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Thursday, Oct. 4, 2007

U.S. CHALLENGE

DHL calls for change of views


Staff writer

Asked to name the largest German employers in Japan, names most likely to come to mind would be car makers, auto parts manufacturers, or pharmaceutical giants. The second-largest is, in fact, DHL, the world's leading international express and logistics company. In Japan, DHL aims to continue its double-digit growth by changing perceptions and grabbing more of the market in the U.S.

Originally American-owned, DHL was founded in San Francisco in 1969 by three men, from whose last names — Dalsey, Hillblom and Lynn — the company made its name. In Japan, its bright yellow-and-red fleet of 1,300 trucks, is now wholly under the wing of the Deutsche Post World Net brand. The Japan operation of the international express division is led by Representative Director and President Guenter Zorn, a native of Bonn, Germany.

A pioneer in international express in Japan, DHL debuted here 35 years ago and has, ahead of rivals FedEx and UPS, led the express market in this country since '03.

Today in Japan, some 11.4 million shipments are made annually by nearly 60,000 customers. Massive investments of some ¥25 billion in infrastructure since 1999 have helped lead to double-digit growth for the past five years, says Zorn, "quite an achievement in the postbubble market."

With three Japan gateways, — Narita, Nagoya and Kansai International Airport — the first automatic sorting system in Japan and 42 service centers throughout the country, DHL Japan is, globally, far ahead of its American rivals. With respect to business between Japan and the United States specifically, DHL owns the No. 1 spot for express shipments from the U.S. to Japan, billed in Japan. DHL falls short, however, when customers in Japan look to send express shipments to the United States. For shipments billed in Japan from Japan to the U.S., it only lays claim to the No. 2 berth and seeks to promote its lane trade between the two countries.

DHL considers gaining a stronger foothold in this market to be crucial to continued double-digit growth." It's a matter of customer perception," says Zorn, who has lived in Japan for 16 years and also heads the German Chamber of Commerce here.

"The perception of many customers in Japan is still, 'if I want to send something to Asia, DHL.' Wonderful. To Europe, DHL. To the U.S., unfortunately, it's still the American companies," the 54-year-old Zorn says with characteristic matter-of-factness.

"Our goal is to change this perception, with proof and facts" of DHL's capability to move shipments efficiently to and within the States.

Once again, here is where massive investment is the predominant game strategy. Since 2004, DHL has pumped some $1.2 billion into its U.S. network. Last year alone, a total of $25.5 million was invested in 65 locations across the U.S.

Facilitating inroads into the U.S. are six regional gateways, including DHL's American nerve center, its air and ground hub in Wilmington, Ohio, which was completed last year following a total investment of $260 million.

Further east, a new, state-of-the-art distribution facility in Allentown, Pa., was established to the tune of $120 million. In Allentown, over 5 km of conveyor belt can sort 90,000 pieces per hour. Some 160 trucks enter and leave the facility daily.

The Wilmington hub is located an hour's flight from 60 percent of the U.S. population and within two days' driving time of 65 percent fo the American population. In Wilmington, the largest privately owned airport in the United States, about 1.7 million shipments, 2.5 million kg, are handled every day.

The hub, opened in 2005, operates 24 hours a day, seven days a week, and has more than 120 aircraft making over 130 arrivals and departures daily. A new automated sorting system, with a 99.9 percent sort-to-bag accuracy, can handle 240,000 pieces per hour.

DHL's rivals in the States, Zorn admits, are huge. "They have 80 percent market share. They have an air and ground network that is giant. They are almost 80-90 years in the business, ground. . . . Our market share in the U.S. is around 9 percent, tiny compared. Here in Asia, it's closer to 40 percent."

Though expanded infrastructure in the States will undoubtedly help to change customer perceptions in Japan, the groundwork is more often than not laid closer to home with outstanding customer service.

Zorn, who first came to Japan in 1986, says it was "love at first sight" with the country and its people. Also the author of four detective novels set in Japan, he is assuredly a powerful weapon for DHL's operations here.

His insight into the people and culture, coupled with his expertise in other countries, make him something of an all-round ambassador.

One of the big differences he sees in Japan is "an almost unreasonable expectation of quality in the sense that people basically expect things to be free of failure, which is, of course, nearly impossible.

"We're leader in the annual customer satisfaction study undertaken by express companies. We have so-called KPIs, key performance indicators. . . . We have a KPI when you call our customer service, the abandoned call rates, when the customer says 'I've waited long enough and I'm hanging up.' We have an abandoned call rate of less than 0.1 percent.

"In other countries, this rate can be as high as 20 percent. The difference is that here they still think (0.1 percent) isn't good enough."

Zorn's experience in other countries (he has held managerial positions in Germany, the Netherlands and France in addition to Japan) serves him well. "I can interpret a lot of the things that the Japanese want or say and translate this, and I'm not talking about language. I can translate this into words and actions that other people understand.

"The second value that I bring is of course I'm here for a long time and I like the country. I'm a bit of an ambassador in the positive sense, so I would defend both my people as well as the country or the company.

Though Zorn, who is an aikido black belt, says he butts heads "constantly" with headquarters, his cultural flexibility ends when it comes to global processes.

"I'm a very strong advocate of not doing things different in Japan when it comes to global processes. It's a bit like in Europe, when the trains from Germany have to stop and can't go into France because they have a different track width.

"Nothing can get in the way of the smooth flow of shipments, Zorn emphasizes. In that respect, he says, "I force it through, 100 percent. I'm an ambassador and can be diplomatic, but I can also be strict and enforce things when needed. Sometimes you have to say, 'Sorry guys, but this is where the defense ends. Our package must not be damaged or lost because we have different standards or different ideas on how to treat things.' "



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