Supply Excellence — DHL’s Domestic US Pullout Shakes Up Parcel Market

DHL’s Domestic US Pullout Shakes Up Parcel Market

November 17th, 2008 · by Rachel Rutkoski · 1 Comment · LCCS and trade, sourcing, supplier management, supply management

This week, DHL announced that as of January 30, 2009, they are halting US domestic service and focusing on “what we do better than anyone else - international shipping”. The move allows them to cut US costs by 80%, although with half of their top customers and global shipping volume based in or routed through the US, they are by no means abandoning their American efforts.

What does this mean for companies that rely on parcel shipments in the US or globally?

First, DHL’s move makes it even more critical for companies to reexamine their small parcel contracts. With UPS and FedEx being the only major players in the States now, you need to make sure you have a competitive contract that suits your service level needs.

Second, if you read my post last week discussing the rumored acquisition of of TNT by either UPS or FedEx, you know companies that rely on parcel contracts really want a single, competitively priced vendor they could utilize on a global scale. With the exit of DHL, UPS and FedEx just got stronger overnight. But if TNT does get snatched up, either UPS or FedEx will instantly become the dominant player in the market.

Finally, this is yet another example of why having a contingency plan for your transportation & logistics is so critical. Not only is T&L susceptible to man-made and natural disasters, it can be just as, if not more, disrupted by mergers, acquisitions and strategic business decisions if you don’t have contingency plans.

Rachel Rutkoski is a Category Manager for Transportation and Logistics in Ariba’s Global Services Organization. Rachel is recognized by the Institute for Supply Management as a Certified Professional in Supply Management (C.P.S.M.) and has several years experience as a supply chain and transportation analyst in Fortune 500 companies.

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