The global delivery and logistics industry is highly competitive. DHL has two large US competitors close behind it, especially FedEx from an international services perspective, but UPS is attempting to grow its international business, seeing the vast opportunities in emerging economies. The study is about how DHL deals in the international supply chain market. In the study the author will focus on factors that drove DHL to choose Singapore as the location for establishing its sustainable supply chain center and the potential challenges/risks should be considered in order to improve DHL’s international supply chain performance in a large competitive market. And at the last part, the author will propose recommendation to DHL to handle the potential challenges/risks in managing the DHL international supply chain.
Factors that drove DHL to choose Singapore as the location for establishing its sustainable supply chain center:
It is 2010, when DHL and NUS announced their Sustainable Supply Chain Centre of Asia Pacific in Singapore. There were a number of alternatives that could be chosen. But DHL has chosen Singapore for their next supply chain center as well. These are the factors that found behind this motive:
Home of Trading Hub
Singapore is now considered the giant of trading hub. A number of national and international business organization are having their center there. This is creating a center of communication between trade giant and assisting to create an environment which will offer to speed connection among them (Liu and Teo, 2015). Nowadays not only individuals are using DHL to deliver their documents and parcels, rather businesses are growing up their mind and confidence over such deliver portal. As Singapore is the home of Asia Pacific’s business organization and their center, it could be right place being where DHL can able to create network which will work speedy and will connects these trading organization.
World Class Infrastructure
DHL is providing national and international courier, parcel, logistics and documents services to one place to another. The prompt transfer and quick connection depends on infrastructure where it is working. Say for example, if DHL open a new branch in place where road transportation, telephone connection are backdated and make it complex to reach the document within the committed time, it may let lose its reputation to the customer who trust on it. Singapore is considered most modern city with all ultra-modern facilities. All the roads and highways are sophisticated and speedy that delivering through road transport made it possible reach the destination within the time (Monczka et al, 2015). On the other hand, telephone collection, mobile wireless facilities helping to reach the customers and their destination easily without any hassle.
Research Facility and Scope of Innovation
DHL now is an international logistics and courier company. International marketing and trading is now more complex than ever because of certain factors including increasing of competitors and web network which use for online transformation of data and documents, which would possible only DHL few years ago (Montreuil, 2011). Now customers’ trends are changing and organization’s failure to detect made it hard to compete and survive in the market. That’s why continuous research and surveying the market are most essential operation need to be continued. For this why, dedicated employees and required infrastructure including monetary assistance, logistics assistance, networking facilities and overall environment which is congenial for resourceful research is required. And most importantly, Singapore is considered such a location where people are available from wide variety of perspective. Which give speed to the research and business operation.
When an organization wants to open a new center, a most critical factor must evaluate is sustainability. The terms sustainability says about the time duration of an initiative up to which it can serve the objectives. When the expenditure tends be high but found that sustainability in terms of services and objectives is less than such initiative must be made cut off (Henry and Kato, 2014). From this perspective, if we now consider the initiative of DHL to set up new center in Singapore, we can have a strong confidence in regards of sustainable impacts. Singapore poses a strong capability in terms of infrastructure, home of national and international trading giant and home of wide variety of citizens which assist to detect the nature and business scope in those countries.
DHL now wants to increase its presence in Asia Pacific. As Singapore is center city of Asia Pacific’s education, research, trade and commerce and networking hub of other countries so setting up center here may provide chance to cover a large being in one main center. On the other hand, Singapore is chosen also considering environmental side of sustainability.
It is also assumes that the new center will bring East and West together and the parties may discover that they have some issues to work on, including a more holistic view of sustainability and partnerships with international civil society, stakeholders that have not been listed as part of the new center, but who could help them work on developing improved sustainable supply chains in Asia (Mangan et al, 2016).
Potential challenges/risks should be considered in order to improve DHL’s international supply chain performance:
An externality is a positive or negative consequence of an economic activity that is not reflected in the cost of the goods or services produced by the activity. Identifying negative externalities is essential for improving supply chain systems and for developing an understanding of their real costs in regards of DHL’s international supply chain performance (Harrington and Smith, 2014). For example, firms outsource labor to low cost countries where health and safety regulations, if they exist, are not well enforced. In some cases, this has allowed for inhumane working conditions. As supply chains cross oceans, transportation, whether by ship or plane, involves burning of voluminous amounts of fossil fuels and increasing greenhouse gas (GHG) emissions at very low prices. Prices are too low considering that they do not internalize the global chain of consequences.
Presence of Intense Competition
When it was before 21st century, the competition in the international market was very poor comparative to today. But as the number of service provider in same industry has increased, completion intensity has raised. Say for example, in international market competitors like UPS, with approximately 397,000 employees and about USD$55 billion in revenues, is a close, financially stable competitor originating in the United States. It continues to build global networks, including a hub in Germany, and is investing in emerging markets and on the other hand, FedEx, with 300,000 employees and about $45 billion in revenues, is not as large as DHL, but like DHL, it has four divisions: FedEx Ground, Express, Freight, and Services. Another company TNT Express, a Dutch firm, is a much smaller competitor, having roughly a tenth of the revenues of the others; However, it is financially stable and global with about 53,000 employees. So we can easily realize the global competition for DHL. So to improve the performance, the presence of competitors, their impacts, marketing strategy and finding out the flows to developed DHL’s within must be kept in mind (Christopher, 2016).
