Analysis of Deutsch Post DHL and Penske Logistics - Case Study Example

Analysis of Deutsch Post DHL and Penske Logistics Table of content Executive summary (I)…………………………………………………………………………4 1. Introduction …………………………………………………………………………………5 2. Deutsche Post DHL………………………………………………………………………….6 2.1. Services offered by DHL…………………………………………………………………..6 2.2. Freight services……………………………………………………………………………..6 2.3. Warehousing and distribution………………………………………………………………8 2.4. Distribution of goods……………………………………………………………………….8 2.5. Supply chain management…………………………………………………………………..9 2.6. Challenges and Advancement………………………………………………………………10 3. Penske Logistics……………………………………………………………………………….11 3.1. Services provided by Penske Logistics……………………………………………………...11 3.2. Freight services……………………………………………………………………………...11 3.3. Truck leasing………………………………………………………………………………...12 3.4. Warehousing and distribution……………………………………………………………….13 3.5. Advancement and challenges………………………………………………………………..13 4. Analysis of Deutsche Post DHL and Penske Logistics……………………………………….14 4.1. Freight services……………………………………………………………………………...14 4.2. Security of the cargo………………………………………………………………………...15 4.3. Cold chain management……………………………………………………………………..15 4.4. Warehousing and distribution……………………………………………………………….16 4.5. Supply Chain management………………………………………………………………….17 4.6. Advancement in services……………………………………………………………………18 4.7. Differences between Deutsch Post DHL and Penske Logistics…………………………….19 4.7.1. Truck Leasing……………………………………………………………………………..19 4.7.2. Multi-modal and intermodal freight ………………………………………………………19 4.7.3. Warehousing and distribution……………………………………………………………..20 4.7.4. Sea freight services………………………………………………………………………..20 5. Conclusion ……………………………………………………………………………………21 6. References……………………………………………………………………………………..23 (I) Executive Summary The paper is a discussion of how logistical companies carry out their operation on a day-to-day basis. Broad analysis of achievement made in the logistical field is brought out. Deutsch Post DHL, a multinational logistical company, has been focused in this paper alongside with Penske Logistics. The two firms have made tremendous improvement in their logistical operations. The paper observes the challenges facing the industry and measures taken to avert security threat during shipment. Supply chain management requires all players involved to offer their services diligently. Regardless of the size of the logistical companies the operations are similar and only differ in few areas. Efficiency in logistics and supply chain is the determining factor in realizing the overall objectives that are mostly determined by consumers’ demand. 1. Introduction The growing demand for goods and services across the globe has posed a challenge not only to multi-national companies but also new entities (Rushton, 2010, pg 26). Corporations have been forced to generate ideas on how they will satisfy the needs of their clients in different localities. This challenge becomes complicated when it comes to the delivering of goods and services with the inherent quality desired by the client. Companies used to run their operations on what is referred to as vertical integration. Vertical integration is where a firm runs all operations right from upstream processes to downstream processes. In simple terms, it performed all activities involved in procuring raw material, distributing finished products, and managing inventory. It might sound an easy task for a smaller corporation, but one has to view it in a broader sense as far as clients are concerned. One can imagine a multinational company like Samsung engaging in all those activities. As a result of the challenges firms faced in managing their logistics and in the same time ensure clients are satisfied, logistic companies were formed. The value the logistics companies have added in the goods and services produced by firms are of immense benefits to both ends (consumers and producers). Credit has to be given to them for transforming the field of doing businesses. Nowadays firms just need to concentrate on their critical role of producing quality products and services. In this paper the focus will be in two major logistics companies namely; Deutsche Post DHL and Penske Logistics. Both logistics companies enhance the quality of goods and services, but might differ on how they accomplish in logistical services. 2. Deutsche Post DHL Deutsche Post was founded late 1960s with the core function just being receiving and delivering mail between Honolulu and San Francisco. The demand for its services grew at an alarming rate and by 1970s it started offshore and inter-continental delivery services. In 1983, Deutsch Post acquired some shares from DHL. In 2001 it was the majority shareholder of DHL. It finalized the acquisition of DHL in 2002 and became the owner thus the brand name Deutsche Post DHL. Its headquarter is in Bonn Germany. The firm has expanded its services, and it is found in all continents with only a few states where it has not established its services. 