Objectives and strategies
Excerpts from Deutsche Post AG's 2014 Group Annual Report.
Strategy 2015 implemented successfully
Since 2009, our Strategy 2015 has formed the Group-wide framework within which we pursue three goals: we want to become the provider of choice for customers, the employer of choice for our staff and an attractive investment for shareholders. Furthermore, we are committed to social responsibility. In the reporting year, we again made important progress towards these goals. This is also reflected in customer satisfaction rates, the results of our annual Employee Opinion Survey as well as the development of key financial figures. Therefore, we feel it is the right time to set the course for future growth and set the stage for further long-term success.
Introducing Strategy 2020: Focus.Connect.Grow.
Announced in April 2014, “Strategy 2020: Focus.Connect.Grow.” underscores Deutsche Post DHL Group’s goal of becoming the company that defines the logistics industry. We have outlined our strategic priorities for the coming years, providing fresh impetus and at the same time continuing on the path we forged with Strategy 2015. We aim to build on these successes and further accelerate our growth.
As a result of the timely preparations we undertook to accommodate changes in the markets and customer needs, our company is equipped to benefit from the numerous opportunities that exist. Some of the most important factors for our business in the future will be increasing digitalisation, accelerated growth in the e-commerce segment and the momentum in developing and emerging countries. Strategy 2020 sets priorities for our investments and actions:
Focus: We concentrate on our core mail and logistics business and continue to pursue our goal of being the provider, employer and investment of choice. We view Deutsche Post DHL Group as a family of divisions, each focused on a well defined market segment. All the while, these divisions are unified through a common understanding of customer needs and linked by Group-wide service units. The divisions work together where it makes sense.
Connect: We are further increasing connectivity within our organisation in order to deliver consistent, first-class service to our customers. A central component of this is Certified, our Group-wide initiative that enables all employees to gain specific skills and knowledge relevant to their roles. It builds upon the Certified International Specialist programme developed by our Express division and aims to certify each and every one of our employees. In addition, we are developing Group-wide co-operation platforms and processes, for example, operational processes and resources, increased digitalisation and leadership development.
Grow: Our Grow pillar encompasses our growth plans, most specifically in e-commerce and emerging markets. We aim to expand our successful parcel business in Germany and to export its successful model to other countries, both in terms of domestic parcel delivery as well as in other e-commerce-related services. Emerging markets also represent a priority focus. Our general aim is to increase our presence where the long-term growth potential is greatest. By 2020 we shall significantly increase our presence in emerging markets, with the goal of 30% of Group revenue coming from these economies by the year 2020. During the coming years we shall develop and assess further initiatives intended to accelerate our company’s organic growth.
Our strategy is designed to establish a unique market presence by the year 2020 – both geographically and in terms of our portfolios’ performance. Our aim is to be internationally renowned not only as a highly customer-centric company but also as quality leaders. When people think logistics, we want them to think Deutsche Post DHL Group.
Strategic priorities of the divisions
The priorities of the operating divisions are anchored in the divisional business strategies. Here, too, our focus is on strengthening our profitability.
Post - eCommerce - Parcel division
In line with Strategy 2020, we see four main drivers for the future success of our business.
Designing a market-based cost structure: To achieve this goal, we are adapting our networks to changing market conditions and shipment structures. We are also cutting costs wherever possible and sensible, whilst investing in innovation and growth areas. Furthermore, we want to further increase the quality of our products and protect the environment in the process. Our Parcel 2012 Production Concept has made our sorting and transport more efficient and thereby lowered costs.
Providing the highest quality to our customers: We want to offer our customers the best service at all times, at the highest level of quality and at reasonable prices. To this end, we are modernising the sorting equipment and IT architecture in our mail network on an on-going basis. We are investing in our parcel network and continually adapting it to increasing volumes. Our goal is to also deliver 95% of all parcels sent in Germany to customers the next day. We not only operate by far the largest network of fixed-location retail outlets in Germany, we also offer recipient services that make it considerably easier for our customers to ship and receive parcels. Furthermore, we are expanding our successful co-operation with retailers, particularly by way of our Paketshops.
Motivating our workforce and keeping them informed: The key to high quality and high performance is happy and dedicated employees. That’s why we not only equip our workforce with state-of-the-art tools, provide mail carriers with e-bikes and e-trikes, offer counselling on health issues and, at some locations, make childcare available – we also offer wages that are clearly above those paid by our competitors. Furthermore, we have succeeded in creating more jobs. Dialogue with our employees is particularly important, which is why management regularly holds a variety of events to personally inform around 18,000 employees about the current priorities and drivers of our business.
Tapping into new online and offline markets: We are taking advantage of our expertise in physical communications to offer effective digital communications. The internet is making it increasingly easy for customers to access our services, allowing them to calculate and purchase postage and also locate retail outlets and Packstations online and by mobile device. We are also investing in future growth areas in all our businesses: beyond our E-POST product, we are a leading provider of target-group marketing in digital media, provide advertisers with consistent, cross-media targeting and are the first parcel delivery service in Germany to operate its own shopping portals. By acquiring Allyouneed.com we have established an online supermarket, where together with retail customers we are now piloting same-day food delivery. At MeinPaket.de we offer one of the largest online marketplaces in Germany and we have also taken our expertise in transport and network management into the recently deregulated German coach market with the Postbus. As part of our Strategy 2020, we are working intensively to internationalise the eCommerce - Parcel business unit. In a number of new markets, we intend to go beyond delivery services to offer domestic value-added e-commerce services.
