINA: track and book material with high accuracy in our On the technological front, Caterpillar is also DHL, or by performing the strategic functions within long been global. “Now,” says Ed O’Neil, “our whole Rows of imported Caterpillar network. Regionally – in the Americas, Asia, and in pursuing a strategy of consolidating and standardiz- Caterpillar.” Continuing to develop data and analytics business is global.” — Anthony Haywood excavators wait at the Port Europe – we also deploy ‘control towers’ over the top ing its systems based on SAP. This is greatly benefiting of Lianyungang in Jiangsu province (top and bottom right), of the network.” the operations and after-sales service side of the busi- while a driver clambers into his Typically, a control tower takes in the strategic ness, he says, where the company is able to leverage dump truck at a Chinese gold design of a supply chain. It not only tracks costs but the broad and highly effective dealer network estab- CATERPILLAR AT A GLANCE: mine (bottom left). also proactively adapts the supply chain in response lished over its 88-year history. Caterpillar, says O’Neil, CORPORATE STRUCTURE & KEY FIGURES to anticipated changes in the market to make sure it is a recognized industry leader in terms of its after- still meets the company’s strategy. And it manages all sales and service. Caterpillar Inc. Headquarters Neovia Logistics Services LLC in Neovia (65% stake owned by Peoria, Illinois. (formerly Caterpillar Logistics Ser- Platinum Equity). of the operational aspects of this supply chain on a Having the right technologies in place is impor- vices LLC) Provides full logistics day-to-day basis. This offers a highly effective means tant, but these technologies must be augmented by Caterpillar Logistics Inc. services to third parties in sectors Offices & facilities: More than 125 Learn more about the of bundling technologies, efficient processes, and close collaboration and the alignment of processes. (Cat Logistics) 100%-owned including automotive, industrial 500 locations in 52 countries subsidiary of Caterpillar Inc., THOUSAND and aerospace service parts, Consolidated sales & revenue global operations of the people together in a single hub to achieve visibility. Caterpillar’s collaboration, O’Neil explains, goes in Caterpillar group at: headquarters in Morton, Illinois. employees in Q4, 2012 consumer durables, technology, (2012): $65,875 billion Two of Caterpillar’s control towers, O’Neil explains, two clear directions. One leads outside the company Provides supply chain solutions electronics, and manufacturing. Consolidated operating profit caterpillar.com are managed solely by DHL. to partners such as DHL, with whom Caterpillar seeks Soper Photography Tori Images, Lester Lefkowitz/Getty chun lyg/Imaginechina/laif (2), Wang Photos: and services to Caterpillar Inc. Caterpillar retains a 35% interest (2012): $5,681 billion 18 | FOCUS: ENGINEERING & MANUFACTURING FOCUS: ENGINEERING & MANUFACTURING | 19

ON TOPIC MRO: MAINTENANCE, REPAIR GLOBAL AIRCRAFT FLEET – AND OPPORTUNITY FORECAST 2010-2030 Sometimes the best place to on improvements that directly save money can be hidden in affect output (that is, goods that +1.7% +2.7% +4.2% plain sight. Maintenance, repair, are sold). Activities that support and operations (MRO) activi- output, such as MRO, can be North America EU, C.I.S. Middle East, Africa ties are often neglected in the forgotten or missed. Ownership of quest to sharpen up business the MRO challenge in an organi- n 2010 n 2030 performance. But there is usually zation can also impact negatively, +5.7% +5.6% Source: Current plenty of room for improve- with true MRO costs spread across Market Outlook, ment. The MRO supply chain many functions. Asia Pacific Latin America Boeing 2011 primarily deals with supporting Resulting neglect can mean maintenance activities (includ- inefficient maintenance-related -ac In its 21st annual Business Aviation Outlook, ing supply of parts and products) tivities becoming business critical, as Honeywell forecasts nearly 10,000 new busi- for customers – typically of an well as impacting customer service $250 ness jet deliveries worth about $250 billion BILLION from 2012 to 2022. Honeywell found that industrial nature, but MRO has a levels. It’s easy to see that there is some 30 percent of operators interviewed had plans to purchase value in every manufacturing and real value to be realized by ensur- a new business jet over the next five years. About 20 percent of asset-intensive sector. Costs asso- ing maintenance engineers have the those planned to purchase by 2013, with a similar proportion ciated with MRO supply chains are parts they need, when and where planning 2014 and 2015 purchases. often hidden. According to recent they need them, at a cost and service GLOBAL PASSENGER NUMBERS independent research, for every $1 level that is controlled and visible. WILL EXPAND BY spent on acquiring MRO goods, DHL has been providing an extra $0.80 is needed to get that MRO services for over a decade, part where it needs to go. And mainly in the energy sector. But 5.3% PER ANNUM keeping spare parts in inventory businesses in the engineering and FROM 2012 TO 2016, WITH 3.6 can pile on an additional $0.25. manufacturing, consumer, and AIRCRAFT ASSEMBLY BILLION PASSENGERS BY 2016. That means 16 percent of the cost automotive industries are also today typically involves of goods sold relates to MRO, and waking up to the fact that there millions of components. Source: IATA MRO transactions can account for could be value realized in the sup- more than 60 percent of all corpo- port processes. DHL’s specialists rate requisitions. work with customers to find the Complex MRO supply chains simplest, most efficient solution often suffer from lack of control to complex MRO challenges. And TRUST IS EVERYTHING and poor synchronization between MRO becomes a money-saver, not parties. Most businesses focus merely an afterthought. The skies may be their business, but aerospace manufacturers leave nothing to chance with their supply chains

ard times in aviation? In recent years, the whole “WE TAKE reckon with countless suppliers, intricate technical planning and information, and a mutually beneficial, airline industry has faced considerable changes INDUSTRY requirements and business models that can promise long-term commitment. Hin its operating environment. Economic crises, economic success only in the long term. Unsurpris- natural disasters, and volatile energy prices are affect- REQUIREMENTS ingly, the resulting tight development and production WIN-WIN SITUATION FOR ALL PARTIES ing the airlines’ business models. SERIOUSLY AND scheduling requires more effective logistics. Developing the trust that’s needed for this kind of re- Aerospace manufacturers are adapting to evolv- lationship is essential, and not usually possible in the ing market realities with significant investments in COLLABORATE MINIMIZING RISK OF PRODUCTION DISRUPTION short term, but the pay-off is well worth the effort and new materials and more efficient aircraft. And they’ve WITH OUR To thrive amid these pressures, leading aircraft man- the patience. After all, as DHL’s Head of Aerospace & remained successful, in part with innovative new de- AVIATION ufacturers are looking toward their supply chains to Aviation Marja-Liisa Turtiainen says, “Within the avia- signs for aircraft that are quieter and lighter – and, stabilize production times, which can in turn deliver a tion industry, nothing works without trust.” perhaps most importantly, require 15 to 25 percent PARTNERS TO distinct strategic advantage. Some manufacturers, for “We take industry requirements seriously,” she less fuel. ADAPT OUR example, have started dual-sourcing critical parts to adds, “and collaborate with our aviation partners to Still, while prospects for aircraft manufacturers minimize the risk of production disruptions. adapt and innovate our offering so it meets their needs.” look generally positive, (particularly given the volatil- OFFERING.“ Another supply chain strategy is to establish The result? A win-win situation for all parties, ity that airlines are facing) these companies certainly Marja-Liisa Turtianen a real partnership with a logistics service provider. which doesn’t take a rocket (or aerospace, as the case TOOLS FOR THE JOB: Having the right equipment and parts on-site for repair saves time, money, have their own set of unique challenges. They must This means tighter cooperation, exchange of strategic Chris Rogers/Getty Images picture-alliance/dpa, Photos: may be) engineer to appreciate. and space. MRO operations are of paramount importance for industrial customers. BUSINESS | 21

