DHL staff sorting the parcels at an outbound shipment processing area in the North-Asia Hub of DHL in Shanghai. [Photo / Provided to China Daily]

DHL chief delivers success by taking customers from rivals

Despite its high global breadth of exports, China still remained 74th in terms of global connectedness, said Frank Appel, chairman of the board of management and chief executive officer at Deutsche Post DHL, who was visiting Beijing after attending the recent Asia-Pacific Economic Coooperation meetings.

The world today is less globally connected than it was in 2007 thanks to the financial crisis. Europe is the world's most connected region. Sub-Saharan African remains the least, according to the index.

Sharing the findings of the German company's Global Connectedness Index 2012, Appel has high hopes for the Chinese market amid the stagnant global logistics industry, which has been affected by the world's weak economy.

"The world economy is not recovering yet," said Appel. "The European crisis is not completely over. The budget problem in the United States is challenging. China is not growing at the pace we've experienced before. When we don't see growth for long periods, it is challenging."

He said there are too many uncertainties and there will still be challenges next year.

DHL's first-half-year financial report has seen increased profitability. Appel explained that reasons the company is doing well are based on the fact they are optimizing their procedures and expanding their businesses at the expense of their competitors while at the same time reducing the costs of production and operations.

"We constantly look into waste," said Appel. "We have six models of methodology to identify them. We have 30,000 people globally trained in the organization to look for initiatives to do better and reduce operational costs."

In March 2009, Appel unveiled his strategy for 2015. Following an expansion phase in recent years, the new focus aims at unlocking the company's potential to increase organic growth.

The strategy provides for a two-tier structure known as mail and DHL as well as tighter links between the different DHL divisions, facilitating an even more intense focus on customers' needs.

He believes more business is going to Asia where there are more people who are becoming middle class. China will become the world's largest logistics market by 2016 but faces challenges including high costs and credibility as well as transportation quality, according to a report released by CEVA Logistics Shanghai Co Ltd.

The China Federation of Logistics & Purchasing said in the first half of this year, the logistics industry was down and the momentum will remain in the second half. The industry has achieved revenues of 93.1 trillion yuan, up 9.1 percent year-on-year.

However, the rate of growth is down 0.9 of a percentage point compared with the same period of last year. The federation said most of the companies' revenues and profits have grown steadily but at a lower growth rate.

With his Bonn-based company operating in 220 countries, Appel travels to China on a regular basis. He is impressed with the infrastructure in China. He talked to the vice-minister of transportation in China: "You are a developed country. If I come to Beijing, I feel no difference except your infrastructure is more modern than ours in Europe."

Last year, for three weeks, the CEO brought his whole senior management to China to visit seven cities. That was because 20 percent of the company's revenues last year came from Asia. Half of those from Asia came from China, he said.

"With more than 20,000 employees in China, our businesses are growing rapidly and it is an important part of our operations," said Appel, who joined the group in 2000, holding various functions such as responsibility for corporate services, logistics, global mail and global business services.

"All of our divisions hold leading market positions, which gives us great opportunities to work with multinational and Chinese companies in the market."