DHL Group Doubles Down On Digitalization Wth A €2 Billion Investment

Logistics giant Deutsche Post DHL Group announced its new five-year group strategy where it has set aside €2 billion ($2.178 billion) for investing in the end-to-end digitalization of its logistics operations. Titled "Strategy 2025 – Delivering excellence in a digital world," the company seeks to hold on to its considerable market share by channelling greater transparency and visibility into its value chain. 

"Deutsche Post DHL Group has never been in better shape. We are convinced that future growth will come from a consistent focus on our profitable core logistics businesses – and digitalization will become the greatest lever. We need not reinvent ourselves, we will digitalize ourselves," said Frank Appel, CEO of Deutsche Post DHL Group, while presenting the new strategy at Frankfurt, Germany. 

The DHL Group consists of five distinct and diversified logistics portfolios that include Post & Parcel Germany (P&P), Express, Global Forwarding, Freight (DGFF), Supply Chain and eCommerce Solutions. The common denominator of future growth in all these segments is unsurprisingly dependent on the continued expansion of the ecommerce market, which has opened up opportunities in end-to-end logistics operations like first-mile, warehousing, last-mile delivery, and even returns' logistics. 

The evolution of consumer expectations in the context of expedited delivery has forced companies like DHL to look at digitalization as a necessity rather than as an option. The company understands that if it does not adapt to the changing logistics landscape or fails to recognize the ‘Amazon Effect' that defines modern-day supply chains, it will be left behind in the rat race that is geared towards making shipping faster than ever. 

The €2 billion allocated for digitalization will be spent over the next five years, with the amount already being included in the company's planned Opex and Capex spending. DHL hopes to realize at least €1.5 billion in annual run-rate benefits by 2025. That apart, the company has set a financial target of growing its group earnings before interest and taxes (EBIT) to at least €5.3 billion by 2022. 

Though digitalization as a strategy is now officially a part of DHL Group's five-year plan, the logistics major had consistently shown interest in adapting to technological disruption over the last few years. 

In the logistics landscape, the threat of Amazon.com, Inc. AMZN looms large. Amazon has made its intentions clear on expanding its services from the current fulfilment centers it operates to the last-mile delivery segment. This would pose a direct competitive threat to incumbent logistics forwarders like DHL, which will have to digitalize and automate large swathes of its value chain to continue staying relevant. 

Warehouse automation through floor robots is a part of the wider modernization drive within DHL, as the company looks to integrate new technologies within its workflow and also offer employees targeted advanced training to bring them up to speed. 

"Moving forward, we will bundle our technological capabilities as a Group in global Centers of Excellence. Here we will centrally develop key technologies like Internet of Things, or IoT, and then provide them to our divisions. This way, we can leverage the strength of our Group to push forward our digitalization," said Appel.

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