previous experience at a big London hospital, Ranson ated. Previously the job, which covers anything from turned to NHS Supply Chain, a private logistics and replenishing stocks of surgical gloves to buying MRI procurement organization which operates a govern- scanners, had been carried out by NHS agencies. ment contract managed by the Department of Health. “The rationale is to drive more value from pro- curement and the supply chain,” says Nick Gerrard, ONE-STOP-SHOP SYSTEM BOOSTS EFFICIENCY CEO NHS Supply Chain. The company would take on BUSINESS Over the last year, NHS Supply Chain – a unit of DHL the risk of investing in things not core to the NHS, – has set about reorganizing SECAMB’s back-office such as distribution centers, allowing the health ser- operations, introducing a “one-stop-shop” system for vice to concentrate on its clinical responsibilities. purchasing, ordering, and delivery. The system “is now a lot more efficient,” says Ranson. Unnecessary NEW SCALE OF OPERATIONS duplication in suppliers has been eliminated. So has DHL had worked with the NHS before, but this was paperwork, as employees use handheld digital devices a new scale of operations. Some 1,600 people who to enter orders. The change has brought considerable “THE RATIONALE had worked in NHS procurement and logistics agen- savings – £250,000 off SECAMB’s budget. IS TO DRIVE cies were taken on. Today the 2,400-strong workforce Ranson’s initiative is just one part of an innovative MORE handles some 4.6 million orders a year from seven dis- project within England’s National Health Service to tribution centers, and works with 850 suppliers and a boost efficiency and savings for Europe’s biggest pub- VALUE FROM catalog of 600,000 products. Sales have also risen from lic healthcare provider. For years, the UK government PROCUREMENT £800 million to £2 billion. And it all runs online, with has tried to control NHS costs, turning increasingly to NHS staff making orders directly via handheld devices. the private sector for solutions. AND THE “Public sector procurement is complex,” says Ger- The NHS is a cherished institution in the UK SUPPLY CHAIN.” rard. “We develop expertise in particular categories – where healthcare ranks ahead of other voter concerns. Nick Gerrard, CEO NHS from gloves to orthopedic joints – and then remove But NHS financing has been a challenge for govern- Supply Chain duplication by offering one contact point.” Combining ments ever since the service was established in 1948. procurement and logistics eliminates further costs. All Now, as a Conservative-led coalition struggles to this requires close cooperation with the NHS. “We do a drive through an austerity program aimed at restor- lot of consultation,” says Gerrard. ing health to public finances, the need to control NHS The company is already halfway to its target of costs and improve efficiency is ever more acute. delivering £1 billion in savings to the NHS within ten The NHS spends around £18 billion per an- years. But there is no room for complacency. NHS of- Procuring health num on products, goods, and services out of an NHS ficials are watching progress and have flagged up the budget of £100 billion. NHS Chief Executive David scope for further savings – something NHS Supply Nicholson estimated that £1.2 billion could be saved Chain says it is working on. “It is a learning experience through better procurement, and a 2011 report by the for the public and private sector,” says Gerrard. IN CASE OF EMERGENCY: Meeting National Audit Office identified scores of inefficien- For DHL, the novelty is a business model going tight response times means beating cies across the NHS. It was to address these that in beyond its traditional expertise and into procurement in hard times logistical difficulties. 2006 DHL was awarded a ten-year contract to procure and the selling of products as well as the maintenance of and supply goods and NHS Supply Chain was cre- capital medical equipment. The next step, says Gerrard, is capital planning. NHS Supply Chain is facilitating a £300 million Capital Fund on behalf of the Department The National Health Service is a cherished hen Paul Ranson started his new job in early of Health that delivers an average saving of 14 percent 2012, he brought something of a revolution. on a range of capital medical equipment. institution. But financing the NHS has always WThe new Head of Procurement arrived at the This is all part of a deeper relationship, which Ger- South East Coast Ambulance Service as it underwent rard sees developing over years, and which could hold been a challenge, and the UK economy is sweeping change. Created by a merger of three ambu- lessons for governments and business in other countries. troubled. Today, as an austerity program aims lance services serving 4.5 million people in southern The scope of business will also grow. As the UK popula- England, SECAMB was in the process of rearranging tion ages, officials anticipate more demand for patient to restore health to public finances, the need its operations to create a new system of ambulance care in the community. This will increase the impor- to improve NHS efficiency has never been bases dispersed across 12,000 square kilometers. tance of logistics. NHS Supply Chain already provides The new arrangement aimed to enable ambulance services to some 200,000 patients in the community, and more acute. New supply chain solutions may teams to meet tight response times for emergency is developing new products and services in this area. be the answer. calls. But it also created logistical difficulties in en- Another novelty is the bottom line. There is a profit suring that vehicles were stocked with necessary con- MEDICAL SUPPLIES: The NHS cap on the company’s returns. “You genuinely see that sumables, that orders were processed in time, and that spends £18 billion a year on you can make a positive contribution to British society,” replacements were transported to the 120 “response products, goods, and services. Gerrard concludes. “That is quite powerful for all our