2.1 Services provided by Deutsche Post DHL The firm offer a wide range of logistical services that includes, freight transportation, warehousing and distribution, supply chain management. The different services ensure that clients are served to their satisfaction. A customer will always demand what suits him/her at that time and with a range of services and products winning loyalty of the consumer is as easy sipping sweet wine. 2.2. Freight transportation services To start off with freight transportation services, individual consumers or corporations might require goods to be moved from point A to point B. The destination of the goods is a factor considered by DHL attendants and in addition to that the urgency of the goods to be delivered is also factored. Freight transportation can be completed by either use of air, roads, rail or waterways. DHL has a developed system that will ensure the goods in transit are delivered to the destination as agreed with the client. (Sales, 2013 pg 56), holds that the state of goods delivered to any logistical company has to be transported and delivered to the destination at least the same state. He further suggests that if this is not taken care of the chances of clients tarnishing the company’s image will become “cheap.” DHL ensures the goods delivered to them are not only handled with the uttermost care when been delivered, but also when the goods are on transit to the final destination. With its worldwide stations, DHL can provide multi-modal transportation. Multi-modal transportation refers to the usage of different modes of transport in moving goods from one point to the final destination. This arises due to natural barriers that hinder one mode of transport to complete logistical processes. The world has become a global village and, as a result, instant services have been on the rise. Goods have not been left out (Chopra, & Meindl, 2007, pg 61). DHL admits the needs for such services and is working hand-in-hand with airline companies to help them when such service arises. To ensure their clients are satisfied DHL has differentiated urgency delivery into two forms. The first one is where the goods or service is booked for cargo space on the plane that will be leaving in a given timeframe. The second form is when the urgency is exceptional the process of shipment is fastened, and a cargo space is booked for the plane that is leaving for that destination at that time (“Dedicated Operations”, n.d, n.p). Charges for the two services differ due to the technicality involved in overriding the standard procedures during shipment. This service has made DHL to become one of the trusted service providers as far as logistical issues are concerned. 2.3. Warehousing and distribution Companies have realized that for them to grow, they have to concentrate on their core functions. Issues concerning distribution and warehousing it is been outsourced to other firms to provide those form of services. DHL steps in and provide a solution to firms that require that kind of services. Warehousing refers to the storing of manufactured or finished goods as they wait to be collected or delivered to the clients. According to (Rushton, 2010, pg 243), the process of warehousing it is very crucial for the products’ quality to be maintained, or else the client will refuse the product on the basis of the quality. DHL has a team of specialists who ensure each type of product is stored safely, and quality is not compromised. For instance, fresh produce will require a cold room to keep the temperature to prevent the products from staling. In this scenario, the team regulates the temperature of the warehouse to slow down the rate of metabolism of fresh products.DHL has also differentiated its warehouse services into the following categories; ambient, temperature-controlled, raw material, finished goods, automated and bonded warehouse. The aim of the differentiation is to enhance the quality of service they provide and meet the clients need. 2.4. Distribution of goods Distribution can simply mean moving goods and services from the source to where it is needed. However, in logistics the distribution aspect is a little bit complex. Complexity arises based on what is to be transported and the final destination. DHL is a global logistics company that has to take all factors concerning the goods into consideration in order to maintain its reputation. Distribution of the goods does not necessarily mean end products only raw materials are also included. It should also be noted that at one time an end product can also be a raw material for another client within the chain. DHL has developed a distribution network that will enable its clients have a timely reception and delivery of raw materials and finished goods respectively time (“Dedicated Operations”, n.d, n.p). The distribution also encompasses the movement of both raw materials and finished goods to and fro the warehouse. 2.5. Supply chain management Supply chain management can be defined as a smooth flow of goods from point of production to consumption (Geunes, 2005, pg 14). The goods in the context are raw materials, work-in-progress, inventory, and finished products. The core function of supply chain management is to ensure logistical cost is minimized and service level enhancement. DHL has been sub-contracted by many firms across Europe to carry out supply chain management on their behalf. Bearing in mind supply chain is a field of different players operating on both streams upward, and downward the chain makes it complex. For an efficient supply chain management there must smooth flow of information to and fro upward and downward streams. DHL ensure it taps relevant information that will enhance the provision of quality services to its clients. Outsourcing management of supply chain makes the company focused on its core function and becomes competitive (Chopra, & Meindl, 2007, pg 17). It is the duty of the outsourced company to ensure that products fulfill the following requirements; right quality, right quantity, right customer, and the right time. All these requirements are essential in meeting a client’s need. This can make a firm lose focus and diverge its effort. DHL has been sub-contracted by many companies producing various products thus developing a unique supply chain management system for each company that will suit its activities. Supply chain management for a multi-national is more complex and requires one to analyze the cost of using different locations to accomplish different services. The system ensures that all the “rights” are meet, and moreover it is able to detect any defect and corrective measure developed thus making supply chain management robust. 