How IT and Globalization of DHL Business Have Made the Global Chain Supply More Efficient - Case Study Example

Globalization and business IT xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Instructor xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Discuss how IT and Globalization of business has made the global chain supply more efficient and contributed to greater profit in business: A case of DHL Abstract Globalization of business and Information technology have transformed the logistic services.DHL as the leading player in the industry has not been left behind, the company has taken advantage to position itself strategically. A globalized word means that supply chain management components can be located in different parts of the world. To fill the gaps logistic are needed to make sure that the manufactured products as well as the raw materials reach the intended user.DHL has positioned itself through its presence in different parts of the world. It has acquired local delivery companies as well as entered into partnership with major players in different Europe and Asia. This has been done to reap the benefits presented by a globalized business. The company has also been a leader in the adoption of information technology. It has invested heavily on information technology including position itself to reap from the growth of online retail trade. The paper recommends strengthening of the market share in the emerging market given that forecasts show that they will continue to record phenomenal growth. It recommends reduction of operation costs through entering into partnership as well as outsourcing the non core business in markets which offer low costs. Definition of terms The term globalization has been used widely but its meaning remains obscure. The term has been defined by several scholars and there is no common definition that has been agreed upon. JX Inda & R Rosaldo, (2006) define globalization as intensification of global interconnectedness. In this definition the two scholars seem to suggest that the world is full of movement, increased contacts and linkages where cultural interactions and exchanges are the order of the day. Using one definition to describe what globalization has been found to be inadequate as it not helps into deeper understanding of the concept. (Arvis, et al 2007). International Monetary Fund defines globalization as the growing economic interdependence of countries allover the world through increased volume and variety of inter border transaction of goods and services as well as free movement of capital between countries coupled by widespread diffusion of technology. (Arvis, J et al 2007) Globalization involves speeding up flows of goods, people, images, ideas and capital across the globe. With increased communication, transportation coupled with greater use of technology the flow is quickened immensely. Growth in technology has helped the quickening of action in cases where it used to take long. For example in the past people relied on snow mail to communicate, but the advancement of technology has now made it possible for a person in one corner of the globe to order for goods or services from the other corner of the world and have them delivered within a few hours. Globalization is said to occur when people from different countries break cultural and political borders and exchange goods and services, capital moves freely from one country to the other as well as economies become more integrated and dependant on one another. (Arvis, J et al 2007)In a globalized economy there are no political boundaries; people are free to move from one location to another. Cultural barriers are also eliminated through adoption of a common language which enables communication of people across borders. The world grows close as the ideological and physical borders disappear, people interact more as they adopt technology to reduce the distances between them. Reduction in trade barriers, decrease in transport and communication costs and others factors have played a great role in globalization of trade. It has transformed the way the production sector is structured. Gone are the days when few plants would be concentrated in an area. With the rise of globalized trade and economy it is now possible to fragment the plants into different locations. A globalized economy has also fostered the increase of exchange flows; the logistics industry has been heavily affected by the new developments. Transport being a crucial component as far as connection of the export and import market is concerned has been heavily affected, this in return has led to increase in profits for the logistics and communication based companies. (Wysocki and Lueck 2006) The dynamic development has fueled the demand for logistic services. With the supply chain management component being broken down and undertaken in different parts of the world, logistic companies become a major factor in the success of any company which is operating under a globalized environment. Globalization and technological forces are changing the supply chain management, in most cases the supply chains are disintegrating as products designers, manufacturers marketers who were previously operating in one facility are now scattered over several geographical regions which are characterized by different business objectives, language and culture.(Johnson,E 2006) For example some years back clothing manufacturing firms such as Levi Strauss had all its operations in one facility. The company was producing, designing and marketing the products in one facility, all this has changed as the operations are located in different continents. The same trend is true for so many production lines, from personal computers to lawnmowers there has been a transition. Hewlett Packard which designed and manufactured its computers for America and European markets has now its marketers, designers and assemblers being scattered in different geographical locations. These new changes have brought benefits, risks and challenges.