points” where the units were stationed. Drawing on Getty Images Sturti/Getty Images, Photos: 2,400 people.” — Frederick Schulenburg 22 | BUSINESS BUSINESS | 23 REACH OUT FOR THE GLOBAL WIN! DHL research shows that small and medium-sized enterprises are more successful when they enter the global market. 410 mall and medium-sized enterprises are the backbone of every MANAGERS national economy. They stimulate growth and, being more flex- INTERNATIONALIZATION DRIVER FOR BUSINESS PERFORMANCE Sible than big corporations, adapt quickly to a market’s changing WERE SURVEYED. MANY SEE PROBLEMS WITH A LACK OF COMMUNICATION. demands. As a result, they drive innovation and also make a sig- Developed-world SMEs lag behind emerging-market SMEs in terms of inter- nificant contribution to export and trade figures. In fact, small and nationalization. BRICM SMEs placed more emphasis on logistics as a positive It’s not all good news. The study found that medium-sized enterprises, or SMEs, typically employ between influence, suggesting they rely more on efficient transportation and customs as SMEs increasingly look beyond their own 35 and 45 percent of the workforce and contribute processes, but also that they see logistics as a competitive differentiator. backyards, they also face some major challenges. INFRASTRUCTURE: between 30 and 40 percent of national Many surveyed said that a lack of communica- BRICM SME Better-performing added value. But there’s one thing even SMEs employ over tion and information about markets and custom- The more international business activities a BRICM SME has, 50 people. This under- many SMEs may not know: the the more likely it is to be successful. ers was still a big problem – one that might be SMEs doing the best this century scores the importance remedied by collaboration with a globally savvy of resources for inter- are those that are working inter- 13% 18% 20% 33% national growth. logistics provider. Another issue was the lack nationally – as a recent study of information on SMEs themselves as a group. commissioned by DHL shows. 5 Despite their major contributions to their na- 0 YEAR OLD 1 tional economies, SMEs may find this informa- 2 AND YOUNGER SMEs ARE MORE GLOBAL THAN OLDER ONES. tion gap means that their interests are not always 2+ Small and medium-sized businesses in developing markets such as adequately represented. 0 Amount of international activity Portion of SMEs outperforming their markets Brazil, Russia, India, China, and Mexico (the BRICM countries) tend to be more international than those in developed countries. Around BRICM AND G7 SMEs IN COMPARISON one-quarter of SMEs in BRICM are “born global,” a phenomenon re- TO THE MARKET: BRICM BRICM SMEs have more international operations than SMEs in the G7. lated to the fact that consumers in G7 countries still have significant- SMEs place more emphasis on ly more spending power. Such SMEs use modern communications logistics as a positive influence SUCCESS: Interna- BRICM All SMEs G7 on their international tional trade and coop- 0 Amount of international activity and logistics services to get to the world’s biggest consumer markets operations than their eration have become (%) Portion of SMEs from the beginning. And SMEs founded in the last five years are G7 counterparts. key drivers of small even more likely to be born that way. That’s also why BRICM SMEs business success. 51% place more importance on logistics. Inefficient public infrastructure 34% 15% 14% 16% 12% 26% 46% 13% 10% 42% is a significant challenge as they look to trade internationally. So 18% logistics becomes a fundamental part of their service, with high- quality services giving them an edge over the competition. 26 0 1 2 >2 PERCENT OF SMES TRADING INTERNATIONALLY SIGNIFICANTLY OUTPERFORM THEIR MARKETS, IN CONTRAST TO 13 PERCENT ANNUAL TURNOVER IS THE UPPER LIMIT FOR A COMPANY OF THOSE OPERATING ONLY IN THEIR HOME COUNTRY. TO BE CONSIDERED AN SME. Why? Some think successful, international SMEs are taking lessons The majority of the best-performing SMEs in BRICM nations they’ve learned elsewhere and bringing them home. Some think it’s be- say they will grow their exports in the near future. In fact, the cause competing across borders forces the company to sharpen up internal majority of BRICM’s best-performing SMEs already do a lot of ABOUT THE SURVEY processes, which benefits overall performance. Others suspect interna- export business with developed G7 countries, which suggests The “International Competitiveness of SMEs” study is a macro- tional SMEs are simply more ambitious. Whatever the reason, more than that in the future they’re going to be well positioned in an economic analysis and survey of 410 SME directors in G7 and one-third of businesses surveyed for DHL saw international expansion as increasingly globalized market. “There are clearly still some BRICM economies. It was conducted between September and part of their plan for long-term growth. Opportunities for product diversi- remaining hurdles for small businesses with global aspira- November 2012. Small and medium-sized enterprises (or SMEs) fication and new knowledge gained by working internationally were a big €50 tions, but we are delighted to see that more and more SMEs are companies with between 10 and 249 employees, and an annual turnover of less than €50 million. part of that, according to the SMEs. All of which shows that international MILLION are looking at the fantastic opportunity that international trade tinyurl.com/DHLsmeglobal trade and cooperation are key drivers of any SME’s success. Studio/Getty Images, Yagi Stefano Dal Pozzolo/laif, Photos: Chinaface/Getty Images represents,” says Ken Allen, CEO DHL Express. 24 | BUSINESS BUSINESS | 25

n a world where natural resources are becoming fueled by the idea that businesses should contribute to scarce, social issues are on the rise, and reputation social and environmental causes to bolster their repu- Ihas become a key factor for business, corporate tation. But creating shared value (CSV) is not about social responsibility (CSR) is a popular catchphrase. trade-offs. Instead of looking at societal engagement Considered greenwashing by some and idealism by and environmental issues as a cost of doing business, others, CSR has in recent years evolved from a de- CSV – or transformative CSR – is about developing a fensive policy for companies to give back to society competitive advantage. through philanthropic engagement into a pragmatic “As such, the driver is corporate strategy – not business strategy driving innovation, brand differen- reputation,” says Valerie Bockstette, Director at FSG. tiation, and long-term return on investment. “Engagement is not seen as a costly redistribution of Well-managed CSR can create sustainable social profit but rather as an investment with a return expec- value and reduce a company’s negative environmental tation. It is not about a CSR department managing an impact for example, while supporting its business ob- “IN THE FUTURE, array of projects developed to meet stakeholder expec- jectives, reducing operating costs, and enhancing re- CSR WILL NO tations or garner a nice headline, but about the entire lationships with key stakeholders and customers. And LONGER MEAN business innovating to address societal challenges.” although CSR is not going to prevent demographic change or reverse the greenhouse effect, companies DOING WELL RESPONSIBLE PRACTICES, BETTER PERFORMANCE can, by being responsible, benefit both themselves AND THEN Studies show that companies with responsible busi- and society. ness practices tend to demonstrate a better financial “Looking to the future, we need a purpose-driv- DOING GOOD, performance than less sustainable competitors. An en, principle-based approach to CSR, in which busi- BUT DOING analysis by the University of Cologne shows that in- ness seeks to identify and tackle the root causes of our WELL BY DOING vestments in companies rated best-in-class according present unsustainability and irresponsibility, typically to their environmental, social, and governance prac- through innovating business models, revolutionizing GOOD.” tices, tend to outperform companies rated lower on their processes, products, and services, and lobbying Christof Ehrhart sustainability by up to 8 percent. for progressive national and international policies,” “With the limitation of resources and a change in explains Wayne Visser, founder of the knowledge values, companies have to revise unsustainable busi- incubator CSR International. In other words, the fu- ness models and live up to their responsibility,” says ture belongs to companies that create shared value, Christof Ehrhart, Head of Corporate Communica- as Michael Porter and Mark Kramer, founders of the tions and Corporate Responsibility at Deutsche Post non-profit consultancy Foundation Strategy Group DHL. “In the past, it may have been enough to adhere (FSG), would say. Traditional corporate engagement to codes and laws. Nowadays though you need addi-

Illustration: Sabrina Tibourtine, photo: DHL photo: Tibourtine, Sabrina Illustration: with society has been rooted in a trade-off mentality tional activities to help solve social and environmental

