The art of staying connected in business

DHL chief delivers success by what he says is optimizing procedures, attracting customers from rivals

Despite its high global breadth of exports, China still remains 74th in terms of global connectedness, says 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 Co-operation 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.

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," Appel says. "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 says there are too many uncertainties and there will be challenges next year.

DHL's first-half-year financial report has seen increased profitability. Appel explains that the company is doing well because it is optimizing its procedures and expanding its businesses at the expense of its competitors while reducing the costs of production and operations.

"We constantly look into waste," Appel says. "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 more people are becoming middle class. China will become the world's largest logistics market by 2016 but faces challenges, including high costs, poor credibility and transport, 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 will remain so in the second half. The industry has achieved revenues of 93.1 trillion yuan ($15.3 trillion; 11.3 trillion euros), 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 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 told the vice-minister of transport 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 team to China to visit seven cities. That was because 20 percent of the company's revenues last year came from Asia and half of those came from China.

"With more than 20,000 employees in China, our businesses are growing rapidly and it is an important part of our operations," says 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."

On top of three global hubs - Cincinnati, Leipzig and Hong Kong - DHL added a regional hub in Shanghai in July last year, its 19th regional hub. The operation at Shanghai Pudong International Airport serves as its biggest express hub in Asia and cost $175 million. Appel referred to it as a milestone for its Asia-Pacific network.

"We are very happy that the Shanghai hub has improved our service quality significantly. We can provide Chinese customers or importers to China with a much better quality of service. We think we've chosen a good place," Appel says.

The hub deals with imports and exports, with express documents and parcels, bringing materials from overseas to Shanghai, from Hong Kong and over the Pacific and from Europe. It distributes them to other regions inside or outside China.

"They are connecting not only China to the world but other regional parts of Asia or to other parts of the world," Appel says, adding the company won't need another hub in the short term because expansion of current facilities will be the priority if it wants to grow.

The growing number of Chinese companies engaging with global trade has boosted its business. DHL has developed a model to help Chinese companies by introducing Chinese nationals living abroad to manage Chinese accounts so they can understand what is involved in exporting to the rest of the world.

At present, foreign operators are not allowed to deliver domestic documents. DHL will retain its focus on international express businesses where it is the No 1 market leader. Although he sees no signs of the government changing the regulations, Appel believes that more competition is good for any market in the world.

Before joining the company, Appel was a managing partner at McKinsey & Co in Frankfurt, Germany. He left for two reasons: the huge opportunity to work with a team and to learn from great leaders. He considers himself a lucky person to have worked for great leaders from whom he can still learn.

Appel has a master's degree in chemistry from the University of Munich and a PhD in neurobiology from the Swiss Federal Institute of Technology in Zurich. He dropped out of scientific research despite working in some fascinating areas. But he was intrigued by what he found at McKinsey - it is successful because it has a great team.

Working not as a scientist but as a manager, he says his job involves selecting the right team.

"I work with great people and see they are succeeding and creating value for our customers," he says. "It is very rewarding for me to have a very strong team that comes from different cultures."

wangzhuoqiong@chinadaily.com.cn

Staff sort parcels at an outbound shipment processing area in DHL's North-Asia Hub in Shanghai. Provided to China Daily

(China Daily Africa Weekly 11/08/2013 page20)