2.6. Challenges and advancement The demand for DHL services across the globe has grown due to international business transactions. The increased demand has overwhelmed its capability especially in countries where it has not established its services. This has forced it to sub-contract other logistical companies to perform the services on their behalf. The sub-contracting comes along with challenges especially in the quality and security of the goods time (“Dedicated Operations”, n.d, n.p). Competent and reputable companies have been recruited by DHL to minimize the challenge of quality especially the “rights”. DHL has always recommended all his shipment to be monitored while on transit. Through the use of Radio Frequency Identification (RFID), the location of each shipment can be identified. In case of any breach, an alert is sent to headquarter, and appropriate action taken. As a business logistical companies such like DHL need to advance their services. Information technology services have made the operations within and outside the organization accessible with ease. Credit has to be given to DHL for embracing technology in their service provision. Currently, you can request for DHL services online and still complete the transaction (payment) using an online platform. It is a tremendous development in the field of logistics and supply chain management. 3. Penske Logistics Penske Logistics is a leading logistical company in China. It was founded in 1969 with its core function being leasing of trucks to companies or individuals who required such kinds of services. It was until 2005 when it initiated logistics operations. The idea behind the initiation was due to pressure from its clients in China who on several occasion requested those services (“Looking for Asian Logistics Specialized Services” n.d. n.p). With the demand in place, the company grew at a faster rate. Kerry Logistics, also logistical company renown in China was experienced stiff competition from Penske Logistics. The Headquarter is in Shanghai, China. 3.1. Services provided by Penske Logistics China is the fastest growing economy in the world currently. That means the rate at which goods and services are created is also high. The created goods and services require smooth and fast logistical processes in place. Penske Logistics provides the following services freight transportation services, fourth party logistics service provider, truck leasing, warehousing, and distribution. 3.2. Freight transportation services Penske Logistics provide both local and global freight services. Recent studies has proven that many firms across the globe produce their products in China this means that China has voluminous production processes ranging from textile, electronics et cetera. Therefore, an efficient and effective logistic company like Penske is on demand. Penske coordinates the shipment of raw materials to the processing firms in China and the export of the finished products. Its freight services are of various modes namely; air, water and roads. With centers in Hong Kong, Shenzhen, Beijing, Guangzhou, and Jinan it can provide freight services to different companies in those locations (“Looking for Asian Logistics Specialized Services” n.d. n.p). The company boasts of skilled and industrious staffs, who have transformed it for the past five years. Truck drivers for Penske are very conversant with the roads network in China, and this makes them able to avoid and minimize impacts of the traffic jam. The company is in the process to expand its sea freight logistics; currently the volume of sea shipment is below its capability. 3.3. Truck leasing Truck leasing was the initial activity Penske Logistics used to engage, but later expanded their services to other logistics services. Truck leasing services offered by Penske Logistics was meant to cut down the cost of operations for companies. Leasing a truck is a brilliant idea for growing companies than acquiring. It is because the company can focus more on its growth, and furthermore trucks in a company should not exceed the number of trucks during normal operations. Companies that acquire a huge fleet of trucks during peak season end up parking some of them during low season in their production. This is not economical it is better they lease the truck during the peak season. Penske provides the truck alongside with competent drivers that make it be considered as the first priority in road freight. The trucks leased by Penske Logistics are of different purposes and customized to suit the operations for an individual company. There has been an increase in the demand for temperature controlled trucks, especially for products that are perishable and will cover long distance to reach the destination. In the year 2009 Penske was forced to fabricate some of its regular trailers to meet the demand for temperature controlled trucks. 