In line with our strategic programme “Focus”, we have expanded our business, increased our market share and strengthened our margins in recent years. In the reporting year, our focus was on merging all areas to respond more flexibly and effectively to customer requirements and changing economic parameters in the future. This will save costs and enable a more rapid exchange of best practices.
Managing revenue and costs: Our return on sales rises when growing volumes lead to economies of scale in the network, innovation and automation improve productivity and costs are strictly managed. We minimise indirect costs through simplified and standardised processes. For example, we are streamlining our IT system architecture step-by-step whilst paying particular attention to adherence to global standards and quality requirements.
Structuring sales and prices: Using global campaigns, we specifically target small and medium-sized businesses, which could benefit the most from increasing export. We concentrate upon items whose size and weight optimally match our network and thereby create economies of scale. In terms of our pricing policy, we encourage global co-ordination and discipline. At the same time we also work to continuously improve our customer approach. Our Insanely Customer Centric Culture programme is intended to resolve problems more quickly and meet customer expectations more effectively.
Managing the network: Most of our costs are attributable to the air and ground network. We replace aeroplanes with newer, more efficient, and thus more cost-effective aircraft. We sell available cargo space to freight and forwarding companies, especially DHL Global Forwarding, improving our network utilisation and reducing costs in the process. On the ground, we are automating and standardising processes. For example, vehicles are equipped by default with shelves and can be loaded directly from the conveyor belt. We also plan our pickup and delivery routes to maximise time and cost savings.
Motivating our workforce: Our proven Certified International Specialist (CIS) training programme ensures that our employees have the requisite knowledge of the international express business at their disposal. Training is carried out in each function as well as on a cross-functional basis delivered by our own employees, some of whom are executives. This adds to mutual understanding whilst reinforcing a team atmosphere and loyalty within the division. The modules under the Certified International Manager (CIM) umbrella are for managers and are intended to strengthen the unified leadership culture within the division. We want to sustainedly motivate our employees around the world. Systematic and continuous recognition of outstanding performance is one way of contributing to this.
GLOBAL FORWARDING, FREIGHT division
With our global product offering in air and ocean freight as well as in overland transport, we aim to achieve growth that exceeds the market average and consolidate our leading position. To achieve this goal, we are continuously expanding our product and service portfolio and improving our internal processes.
Expanding product and service portfolio: In the Global Forwarding business unit, we are expanding the geographical coverage of our multimodal transport services, for example, in Asia. Our offering covers the production and commercial centres of Shanghai and Suzhou in northern China, and the western city of Chengdu, which is one of the main distribution centres and a hub for the high-tech sector and the automobile industry. Since the beginning of 2014, we have offered the first temperature-controlled rail service between China and Europe. Our new Railconnect service allows companies of all sizes to better manage their inventory flows by dispatching shipments in smaller consignments. In the overland transport business, our daily Eurapid service provides fast, reliable and day-definite deliveries to Europe’s major markets. The number of participating terminals doubled in the reporting year from 25 to 50.
Simplifying and standardising processes: With our strategic project New Forwarding Environment (NFE), we are gradually introducing a forward-looking operating model with efficient processes and state-of-the-art IT systems, which is intended to underpin our position as industry leader. NFE will allow us to manage our processes better, standardise products and offer modular services. In future we intend to have a globally harmonised and unified organisation with dedicated customer service, which will allow customers to benefit from shorter response times. The new structure is also better tailored to the needs of our customers’ products and ultimately delivers targeted, item-specific information. We are increasing the transparency and quality of data for sales volumes, customer figures, capacities, operations and freight. In the reporting year, NFE was put into operation in additional countries. We intend to implement it throughout the entire Global Forwarding business unit.
SUPPLY CHAIN division
We intend to define our industry globally through standardised, cost-efficient, high-quality and innovative solutions. To achieve this whilst increasing our profitability, we reviewed our business in the reporting year and defined a strategic framework with nine initiatives and four supporting activities. In line with our Group strategy, our approach is built on the three pillars of “Focus”, “Connect” and “Grow”.
Our Focus agenda is aimed at increasing our efficiency and quality through standardisation and reducing complexity. We intend to adopt best-in-class operating standards and roll them out worldwide. We also aim to establish a globally harmonised process to enable innovative and customer-centric solutions. By applying First Choice methodology and our best-practice solutions, we expect to improve our operational performance.
The Connect pillar is about connecting our people and processes to achieve efficiency gains on a global scale. A lean management structure and the use of shared service centres will improve our cost structure and establish industry-wide best-in-class functions. To accompany these organisational changes, we are training our staff using the Certified Supply Chain Specialist (CSCS) programme which is based upon a proven approach that was applied successfully by the Express division.
Finally, the Grow pillar focuses on shifting our portfolio to address those market segments that offer the most potential for higher profitability and stronger growth. The inclusion of more value-added services in our portfolio will help drive this shift. Likewise, a pivot towards global business models for key sectors, such as Life Science & Healthcare, will help accelerate future growth.