The center in Singapore may be one way to establish and grow DHL’s presence in Asia, relative to its competitors. As all of these firms compete directly in similar business activities with DHL, they also consider their reputations through CSR initiatives. As they grow internationally, they increase risks to their reputations especially because they become exposed to lower environmental and labor standards around the world, directly or through other contracted partners’ activities (Cosimato and Troisi, 2015). Many NGOs and IGOs are watching over this globalizing landscape and the related negative externalities. As these factors are exposing positive changes, customers of DHL can expect to firm should also engage in these activities. For this why, DHL will need financial assistance and profit must be in high to cover the new expense sector. As CSR is here a competitive factors to highlights the presence, DHL must consider it to move forwards.
Maintenance of Cultural Barriers
Whenever an organization set out for international supply chain, maintaining the cultural barriers is one of the most critical things must be handled to move forwards. When DHL has to keep delivering the parcel, logistics, and other document to the destination in different countries, knowing the culture and traditions of these countries need to be assessed. Otherwise detecting customer demands and requirements, how they want to be treated in service performance are factors really matters to improve the supply chain performance (Waters, 2011). Cross cultural barriers can give a position where customers can depends on DHL deliver their logistics to the right place and in the right time?
Environmental Side of Sustainability
DHL has established this Asian center focusing on the environmental side of sustainability, but will it also need to work with NUS more broadly on sustainability in supply chains, including labor issues. Say for example, NUS must include advanced sustainability research and programs in its curricula to be a globally competitive research and educational institution.
However, if firms are arriving to Asia for low cost labor, in a Race to the Bottom, whereas sustainability promotes a Race to the Top, how will NUS and other Asian institutions and organizations reconcile these competing pressures? NUS will be working with globally recognized foreign firms, such as DHL, Dell, and Accenture that are bound by their home countries, unions, civil society, and their reputations to engage in not only green practices, but also fair labor practices (Wang et al, 2016).
Recommendation like to propose to DHL to handle the potential challenges/risks in managing the DHL international supply chain:
International supply chain poses international competition. International competition tends to compete with larger community who provide the same category service. To survive in such condition which offers complexities and required to more strengths and effectiveness in management. So here is some recommendations to handle the potential challenges/risks in managing the DHL international supply chain:
Focus on Customers/ service qualities
It is customer to whom the prime power of existence of an organization depends on. Focusing on customer refers to focusing on what actually demands and required by customers. As we can see large competition where UPS, FedEx and TNT express are competing to survive, to make a difference from these competitors, DHL must bring changes in customer policy and service performance (Wuttke et al, 2013). And it is quality and service performance towards the customers which can bring a change. Currently DHL is covering services like parcel, documents, logistics and it can expand the range of service based on international demands requirements.
Managing Cultural barriers
In the previous task, we saw that as DHL is conducting international supply chain sometimes cultural barriers appears as nations from different perspective must cover under the service. This is caused problem like misinformation, miss communication and sometimes even problems lies in finding the location too. Such difficulties directly involves with customer satisfactions and expectation as customers think that, provider of service is already expert in it. That’s why managing and minimizing these cross cultural barriers which causes prime difficulties in communication must be focused (Angeles, 2013). To manage and minimize these problems, employees must be trained in different languages, to be acquired knowledges and have to experiences so that such difficulties can be settled quickly.
DHL need to be focusing on improving the ICT (information and communications technology) sector’s activities. Parcel delivery is successful because of growing e-business of DHL.The UNEP is working with the Global E-Sustainability Initiative (GeSI), an ICT industry specific collaboration that works with NGOs to improve the sustainability of their members’ and other supply chains. The UNEP is turning to standards and codes such as ETI (Ethical Trading Initiative Base Code), EICC (Electronics Industry Citizen Coalition Code of Conduct), these standards and codes apply universally to all supply chains.
Competing on sustainability
DHL’s main competitors, UPS, FedEx, and TNT Express, are competing on sustainability initiatives and this could be one motivation for the firm’s own unique initiatives, such as a partnership with a university. As all other competing firms are focusing on the factor sustainability, it can bring credit to them from customers as thinking unique. To keep the pace with other competitors who are doing well, such good initiative and contributing in such universal issues can bring better result for DHL profitability and future expansions (Angeles, 2013).
Environmental and Labor standards
Environment and sustainability are two big issues that impacts today on acceptance and reputation of business. All firms compete directly in similar business activities, they also consider their reputations through CSR initiatives. As they grow internationally, they increase risks to their reputations especially because they become exposed to lower environmental and labor standards around the world, directly or through other contracted partners’ activities. Maintaining these standards create a congenial environment in which not employee feel better to give identity and buyer also feel special being a member of such initiatives through the effort and contribution of DHL.
DHL’s main competitors, UPS, FedEx, and TNT Express, are competing on sustainability initiatives and this could be one motivation for the firm’s own unique initiatives, such as a partnership with a university. DHL and NUS announced their Sustainable Supply Chain Centre of Asia Pacific in Singapore. Singapore is a major trading hub with world class infrastructure. The intention is to promote sustainability in Asian supply chains. So after the completion of this study, the author has learned factors that drove DHL to choose Singapore as the location for establishing its sustainable supply chain center and the potential challenges/risks should be considered in order to improve DHL’s international supply chain performance in a large competitive market. And recommendation to DHL to handle the potential challenges/risks in managing the DHL international supply chain.
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