3.4 .Warehousing and distribution In all its centers in different town, Penske Logistics has warehouses. These warehouses are rented by firms or sub-contracts Penske to manage its inventory. Companies in Hong Kong prefer to use Penske’s warehouse because of the quality service that goes hand-in-hand with the maintain quality of goods. However, this does not mean that other warehouses do not have poor quality services it is only that warehouse in Hong Kong has the highest turnover as compared to others. The warehouse are designed to hold finished goods mostly electronics that waits to be shipped to the clients abroad. Most firms that have contracted Chinese companies to do the production emphasis the use of just-in-time model (JIT). The cost of maintaining inventory makes the products expensive due to the accrued cost. Penske Logistics provide distribution of finished goods to consumers across different towns. Distribution of the finished goods to the consumer by a third party makes the business competitive. The distributor will always try to meet the “rights” so as to remain relevant and trustworthy. Companies usually contract the distribution of their products to relieve the pressure exerted on them by consumers. It is the responsibility of the distributor to evaluate all possible hindrance in meeting the client’s expectation during shipment. The hindrance should be worked out to ensure the clients receive what they procured. Penske Logistics has developed a strategy that will ensure consumers’ feedbacks are incorporated in its operations for better services. 3.5. Advancement and challenges Technology develops and becomes obsolete as time progresses. For a company to take the risks of incorporating technology in its operation it is something to be awarded credit. Penske Logistics tries to keep up with technology so as to give it competitive edge in logistical services to its clients. The use of RFID in tracking shipments is inevitable in the logistical field. Clients will always want to be assured of the safety of the good when they are on transit. The use of an online platform in conducting business has become the “new market”. Organizations have to ensure that almost all its activities can be completed using online platform. Requesting services from Penske Logistics can be performed using an online platform. The company attests to the growth for its operation is because of massive online services. When the Chief Executive Officer of Penske Logistics was interviewed by a journalist, he said;” We have recorded high turnover using this online. I think my IT team should work out to ensure the remaining services are also available online.” 4. Analysis of Deutsch Post DHL and Penske Logistics This section will be concerned more with how these two logistical companies perform their operations. Similarities and difference in their operations will be brought out clearly. The challenges facing each firm and how it is tackled will also be analyzed and compared to the other. 4.1. Freight services Both companies provide freight transportation services. In Germany DHL boasts of an efficient road network that makes it easy for them to offer road freight services. Air, sea and road freight services are the key freight services a logistic company should be able to provide to its clients. A client would be satisfied if the cargo is shipped by the company that was contracted right from the origin to final destination (“Delivering quality globally”, 2012, pg 36). This is why logistical company tries to provide freight services using different modes. Both companies provide air freight services. Globalization and urgency in shipment forces logistical companies to provide air freight. Shipping of bulky cargo using waterways is affordable. Logistics companies assist the shipment of such goods. Though it takes long before the consignment reaches the client, DHL and Penske ensure they are in constant touch with the client. Notification about the progress of the ship is forward to the client on real-time basis. These efforts are geared to make the client feel the consignment will be delivered soon. 4.2 Security of the Cargo According to (Chopra, & Meindl, 2007, pg 115), Security of the goods been shipped is paramount, and it can never be compromised regardless of which mode is used. This is evidenced on how both companies use a tracking device that will provide signals the location of the goods. The device has the capability to detect a security breach of the consignment. DHL staffs have great confidence in the use of Radio Frequency Identification and believe nothing can go wrong when the goods are in transit. DHL serves a vast number of clients, and it can never allow any security breach to the consignment of either its loyal or new clients. Penske Logistics on the other hand had used tracking devices services for a long time when it was only leasing trucks. In its currently logistical services, it still uses the Radio Frequency Identification to boost cargo security. 