HELPING TO DEAL WITH DISASTER – DPDHL AND THE UNITED NATIONS

Deutsche Post DHL’s disaster manage- of disaster management – preparedness, Teams (DRTs) after natural catastrophes. DOING WELL BY ment program GoHelp is an initiative response, and recovery. The company works “Working directly with the United Nations very close to the heart of everyone involved, with the UN Development Program (UNDP) is the best way to deliver on short notice,” and the basis for a longstanding public- to prepare airports for disaster response says Christof Ehrhart. “Our strategic DOING GOOD private partnership (PPP) with the United through its program Get Airports Ready for partnership is not about giving money, Nations. Using its core competence in logis- Disaster (GARD), and with the Office for but about bringing in our expertise in the tics, its global network, and the know-how the Coordination of Humanitarian Affairs right way to develop knowledge and build Transformative corporate social responsibility in the logistics of its employees, DHL focuses on all phases (UNOCHA) by providing Disaster Response sustainable partnership networks.” sector creates social value to the benefit of companies, customers, and the environment. What’s not to like? 26 | BUSINESS BUSINESS | 27 SIZE DOES MATTER issues. In the future, it will no longer mean doing well In the wake of climate change, a main con- and then doing good, but doing well by doing good.” cern for business is streamlining processes for sup- Accordingly, CSR experts predict that, as so- ply chain decarbonization – something sought not Container ships are big – and they’re about to get bigger. Ten ultra-large cial and environmental problems become increas- only by investors, but also by increasingly carbon- vessels will join the world’s fleet this year. But is the extra capacity really ingly complex, companies will have to move beyond conscious consumers. They are forcing retailers and needed in today’s volatile economy? And what is super slow steaming? 400 global standards such as the UN Global Compact distributors to re-examine their sourcing decisions, or ISO 14001 and develop products and processes and this challenges logistics providers to reduce their which meet demands creatively and sustainably. One environmental impact while creating individual yet y the end of 2013, the largest container by days. Many customers looking to cut costs are example is M-Pesa, developed by Vodafone to allow scalable solutions for their customers. “After all, lo- ship in the world will be Maersk’s Triple E. willing to make the switch. What they ask for in Meters the world’s unbanked to perform basic financial trans- gistics is responsible for 12 to 14 percent of the global BThe three Es stand for economy of scale, return is predictability and reliability. Ironically, actions with cell phones. At the same time, offering carbon footprint,” says Ehrhart. “Not surprisingly, energy-efficient, and environmentally improved. slow steaming can actually help. less ethical products and services will no longer be an the majority of customers ask for measures of sus- Ten of these ships will be launched in 2013, and option. Wal-Mart, for example, voluntarily limits the tainability, which is why the logistics industry sees its another ten by 2015. They will be 400 meters long SLOW STEAMING CREATES SAVINGS company to the use of organic cotton, forcing its cus- responsibility as an opportunity.” and 59 meters wide. To put that in perspective, Super-slow steaming means bringing the speed tomers to do the same. imagine a building 20 stories high, as wide as an down from around 20 to 15 knots. This cre- Progressive companies will also be required to MAKING MEANINGFUL CHANGES eight-lane highway, and almost as long as the ates savings for carriers, but can damage the 324 demonstrate full life-cycle management of their prod- The sector has accordingly started targeting substan- Empire State Building. One of these behemoths engines of older vessels. The new big ships can ucts, in particular committing to zero waste, CO2 neu- tial reductions in CO2 emissions and transportation could carry over 746 million bananas – enough cruise at lower speeds without damaging their 300 trality, and water-neutral production, with mandated costs, making meaningful changes in operational for every single person in Europe to have one. A engines. Slow steaming is also more environ- DP DHL recognizes and take-back schemes for most products. Thus Nike has embraces its responsibility to efficiency and new technology. One lever is the -de train loaded with all 14,770 containers from one mentally friendly, reducing CO2 emissions by started to reduce its environmental impact by apply- make a positive contribution ployment of green vehicles in urban areas, while of these ships would be 88 kilometers long. more than 50 percent per container. to society and the environment. ing “considered design” principles, such as substan- To find out more, visit: aerodynamic technologies, such as those supported Impressive numbers, but they come with a But whether or not ocean freight’s fu- tially reducing the amount of toxic solvent adhesives by the USEPA SmartWay program, are seen in fleets few caveats. The size of the ships will limit the ture is green, the bottom line remains. that factory workers and waterways have to cope with. tinyurl.com/DHL-CoRe throughout the business. Other measures include routes. With a draft of 14.5 meters, they will be Andreas Bödeker, Head of Global Ocean Over 130 Unilever factories worldwide send zero optimizing network logistics, implementing green too big to use any port in the Americas or pass Freight at DHL Global Forwarding, fore- waste to landfill, while at the same time saving money building technologies, and sustainable packaging ini- through the Panama Canal. And once the mam- sees continued rate volatility. He predicts to invest in the business. tiatives. Cross-sector partnerships are being formed moth container ships do dock, the question is that with the advent of the big ships in But dealing with all these challenges is not some- to develop sustainable warehouse designs or strategies then how to deal with the monsters. 2013, demand and supply will start to even thing companies will have to do alone. Cross-sector for reducing waste levels. out by the end of the year. In any case, it is partnerships will be at the heart of future CSR ap- Green logistics is a trend. According to DHL’s CHALLENGING PORT INFRASTRUCTURE not the size of the ship that counts, but the 200 proaches. No single player will have all the solutions, Green Trends Survey it is already important to more Larger ships have better economies of scale, service. — Gaby Pinkner so companies bring their core competencies to the than 60 percent of logistics customers, while a major- which helps bring down overall transportation party on a local and global level. ity of end customers is willing to pay premium prices. costs. However, they could create operational and Not surprisingly, CO2-neutral services are one of infrastructure challenges on the landside. If port 150 the fastest growing products in the business. DHL, operators don’t improve their infrastructure and for example, through its GoGreen program, contrib- intermodal connections, Triple E vessels will not utes to climate protection projects for every GO- be able to call at them – and this would have far- GREEN parcel delivered by Deutsche Post DHL reaching consequences for global flow of goods. worldwide. For now, the ultra-large container ships will “To offer credible green logistics, you need to be used on the Asia-to-Europe route involving calculate exactly how big the carbon footprint of Chinese ports such as Shanghai, Ningbo, and 100 each delivery is, and you need the proper tools Hong Kong, already fitted with the cranes and and methods to do it,” explains Ehrhart. “We be- moorings needed to cope with the massive ships. SCALED UP: Maersk Triple E container ships are big lieve that it will be necessary to quantify distinct In Europe, the ships could dock at Rotterdam enough to dwarf wind emissions for a sustainable reporting as well as or Felixstowe. In Germany, Wilhelmshaven and turbines and outreach in fulfilling the extremely high expectations of Bremerhaven could handle loading and off-load- the Eiffel Tower. A whole a postmodern economy.” And how much does ing, and Hamburg is increasing capacity. herd of elephants might easily get lost on one. Just that cost? “At Deutsche Post DHL Corporate It is a drastic shift. Moving from a delivery a single such vessel could Responsibility is intrinsically embedded in time of just a few days to an average of 25 days carry enough bananas our company strategy, which makes it im- from China to Europe is not an easy transition. for every single person in possible to identify a specific cost of CO2 With air freight, a customer knows the exact time Europe to have one each. 4 neutralization,” says Ehrhart. That’s trans- his goods are going to arrive. With ocean freight,

formative CSR at work. — Tong-Jin Smith Getty Images photo: Tibourtine, Sabrina Illustration: a storm out at sea can knock a ship off schedule 28 | BUSINESS BUSINESS | 29