(Johnson,E 2006) Given that businesses are operating in a global environment, companies have to consider other parts of the world when formulating their strategy. They cannot isolate themselves, or basically ignite what is happening outside their spheres. They have to put into perspective factors such as economic trends, technological discoveries, and competitive situation. With globalization of trade it is now possible to have a product manufacture in India and sold in United States of America. The creation of economic blocs and large economic regions has given rise to cross border and international logistics. As economic regions expand there is more cross border trade and the distances which the logistics industry covers also increased. The integration of Europe and creation of trading blocs across the world has led to creation of large markets for goods. Given that these blocs are mainly geared towards promotion of trade, logistic companies became an integral part in ensuring that good reach the intended points. The fact that the world has become a global village means that businesses and supply chains are interlinked all over the world. For modern companies to be successful, they need to orient their business across borders and control the operation cost in order to survive the increased competition. (Sunil and Peter 2005)‘Cutting cost means doing away with those operations or business units which are not profitable for the company and focusing on activities which are relevant to the business. This means that the companies which are operating on a globalized economy or environment can reduce the operational cost if they use the services of logistic companies to bridge the gap. Off-shoring and outsourcing are two concepts that have been adopted by business which would like to create a competitive advantage. They have embarked on off shoring the components of the value chain to areas where the cost will be low. This trend has seen the logistic companies become more relevant in the value chain as they are used as a cost reduction and relevant players in the whole cycle. Globalization has seen the value chain activities being spread allover the world therefore demanding the logistic service providers to adapt to the changes that are taking place in the world of business. (Johnson, E 2006) DHL Company background DHL company was established in 1969 by three partners; Dalsey Adrian, Hillblom Larry and and Lynn Robert. The name of the company DHL is derived from the first letter of the three partners’ surnames. The action by the three partners to form the company would later be hailed as the greatest move as it came to have profound effect on how the world business operates. The three partners began by shipping papers through airplanes from San Francisco to Honolulu. The later embarked on the custom clearance .The new concept gave rise to international air express, the fast delivery of shipments and documents through the air. The company has since seen transformation, with the major one being the acquisition by Deutsche Post World Newt in 2001.DHL has become a market leader globally in areas of international express, air freight and overland transport. The company offers a variety of customized solutions ranging from shipping of documents to supply chain management. DHL structure The company has a number of business units; one of them is DHL Express and parcel network, this unit has more than four thousand offices allover the world and covers more than one hundred and twenty thousand destinations. (Mangan, , Lalwani and Butcher 2008) The second unit is the DHL Freight which offers national and international transport solutions to different parts of Europe. The third unit is the DHL Global Forwarding that offers water and air freights as well as project logistics services all over the world. Global Mail offers mailing services to international customers allover the world. Company mission and strategy The company aspires to the leading logistics and supply chain Management Company operating in all corners of the world. It aims at delivering excellence and quality services to its customers. The company aspires to take advantage of technological advancement and globalization to achieve its objectives and goals.DHL aims to be become the market leader through providing first class services in all the areas they where they offer their services. As one of the leading logistics service provider DHL pays attention to the international air services. DHL strategies in entering the globalized market The company has continued to diversify and grow in different areas such as freight services, express services, supply chain and mail services owing to their dedicated customers as well as reliable partners. (Mangan, , Lalwani and Butcher 2008) The company has entered into strategic partnerships with airlines to ensure that they reach every corner of the world. It has also gone ahead to acquire stake in an air line giving a competitive advantage over other logistics companies. The company has also acquired a majority stake in the British logistical company Excel. The acquisition of the company by the German based Deutsche Post World Net made its presence in Europe and beyond stronger. The company has also expanded its wings in Asia, in 2002 it entered into a joint venture with an Asian logistics company Cathay Pacific. China market has been described as enormous and strong, in 204 DHL unveiled its one hundred million dollar facility which made the city is central Asia hub. (Mangan, , Lalwani and Butcher 2008) The company has continued to grow and maintain the global leadership in logistics management. This has been achieved through a three decade continuous expansion of the networks and enhancement of the domestic and international shipping as well as providing its customers with the quality and superior services which meet their needs. How DHL benefits in a globalized trade The global market has continued to grow presenting both opportunities and challenges for the company. The advancing globalization means that the supply chain management will continue to grow even in a faster rate than the economies of the individual nations as well as global economy as a whole. In Asia trade flows have continued to increase both within and outside the continent.DHL as a market leader has benefitted from this development as it has divisions operating in the region. The same applies to the emerging economies where the company has taken advantage of the arising opportunities in these regions. (Mangan,Lalwani and Butcher 2008) (Coltman, Whiting and Gattorna 2010). The sustained trend where companies outsource for services presents an additional opportunity for DHL.Given that in terms of uncertainty the companies strive to reduce costs as well as streamline business processes. It is