4.3. Cold chain management Due to the handling of perishable products like flowers, and vegetables logistical companies have to manage the flow of these products while maintaining the appropriate temperature. The practice is referred to as cold chain management. Both Penske Logistics and DHL provide this service to its client. Right from the point where the goods are collected the temperature is controlled till it reaches the client. Cold chain management ensures the quality of the goods is maintained, and it is sometimes referred to as value added services. Cold chain management is a complex process that requires skilled personnel to oversee the transition of processes. Interruption of temperature may result in massive loss that is why both companies have a team of specialists to handle cold chain management. Above all, the companies have a reputation to protect, so as to win other clients in the future. 4.4. Warehousing and distribution Both Penske Logistics and DHL provide these services to its client. Penske is a renowned, logistical company in China and other countries in Asia in the provision of the services. DHL, on the other hand, has grown and became the pacesetter for other logistical companies. Warehousing of a client’s goods is crucial and requires proper care when still in the warehouse (Adams, 1996, pg 22). Warehouse of the two companies can provide service for a wide range of products. It is advisable that each stage in the supply chain to be linked with the other stages. The linkage allows for communication that is essential in making sound decision. Information on logistics is crucial and volatile, what could make sense now might be as old as a century the next day. The warehouses of the two companies are located in the major towns of different countries. Decision of where to locate a warehouse should always be arrived at after critical analysis has been done. Accessibility of the warehouse is vital as well as security. Client won’t allow his treasure to be warehoused where the security is not guaranteed. According to Adams, (1996, pg 43), distribution of raw materials and finished goods goes far beyond the physical collection and delivery. He further suggests that prior the distribution a logistical company should always know facts about the goods to be distributed. The current state of the world with terrorism being on the rise chances of merely distributing does not hold at all (Hoffman, n.d. pg 57). Scrutinizing of the goods is done before actual distribution by both firms is conducted. It is also important to note that some goods are legal, but hazardous. In this case, the staff handling the goods should have the expertise of preventing any harm that may arise during distribution. Penske Logistics has been contracted by an electronic company in China. The products are delicate thus proper handling during distribution. 4.5. Supply chain management Supply chain management has a wide scope as far as shipment is concerned. Companies nowadays want to do away with the pressure arising due to shortages in supply. The solution they have taken is to contract logistical companies to provide this service. Both Penske and DHL are fourth party logistics service providers (4PL). A fourth party logistics services provider is a contracted logistical company to oversee the operations conducted by other logistical company (Chopra, & Meindl, 2007, pg 95). This is normally done by multi-national companies that want to be certain that the contracted logistical company is up t task. Recent studies have shown that 4PL companies have a good reputation and have been trusted by clients for a long time. DHL has been in the operation for quite a long time that it has gain trust and loyalty from clients. The same applies to Penske only that it used to lease trucks before engaging in logistical services. Supply chain has many players, and all these players need to work towards a common objective(s) (Geunes, 2005, pg 74). DHL and Penske Logistics provide solution on how these players can be integrated to offer smooth operation. As logistical companies, they are abreast with challenges facing each stage in the chain. A breakdown at any stage within the chain will definitely halt the operation of other stages. This is why a 4PL company should ensure coordination of the stages and a mechanism to identify any breakdown possibility. If for instance, a company contracted to supply fifty ton of wheat per week then the company fall short of supply a crisis looms. The 4PL must come up with ideologies to avert the looming crisis as fast as possible. 4.6. Advancement in services The beauty of innovation has forced corporation to adopted new ideas and incorporate in their services. Both firms have not been left out in embracing technology. DHL offers its services using the online platform. It will be unfortunate for any firm to ignore the benefits accrued from the use of online in doing their business. Through the use of technology, the services of the two companies have improved. People across the globe are busy and will always look out for the most convenient service provider. The relationship between the clients and the two firms has enhanced due to the interaction. The real-time update service is a very great idea and credit has to be given for that. Insuring goods on transit is a real phenomenon that logistical companies have embraced. The idea behind is to instill faith and loyalty to the company by the client. 4.7. Differences between DHL and Penske Logistics Both companies provide similar services, but they differ on how each company conducts its services. How service is offered in the logistical field determines the superiority of a given firm. 4.7.1 Truck leasing This service is only offered by Penske Logistics. Penske identifies the need for trucks by individuals and corporation. Leasing of the trucks is flexible can decided for how long it will require those services but the minimum period has per Penske Logistics is six months. On the other hand, DHL only provides the service by their trucks they do not lease trucks. The trucks owned by DHL only ferry goods that it has been contracted. Penske combines the two services and can maximize the return from its trucks. 