Van de Geijn commissioned a team of “Make Life EaZy” into one particular way forward, is to create settings where THREE STRATEGIES consultants, who flew from country to country to facilitate teams can conduct fast, low-risk, and low-cost experiments simplification projects, report best practices, and measure to find ­answers. progress. They also identified and trained local staff as “EaZy Take global adhesives company Avery Dennison. Faced Challengers” who could engage customers, distributors, and with the need to ramp up top-line revenue, President (now AGAINST COMPLEXITY employees to identify opportunities to simplify products CEO) Dean Scarborough decided that instead of a big, Managers cause complexity, which means they can also do something about it. and services. Sales in Zurich’s European Life business grew company-wide “program,” each division would conduct fo- significantly, and van de Geijn’s successor made “Make Life cused, 100-day experiments to capture revenue from specific EaZy” an ongoing part of his management process. opportunities with their own products and markets. One di- visional team figured out how to take a taping product for STRATEGY #2: USE SEMI-STRUCTURES TO GET THINGS DONE builders and repurpose it for retail, and generated a first sale The survey showed that poor collaboration between units is to a major chain within 100 days. The team then built on this a major complexity driver. As one manager said, “We have success to create a new, ongoing revenue stream. Over the products that need to be tailored to our customers’ require- next two years, hundreds of rapid results teams were formed AN ESSAY BY ments but too often fail to respond because people are not and generated millions in new revenue. They also learned RON ASHKENAS prepared to deal with a myriad of approvals.” how to get things done across functional boundaries. It’s understandable that managers don’t want to col- Senior Partner, Schaffer Consulting (Stamford, Ct.) and Executive in Residence at the Haas Business laborate across silos when they perceive it will be frustrating School of UC Berkeley and unproductive. Nor do they want to “reorganize” since moving the boxes around often just makes things worse. An alternative is to utilize what we call “semi-structures” – temporary work groups charged with solving specific prob- lems quickly. One of our clients was recently forced to make a sig- nificant headcount reduction. Past reductions had failed to deliver expected benefits due to unclear target setting and arge organizations have always been complex. But in The good news is that if managers cause complexity, uneven execution. Too often, unintended consequences recent years, with the advent of globalization and the then they can also do something about it. Here are three were discovered after commitments had been made, and Lacceleration of new technologies, this complexity has strategies to help: managers were allowed to backtrack. “MUCH OF THIS COMPLEXITY- multiplied. Many managers have become frustrated with So this time the CEO tasked a cross-divisional group to how difficult it has become to achieve results. STRATEGY #1: ELIMINATE COMPLEXITY BUILD-UP work with their finance and HR officers, and deliver com- CAUSING BEHAVIOR RESULTED Several years ago, seeing many of our consulting clients Almost everyone in an organization can identify examples mitments within four months for over a billion dollars in FROM WELL-MEANING ACTIONS struggling with this increasing complexity, we developed of seemingly unnecessary complexity – inefficient meetings, savings. This team received some minimum guidelines, but INTENDED TO DEAL WITH A FAST- an online questionnaire to help them identify where it was redundant approvals, time-wasting emails. This was con- otherwise was authorized to work independently and de- coming from in their organization. We recently analyzed tinually confirmed in our survey responses with examples velop what it felt to be the best overall solution. The team PACED ENVIRONMENT.” the responses to this survey from 1,400 managers across ten such as, “more administration paperwork that ticks boxes sought input from managers known to advocate radically different ­companies. but does not move delivery forward.” streamlined operations, worked to simplify processes that Scoping these projects so teams could quickly experi- The surprising result of this analysis was that the most In most cases these examples reflect patterns accumu- cut across units, and phased reductions to mitigate perfor- ment with new ideas not only allowed them to create mo- significant source of perceived complexity was the managers’ lated over years as structures have shifted, processes evolved, mance risks. This cross-silo “semi-structure” allowed the mentum with a first success, but also to deliver the insights own behavior. They said that much of it is caused by lack of and product portfolios proliferated. The simplest way to organization to reach decisions more quickly than before. needed to scale new ideas to the entire organization. And transparency between units, poor planning and strategy, and tackle complexity build-up is to regularly question proce- Separations proceeded largely according to plan, with mini- they eliminated complexity, because they were designed to weak management disciplines. dures or behaviors to see if they still make sense. mal disruptions to results even though they were among the work within the environment where they were developed. Of course, much of this complexity-causing behavior The life insurance division of Zurich Financial Ser- most aggressive in the company’s history. No manager intends to make things more complex. But resulted from well-meaning actions intended to deal with a vices offers a good example. Several years ago, the head of unless managers make the conscious decision to work dif- fast-paced environment. As one manager put it, “We need to the business, Paul van de Geijn, and his team developed a STRATEGY #3: FAST-PACED, RAPID-CYCLE EXPERIMENTS ferently – and employ the kinds of strategies described here respond to our customers so quickly that we don’t have time concerted simplification effort known as “Make Life EaZy.” Too often we see organizations implement broad changes – they run the risk of doing so anyway. to make sure what we’re doing is consistent with corporate It was launched at a workshop where Zurich Life manag- without first exploring their consequences. This can mean standards or will work for other business units. We end up ers from 15 countries were given five minutes to fill in their major initiatives failing to reach their objectives and often Searching for simplicity? Read more on the HBR blog network: supporting hundreds of product variants, billing codes, and home country’s application form for the simplest type of life creates even more complexity. An alternative to this “big

legacy technologies.” insurance. Not one could complete it in the allotted time. Flickr/Getty Images photo: Bernd Schifferdecker, Illustration: bet” approach, where tremendous resources are poured blogs.hbr.org/ashkenas 30 | SOLUTIONS SOLUTIONS | 31