is on this premise that most companies outsource some activities especially those which are not their core business. Supply chains tend to become more complex as well as spread across the globe risking disruption. Customer in this case can become disoriented, to solve the problem integrated logistic solutions are needed.DHL having divisions across the board and the fact that they offer each other close cooperation it has benefitted from this development. (Coltman, Whiting and Gattorna 2010) Online marketplace has created a boom for DHL as there has been a rise in demand for delivery of goods and services. Online shopping means that one can buy goods from any part of the world. The supplier is required to deliver these goods to the consumer. Given that this kind of trade has been on the rise, there is increased demand for logistic services. This has placed the company in a position where more revenue can be earned. Given that some of these goods are not bulky the cost of transportation is greatly reduced ultimately increasing the company profitability. Increase in revenue Deutsche Post DHL has reported a three times increase in net profit for its second quarter. According to the company report this increase has been attributed to the market growth especially in the emerging markets of African and Middle East. The strong growth across Asia and expansion of the online retail trade has also been pointed as the other factor behind the handsome profit posting. The company operating profits have increased from 359 million dollars in 2010 to 798 million dollars. This is one of the DHL divisions which has recorded good returns as the market changes take place due to technological advancement and globalization of trade.DHL division (2011)(Harwood 2008) Use of Technology to enhance efficiency in DHL DHL has instituted a mechanism where the customers are updated about their shipment regularly. The company was the first to adopt the high speed TCP communication network. From the time the company adopted this information technology it has maintained a leading position, it has been spending heavily every year to ensure that there is infrastructure development. The company has three data centers which are located in Africa, Europe and United States. These data centers are meant to host application and global services which support the company operations allover the world. DHL as a company was quick to realize the huge potential presented by the growth of internet especially in communicating with its customers. The company has responded to customers using email as it is quick way of having a message delivered. Internet has been used by the company to deliver services and information in all the corners that the company reaches. Technology at DHL is viewed as an important part of the operations which has helped in creation of a competitive advantage, improving efficiency in the business and integration with the customer. Recommendations It is forecasted that the Asian and Africa economy will continue to record robust economic growth in the next ten years. The high growth is an opportunity for the logistic industry since there will be a great need for export and imports. This creates a huge opportunity for DHL given that its presence in these regions is noticeable by the increased expansion and acquisition it has undertaken in the last few years. The company needs to play an important role in supporting the growth of these regions through providing a channel through which products can be moved from the producer to the consumer. The companies should increase its investments in aircrafts; motor vehicle as well as acquisition of local delivery companies tto strengthen its capacity to take up the growing market. The company should also position itself to tap the increased online retail trade. It needs to partner with the companies which offer online shopping to increase its revenue on this base. (Sunil and Peter 2005)(Marah 2009). It should also strategize on stabilizing the operation cost and increase investments which are geared towards tapping new markets and solidifying the old ones. To reduce the cost of operation the company can liaise with oil suppliers and form a partnership, as this has been noted to be the major component which has led to increased costs. Given that oil prices will continue to rise, this form of alliance will ensure that the cost of fuel is stabilizing hence reducing the cost of operations by a greater margin. (Rahul 2005) (Thakkar et al 2005) (Brah and Ying 2006)(Sheffi 2006). The company can also outsource some of its non core business in markets where labor costs are low. Africa; China and India present a huge opportunity where the company can outsource some of the services such as customer support as well as information technology. This will greatly reduce the operating cost as well as investments in research and development. In conclusion DHL has enjoyed the benefits presented by globalization and information technology as well as encountered challenges. The company can continue to reap these benefits if it positions itself to successfully tackle the new challenges that may be brought by technology advancement and globalization. References Arvis, J.-F., M. A. Mustra, J. Panzer, L. Ojala, and T. Naula. 2007. Connecting to Compete: Trade Logistics in the Global Economy. Washington, DC: International Trade Department, The World Bank. Coltman Tim, Staurt Whiting and Gattorna John (2010) Realigning Service Operations Strategy at DHL Express, Interfaces vol 40 issue 3 p175-183 Johnson,E (2006)Supply Chain Management: Technology, Globalization, and Policy at a Crossroads vol 36, No. 3, May–June 2006, pp. 191–193 accessed from http://digitalstrategies.tuck.dartmouth.edu/cdsuploads/publications/pdf/Paper_Interfaces_Global_1.pdf JX Inda & R Rosaldo, (2006)A World in Motion’ in JX Inda & R Rosaldo ,Anthropology of Globalization, Blackwell Publishing, Malden, MA, 2002, pp. 1-34.- 4 Kevin O’Marah. (2009) Supply Chain Risk, 2008-2009: As Bad As It Gets.” AMR Research, May 21, 2009. Management Mangan, John, Lalwani Chandra and Butcher Tim (2008) Global Logistics and Supply Chain Management, John Wiley and Sons pp205-210 Matthew Harwood.(2008)GAO Finds Problems in Supply Chain Security Practices.” Security Rahul Altekar, 2005, “Supply Chain Management-Concept & Cases”, Prentice Hall , New Delhi Shaukat A. 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