4.7.2. Multi-modal and intermodal freight Geunes, (2005, pg 136) argued that in order for a logistical company to have a smooth operation, it should be able to provide multi-modal services. Both firms provide air, roads, and waterway freight services, but DHL is more robust in air freight since it owns number of planes. It is advantageous for them since it can cost some cost thus increase profit levels. DHL has more stations as compared to Penske Logistics distributed across the continents. The benefit for this occurs when a consignment shipped in a foreign country still it will be DHL that handles it at that end. For Penske, it has to contract another logistical company in the region to assist in the reception of the consignment. However, it does not mean that all branches open worldwide having DHL brand belongs to Deutsche post DHL. Some of the branches operate using the brand name and pay for goodwill. Control measures have been placed to ensure that quality of services provided by those branches meets the threshold set by Deutsche Post DHL. 4.7.3. Warehousing and distribution The two companies provide warehousing and distribution services to its clients, but there are differences in how they conduct the services. DHL provides warehousing services for all goods; raw material, work in progress and finished goods. Penske only provides warehousing services for finished and raw materials goods only. However, the management is working on ways on how to expand its warehouse services for work-in-progress goods. DHL has different types of warehouse that can be used to different stages in the supply chain. DHL has several fully automated in different states that have increased efficiency in service provision. Distribution of goods and service adopted by DHL is different from what Penske logistics. DHL provides a doorstep delivery as well as station collection. The distribution is handled by DHL right from the collection of the consignment and delivered to the destination solely. However, for Penske Logistics distribution outside the Asia and especially Africa the distribution is conducted by other logistical companies. Doorstep delivery is not guaranteed like the case for DHL. This sort of differences makes DHL be the top-of-mind for anyone who wants to ship a product anywhere. 4.7.4. Sea freight services Both DHL and Penske Logistics provide waterway service for bulky cargo that might be expensive if air freight was used. However, the sea freight services for DHL surpass that of Penske. DHL owns containers in their warehouses near inland depot and seaports, and this facilitates clients in containerization of their cargo. According to (Lowe, 2005, pg 69) the container services are differentiated to suit different classes of the cargo. For instance, cargo of several clients can use one container if they are few and content similar. The service is referred to as less-than-container load. Penske logistics, on the other hand, has not fully exploited its sea freight services as compared to DHL. Though it the second sea freight handler in China after Kerry Logistics, it still got much to do. Use of containers during ground freight services is highly recommended since the state of the cargo is not compromised (Rushton, 2010, pg 47). The cost of owning containers is expensive, and companies always prefer either to lease or hire the services. Logistics companies that have specialized in containerization have made it efficient for other logistical companies to perform sea freight services. 5. Conclusion The study processes daily either inflow or outflow. Logistics companies harmonize those processes and facilitates the realization of the company overall objectives. Challenges facing logistical companies should not be considered as a hindrance to success. Rather the challenges should motivate players at different stages in the supply chain. Overall functions of supply chain management are to minimize costs incurred in logistical processes, enhance quality of the consignment, and conducted on the two firms has brought to light processes involved in moving either service or goods. It is indisputable life without logistical companies can end up in a crisis. Businesses perform voluminous enhancing service level. The two firms have differentiated their services that are similar. Differentiation of services in logistics is meant to satisfy the particular needs of a specific segment of customers (Wood, 2002 pg 185). The future for Penske logistics is bright. Considering the time it has been in the logistical field and the achievement it is commendable. In less than ten years, its services have been recognized in China. DHL still has a platform to enhance some of its services. For instance, it can open up new branches in the countries where there have not yet. This will improve their service provision, and that is what clients require. Their distribution network (doorstep) is an admirable one, and other logistical companies should also adopt a network similar to that network. The use of technology has revitalized logistical field. Some of the innovation are sophisticated like Radio Frequency Identification but when implemented have enhanced services. 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