nize the need to innovate, the day-to-day pressures support as part of the company’s distribution channel, make this difficult to achieve.” while receiving reverse logistics services for recycling For customers of logistics providers, meanwhile, and repairs of mobile devices. the global financial squeeze fuels the need to drive growth while shrinking margins. For these custom- DIFFERENT MINDSET ers, then, process improvements, added technology, In both cases a different business mindset was required SOLUTIONS and better services from their logistics providers is – one which didn’t simply and traditionally view the re- no longer enough. In a saturated or new and unex- spective supply chains in isolation. So, BA transferred plored market, companies require something more its in-flight supply from a catering company and put from their 3PLs – something which gives them the it into the hands of DHL for domestic and short-haul edge over the competition: a new product or service flights from Heathrow, opening up engagement with idea that, when implemented, makes a significant im- multiple food providers to acquire the best products pact by simplifying, automating, generating value, at the most competitive prices, reduce costs, and im- or reducing costs. They expect something transfor- % prove customer experience. mational. of logistics55 operators will be imple- DHL also works with Telefónica, owners of the menting new, innovative supply-chain O2 brand, to provide customized services to ensure TRANSFORMING BUSINESS solutions over the next six months, with a further 19 percent actively that the company can quickly bring its product and Fortunately, the implementation of transforma- reviewing options, according to The service ideas to market – and, crucially, meet the Barclays and Grant Thornton UK tional services is a win-win for both companies Logistics Confidence Index demands that such services can require in a 24/7 and the logistics providers who serve them. Logistics for H2 2012. world of instant consumer engagement. IMPROVED CUSTOMER EXPERIENCE: providers may find the best route to growth is through Yet it’s not simply commercial organizations that BA has put its in-flight catering for domestic diversification of traditional product offers and servic- benefit from transformational services. In the UK’s and short-haul flights from Heathrow in the es; so, by offering ways to transform their customers’ public sector, city councils have long wanted to re- hands of DHL, meaning engagement with businesses, 3PL providers can start to transform their duce commercial traffic into urban centers, although multiple suppliers – and much better meals. own and open up markets that would not necessarily be this has proven difficult in a world where companies “natural” areas for a supply chain outsource company. insist on frequent deliveries, regardless of cost and car- The benefits to the customers of 3PLs are rather more bon footprint. obvious. In the UK, organizations facing different sets However, some councils have been taking advan- of challenges have recently needed to transform their tage of DHL’s consolidation service, which analyzes operations, and have done so by re-thinking their traffic flow, considers companies that could share- ve traditional supply chains in close collaboration with hicles, and challenges the way they service their needs, Tucking into their logistics provider. implementing improved supply chains through the use British Airways, for instance, needed a more flex- of data-driven consolidation centers. ible approach to food and beverage provisioning on its flights. And communications operator Telefónica UK UNLOCKING OPPORTUNITY wanted to ensure that its retailers received best-in-class Effective implementation of transformational services transformation requires close collaboration between logistics provider and customer. To help deliver transformational pro- New markets require new strategies and new ways of thinking, which is why grams to its own customers, DHL set up a Specialist Services division in January 2012 with approximately transformational services have become critically important to some companies – 2,000 staff. Taking a consultative approach, it works with customers to identify and address the needs of and the third party-logistics providers who serve them. their end users, then creates the appropriate solutions. “Much of our focus around transformation is ight now, the business world is not always turn- Currently, the third-party logistics (3PL) market helping our customers approach the market in a new ing as it should. Economic volatility has caused is facing particularly acute challenges. For logistics way and become true leaders in where they want to Runrest in global markets; and when the market providers in the United Kingdom, for example, glo- play,” says Paul Richardson, Managing Director of environment changes, businesses must adapt in or- balization has turned 3PL into a fragmented industry, Specialist Services at DHL Supply Chain UK. “It’s a der to cope. Put simply, unstable and unpredictable one where innovation – a critical driver of growth, different approach that helped us with BA, Telefónica, conditions require a new, creative way of thinking if differentiation, and profitability – becomes ever more and with our work in city centers, and starts when businesses and their logistics providers are to produce difficult. The economic crisis only makes a tough situ- we go to customers and spend a day listening to their higher returns while reducing costs. ation worse. “The continuing economic climate is pro- problems. Then we begin building a transformation Squaring this circle isn’t easy, but it can be done viding the logistics industry with challenges,” noted CONSUMER ENGAGEMENT: DHL program that helps them see what could be done. They is helping to ensure that Telefónica can through the transformation of traditional business Rob Riddleston, Head of Transport and Logistics at may not know of an opportunity that could transform meet voracious consumer demand for new operations. This fundamental change is no longer sim- Barclays, at the launch of Barclays’ H1 UK Logistics products and services. their business, and our job is to try and unlock what

ply a nicety in some markets – it’s a necessity. Confidence Index in July 2012. “While some recog- Mauritius Airways, British Photos: that could be.” — Tony Greenway INFOGRAPHIC | 33

YELLOW IS THE 1.62 billion tons*2 Truck emissions in Europe

Around a quarter NEW GREEN of these emissions Sustainability is one of the biggest issues for our comes from future. DHL has introduced its GoGreen program empty runs which will help improve the CO efficiency. 2 }

DHL is investing constantly in more Warehouse lighting efficient, newer, and accounts *2 quieter aircraft, which for up to 80% use less fuel, fly more of a company’s 2011 quietly, and emit lower levels of air pollutants.*3 energy consumption Jet aircraft by nitrous oxide (NOx) emission standards Number of Aircraft 155 1.86 26 34 36 59 *1 billion 2011 { Number of Aircraft 147 The number of CO2-neutral GoGreen shipments sent by 28 34 36 49 Deutsche Post DHL increased by nearly 13 times from 2008 to 2011. 2010 { no classification CAEP/4 highest achieved } Constantly increasing CAEP/2 CAEP/6 emissions standard requests for GoGreen * CAEP is a committee and classification for environmental protection in aviation shipments According to a survey, this many consumers would pay a higher price for green products:*4 China India 84% Malaysia { Singapore USA Japan % France 2008 50 { Germany higher share performance for companies with best performance 145 million in the field of sustainability. } GoGreen shipments 2 %* www.dp-dhl.com/gogreen +8 The consumer Plastic Paper goods industry uses trees felled for of packaging { } paper production*2 = 100,000 trees 2 = million 253 per year* 7 million tons *1 Corporate Responsibility Report 2011, page 48; *2 Delivering Tomorrow, Towards Sustainable Logistics, page 8–9; *3 Delivering Tomorrow, Towards Sustainable Logistics, page 56; *4 Delivering Tomorrow, Towards Sustainable Logistics, page 78; Infographic: G+J Corporate Editors GmbH 34 | SOLUTIONS SOLUTIONS | 35

SPEED OF FLIGHT: DENSO Europe’s customers can now place orders up to UAE CONNECTS THE DOTS seven hours later and receive products earlier the next day. The United Arab Emirates (UAE) is becoming one of the world’s busiest logistics hubs, making the most of a prime location on the global map and serving two billion potential customers in four time zones.

edicated to steering its economies away from de- tics Corridor. With a single custom-bonded zone and pendence on oil, the UAE’s most recent infra- direct access to the major trans-emirate road net- Dstructure projects include a nationwide rail sys- works, DWC is a truly multimodal logistics platform tem, expected to be operational by 2014, and the providing unprecedented levels of connectivity, speed, December 2012 opening of the $7.2 billion Khalifa and efficiency. An area of 140 square kilometers has Port. been designated to create a self-sustained economic “This flagship project strengthens our progress zone to support a multitude of activities including lo- and will also contribute to the continuation of the gistics, aviation, commercial, and other businesses high rate of growth witnessed by the UAE,” President around a world-class airport with a planned annual His Highness Sheikh Khalifa bin Zayed Al Nahyan capacity of 12 million tons of cargo and 160 million said at the inauguration. passengers. Together with the already bustling port and free With the freight forwarding segment the stron- zone at Jebel Ali in Dubai and the adjacent vast new gest contributor to logistics, earning 63.1 percent of Khalifa Industrial Zone Abu Dhabi (Kizad), the new the revenue, it is no surprise that on the World Bank’s AUTOMOTIVE TAKES OFF port is expected to increase the UAE’s international THE UAE IS THE MOST global Doing Business list the UAE ranks No.5 in trad- CONNECTED COUNTRY in trade volume significantly. According to a Frost & Sul- ing across borders. Located in close proximity to the the Arab World, according to livan study, the UAE’s logistics market, currently rep- the DHL Global Connectedness high-growth economies of India and China, the UAE AT END-OF-RUNWAY resenting around 2.5 percent of the nation’s total GDP, Index 2012. imports around 60 percent of its products from should sustain a compound annual growth rate of 8 these countries, mostly transiting through the Dubai Automotive supplier DENSO wanted to expand mature and highly competitive. That means as a sup- percent, reaching revenues of $10.06 billion by 2015 borders. European operations, and found the answer at plier you have to keep customers loyal to dealers and and an estimated $16 billion by 2020 from just $6.35 Taking advantage of the UAE’s strategic position, repair shops. And that requires being able to deliver billion in 2009. The DHL Global Connectedness In- DHL Express just broke ground on its largest opera- DHL Supply Chain’s End-of-Runway site in Leipzig. your products quickly,” says Kemps. dex 2012 ranks the UAE No.23 – just three places be- tions facility in the Middle East at Dubai’s Meydan DHL Supply Chain provides DENSO with stock- hind the United States in the global flow of trade, Racecourse district. Expected to be operational before t may be called the aftermarket, but it can’t be run on keeping, picking, and a range of shipping boxes. The capital, information, and people – making it the most the end of 2014, the new center will cover more than DENSO’S GLOBAL an afterthought. Rapid and flexible delivery times as warehouse is replenished from DENSO’s distribution connected country in the Arab world. 17,000 square meters – approximately the size of three PRESENCE Iwell as proximity to dealers and distributors are at center in Amsterdam. Automotive parts distributors Further testament to this connectedness is the re- football fields – which includes 7,300 square meters of the top of any automotive supplier’s mind. So, when can now place orders with DENSO up to seven hours cently launched airport and logistics hub Dubai indoor sorting and loading area. It will further en- Find out more about 6 DENSO Europe BV, the European headquarters of later, and receive the parts earlier the next day. World Central, which takes advantage of Jebel Ali Dubai’s DWC airport at: hance the company’s performance in the region, due global automotive supplier DENSO Corporation, de- DENSO will also have access to DHL’s Integrated Port, seamlessly connecting to its Al Maktoum Inter- to its strategic location in Dubai and state-of-the-art 51  www.dwc.ae cided to expand its operations, it gave the decision a 68 Solutions Center in Leipzig, with a supply chain ware- national Airport through the dedicated Dubai Logis- features and handling processes. lot of thought. It found the answer in Leipzig, Ger- Total: 188 house boasting 15,000 square meters of high-end stor- many. Or more specifically, at the End-of-Runway site age space. An adjacent Technical Services Workshop of DHL Supply Chain in Leipzig. 35 28 offers value-added services such as DHL’s integrated DENSO has become the first customer for End- Return & Repair service for faulty parts. of-Runway, which is located in close proximity to the The service was rolled out in February and was at HOW TO KEEP THINGS COOL IN CARACAS Express Hub. The solution encompasses warehousing n Japan full capacity in March. DENSO will first use End-of- n and freight transport services as well as domestic and North America Runway to service dealers in Germany, then gradually Vaccines, insulin, and other drugs – the of transportation methods. So global logis- n Europe international express deliveries. End-of-Runway is a n Asia-Oceania expand to surrounding countries. And the agreement list of medications that must be stored at tics service providers have to build up and global logistics solution targeted particularly at cus- n Others includes pay-per-use pricing: the automotive supplier specific temperatures to remain effective maintain cool-store networks all over the tomers in the life sciences and healthcare, automotive, only pays for the capacity its shipments require. is a long one. Distribution chains are sel- world for clients who operate globally in the Consolidated subsidiaries, technology, and engineering and manufacturing sec- March 31, 2012 DENSO hopes more flexibility will lead to an in- dom simple and vary hugely. Temperature- life science and healthcare sectors. tors. In Leipzig it can combine not only express and crease in its aftermarket business. Customers will be- controlled supply chains are particularly Recently, DHL Freight, Global For- road freight services, but also storage, screening, dis- Source: Denso come accustomed to being able to place orders later important in tropical countries, where med- warding began operating a new cool store tribution and repairs, all at one location. and still count on early, next-day delivery. But it’s not icines are exposed to higher temperatures. at Caracas airport in Venezuela. Equipped It’s a solution well tuned to aftermarket compa- just flexibility for DENSO’s customers; DENSO itself The distribution chain may involve a with the most modern technology, the new COLD STORAGE is a key component for nies, says Pascal Kemps, Sub Sector Head Passenger can now select from a grid of overnight delivery times pharmaceuticals and medical supplies. number of storage and transit locations, facility can keep up to 120 pallets at the

Vehicles. “The aftermarket in western Europe is fairly to fit its own corporate cycles. DHL Getty Images, AGE/Mauritius, Christoph Busse/Transit/Fotofinder, Photos: including airports and docks, and a variety correct temperature. VIEWPOINTS | 37

Simon Berry had a logistics problem: So this is a private enterprise initiative? Yes. It creates work for wholesalers and the entrepre- how to distribute medicines to poor neurs who transport and profit from it. Consumers people in remote places. His solution? will be healthier and their children will be able to get VIEWPOINTS to school. It’s a win-win. We’ve priced the kit at a level To piggyback Coca-Cola’s delivery which people said they could afford: about one dollar.

network. He’s now the head of a charity How easy was it to get Coca-Cola on board? that’s doing exactly that. I got nowhere at first. Then, four years ago, during our Facebook campaign, BBC Radio 4 did a piece about the idea and spoke to Coca-Cola’s global head of stakeholder relations who said, “We’d like to talk more imon Berry was working on a project in Zambia about this.” Our relationship developed from there. in the late 1980s when he had “a penny drop mo- They’ve given us a lot of insight into their business. Sment.” He was in a remote area where children were dying of minor conditions such as dehydration Do you transport medicines in the crates with the from diarrhea. These tragedies were easily prevent- SIMON BERRY, Coca-Cola bottles? able, but simple medicines were not reaching the CEO COLALIFE My wife, Jane, had the idea of utilizing the unused Berry was born in Bath in the people who needed them. Yet Coca-Cola was available spaces between the bottles. We created a plastic United Kingdom. At university even in the most remote places. Simon realized that he decided to work in the eco- wedge-shaped container called an AidPod that fits if Coca-Cola’s logistics network was that effective, it nomic development sector. From into those spaces and carries the kits. It’s taken on a could also be used to deliver essential medicines. The 1986–89 he managed institu- life of its own (and has been nominated for the Design tional development in northern trouble was he couldn’t get anyone’s attention. Museum’s Designs of the Year 2013). That it also fits Zambia for the UK government. “But then,” he says, “four years ago, I decided He has won a number of into Coca-Cola crates is almost subsidiary now. to share the idea on Facebook.” This time it took off awards in social enterprise and thanks to thousands of online supporters. Simon is open innovation. Why? now CEO ColaLife, a charity working in developing As with any emerging market, Coca-Cola is always countries to bring Coca-Cola, its bottlers, and others trying to ensure that they get their product to every together to open their distribution channels to “social store shelf possible. While they take on this daily chal- products.” A pilot program with anti-diarrhea medi- lenge, we are still piggybacking on Coca-Cola’s pro- cines is underway in Zambia. cesses and their infrastructure, but our medicine isn’t “We don’t want to get medicine to the end user in going into Coca-Cola crates very often. a philanthropic, aid-driven way. We want to do it in a sustainable way. We’re making a product available in How much did you know about logistics at the the private sector, which creates jobs – and saves lives.” beginning of all this? Nothing, but in a way that’s helpful because you ask Why did no one think of piggybacking onto Coca- lots of stupid questions. You’re allowed to. And those Cola’s distribution network before? stupid questions take you in directions even the pro- People think Coca-Cola has an amazing distribution fessionals wouldn’t have thought of. Now we’ve de- system. But actually they just manage an amazing signed an end-to-end delivery system and have a value distribution system. They’ll get their product to, chain that works at every step. say, district centers in Zambia and then the inde- pendent private sector takes over: entrepreneurs on What’s driving you? bicycles or horses and carts or small trucks. So, with The fact that children in developing countries are Coca-Cola’s permission and the support of their bot- 20 times more likely to die before the age of five than tler in Zambia – SABMiller – we’re using Coca-Cola children in developed countries, and their second DELIVERED. THINKS INSIDE THE BOX WITH... wholesalers as pick-up points for our anti-diarrhea biggest killer is diarrhea. We want ColaLife to have kit. The key is to get wholesalers to agree to take on a significant impact on child mortality. We’ve sold a our product as well. Plus, we’ve asked the people who huge number of kits. Now we want other established need these kits which retailers they would like to buy big players to see what we’re doing and incorporate them from – and then recruited those retailers and the principles into their own programs, and health Find out more about trained them to explain how the medicine should be AidPods at: organizations to recognize small retailers in remote Simon Berry used. They’re the ones who buy the commodity from communities as legitimate channels for the delivery of www.colalife.org Photos: Jean Goldsmith, Colalife Jean Goldsmith, Photos: the Coca-Cola wholesaler. medicine. — Tony Greenway 38 | VIEWPOINTS

PUBLISHED BY NEXT ISSUE 03 | 2013 WHAT’S THE STORY, MR. AMATSU? DEUTSCHE POST DHL HEADQUARTERS “IN FASHION TODAY YOU HAVE TO TAKE Represented by: Dr. Christof Ehrhart A GLOBAL APPROACH” EVP Corporate Communications & Responsibility Silje Skogstad SVP Global Media Relations

Editor-in-Chief: Honored: Yu Amatsu receives the DHL Michelle Bach Designer Award in Tokyo. ([email protected])

Consulting Editor: Eske Wright

Editorial Assistant: Barbara Zanusso

Digital Editor: Valerie Kemme-Smith

Project Lead Digital: Dr. Diane Rinas Catwalk: Fashion changes fast, and Thorsten Michel it’s important to see the actual clothes. Digital Consultant: Julian Klewes More about Amatsu’s collection at Mercedes-Benz Address: Fashion Week Berlin at: Deutsche Post DHL Headquarters tinyurl.com/DHL-yuamatsu Charles-de-Gaulle-Strasse 20 53113 Bonn, Germany Tel. +49 (0) 228-18 20

FASHIONABLY FAHRENHEIT: Commercial Register No.: Amatsu’s stunning collection at Registration court Bonn Mercedes-Benz Fashion Week Berlin. HRB 6792 Turnover Tax ID No.: DE 169838187 Website: www.delivered.dhl.com

Editorial Production: FOCUS Axel Springer TOKYO TO BERLIN AT THE SPEED OF YELLOW Neue Geschaeftsfelder EVOLVING NEEDS OF LSH: Japanese designer Yu Amatsu took his collection to Berlin this season, with DHL helping his label, Project Management: GRASPING THE FUTURE OF Mai Tâm Phan, Lutz Thalmann A Degree Fahrenheit, to raise European temperatures. Contributors: A GROWING SECTOR Matthew Baird, Michael Bee, Andrew Bulkeley, Robert Bush, My own collection on the catwalk at Mercedes-Benz Fashion Week but also the actual clothes. It is crucial that buyers and media at the Richard Demarest,Tony Green-­ Berlin – what an amazing feeling! key shows have access to these clothes, to see and touch them to way, Anthony Haywood, Henning Hinze ,Valerie Last year I was honored to receive the DHL Designer Award at have a sensory impression. My own design process starts when I’ve Kemme-Smith, Axel Novak, BUSINESS Mercedes-Benz Fashion Week Tokyo. With the shipping credit DHL got the cloth in my hand. We shouldn’t be too theoretical, we need DDP Images Gaby Pinkner, Cathrin Schaer, Frederick Schulenburg, THE CHALLENGES awarded to me, I was able to get my collection to the fashion crowd concrete things and the logistics companies make it possible. Dr. Tong-Jin Smith, in Berlin. This was inspiring and I made many great contacts with This was my first time showing my collection outside Japan. The Allison Williams OF SUSTAINABLE industry insiders and trendsetters from all over the world. Brandenburg Gate was a great venue and the whole event was ex- Art Direction: SUPPLY CHAINS DHL is a global logistics company and that’s a symbol for my tremely well organized. I am very thankful for the opportunity and Pawel Pedziszczak work: Logistics is essential for fashion. Fashion changes very fast, I was thrilled to be there. My immediate focus is now on showing at Printing: Firmengruppe APPL, and it’s not only necessary to transport concepts, images, and data, home at Mercedes-Benz Fashion Week Tokyo! sellier druck, Angerstraße 54, 85354 Freising Best of logistics ONLINE YU AMATSU’S RUNWAY SUCCESS Paper: This paper is made from 100% recovered paper. We are 1 What do 1,300 2 Strong growth 3 Technology consum- committed to protecting the environment and the world’s CEOs worldwide have in production from ers are homing in on Berlin New York resources. to say about today’s unconventional sources a small set of multi- Tokyo NEW YORK JAPAN CHINA JAPAN business challenges of gas and oil will have function devices, yet and opportunities? See the PwC a major impact on global energy still they continue to experiment. Shanghai wins GEN ART chosen for Shinmai represents Japan receives DHL Designer Avant-Garde Award ­Creator’s Project at the Shanghai Award at at Mercedes- Annual Global CEO Survey markets to 2030. More in BP’s latest More in Accenture’s 2013 Consumer two years running in 2009, presents debut Expo 2010. Benz Fashion Week tinyurl.com/pwcglobal Energy Outlook 2030 Electronics Study New York. collection 2010. Tokyo in March 2012. tinyurl.com/bpoutlook2013 tinyurl.com/accenture-electronic Photos: DDP Images, Getty Images (3), picture alliance/dpa (2), Hamilton/REA/laif, Hamilton/REA/laif, picture alliance/dpa (2), Getty Images (3), DDP Images, Photos: