DHL FHWA Net Conference Presentation
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DHL FHWA Net Conference Presentation. October 20, 2004. Ground Network Review. Purpose. To discuss the strategic redesign of the Legacy Airborne Ground Network into a fully integrated DHL National Hub and Spoke Ground network. Agenda. DHL Background – Who is DHL?

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DHL FHWA Net Conference Presentation

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Dhl fhwa net conference presentation

DHL FHWA Net Conference Presentation

October 20, 2004

Ground network review

Ground Network Review



To discuss the strategic redesign of the Legacy Airborne Ground Network into a fully integrated DHL National Hub and Spoke Ground network



  • DHL Background – Who is DHL?

  • Current Ground Network Design

  • Transition from Centralized System to Hub & Spoke Design

  • DHL’s Ground Hub Network (Why Transition)

  • Network Design Methodology and Optimization Modeling

  • Transportation Planning Considerations

  • New Network Design: Hub & Spoke Network

  • Transportation Economic Reality

  • States That allow Double Trailers

  • DHL impact on Existing Interstate/Turnpike network

  • FHWA Assistance

  • Summary

Who is dhl

Who is DHL?

  • DHL was founded in San Francisco in 1969

  • We are an express delivery company that services approximately 8% of the U.S. domestic market

    • Under the DHL Express Service umbrella, we offer Ground Deferred, Express, 2nd day, and Residential delivery (At Home) service

  • DHL is the #1 provider of international shipping in the world, with approximately 38% of the global express market share.

    • We operate in 220 different countries

    • Over 32,000 employees in the United States

  • Thus our motto of “We move the world”

  • We recently acquired Airborne Express to become the #3 domestic provider in the express delivery industry in August 2003

    • Moving approximately 386 million packages each year in the Americas

Current network design central hub system

Current Network Design: Central Hub System

Green Lines – Aircraft Connection required

Orange Lines – Trucks to and from Stations

Red Lines – Interhub truck moves

Dhl hub and spoke system

DHL Hub and Spoke System

  • By December 2004, DHL’s Ground Network will consist of 19 regional hubs, and 442 service centers located throughout the lower 48 states

  • We service every zip code in the United States

  • DHL is shifting from a Central Hub system to a Hub & Spoke system similar to the UPS and FedEx operational designs

  • Future business plan to invest $1.2 Billion

Why are we transitioning

Why are we Transitioning?

  • In order to compete with the duopoly that is FedEx and UPS, we had to change the way we operated.

    • Allowed us to realize some of the benefits of consolidation that weren’t being realized before

  • Customers wanted a network that was competitive throughout the nation, not just in between one or two specific markets

    • We are very competitive to the Industry Standard

    • Setting the best transit in some markets

  • Under the old system everything traveled to our hub in Wilmington, OH

    • This caused extremely uncompetitive service between points located on the West Coast and Mountain states

  • We previously used excess air capacity on existing flights to move ground packages on low volume lanes, but as volumes continue to grow, we will run out of capacity on these underutilized flights

Network design methodology

Network Design Methodology

  • DHL is currently in the process of expanding it’s Ground Network Operations in the United States

  • By using factors such as market density, interstate road connectivity, industry transit times, and road speeds, we select the most optimal location for our Regional hubs

  • We also factor in criteria like labor constraints, traffic and weather patterns, and proximity to airports in determining the final location

  • By shifting to a hub and spoke system, we are now able to provide competitive service, while taking advantage of the economies of scale that come with consolidation

Optimization modeling

Optimization Modeling

  • In the years past, DHL designed our network using manual trial and error

    • Hub location analysis was dependent upon a blend of logic and “gut feeling”

  • In today’s world of simulation and statistical modeling, DHL uses state of the art Optimization software to identify investment opportunities for trucks and hubs

  • By equipping analysts that know the in’s and out’s of the small package industry with powerful computing tools, we are able to identify profitable investment opportunities

    • Decisions such as where to place a new hub

    • What truck linehaul requirements will be needed

    • Hours of operation

    • Cost/benefit analysis

    • Optimal routing and scheduling

    • Volume arrival profile at hubs and service centers

Transportation planning considerations

Transportation Planning Considerations

  • The small package industry truckloads differ from typical truckload.

    • 23,500 lbs looseloaded or 18,500 lbs palletized

    • Truckloads will always cube out before we ever exceed maximum weight limits

    • Most truck runs are serviced by team drivers due to the service commitment for our interstate runs

    • We use a 47 mph transit standard for determining our transit times throughout the country

    • We drive industry competition by dissecting the U.S. into 5 transit day regions

    • We also operate a majority of our truck runs at night, between the hours of 8 pm to 8 am.

New network design hub and spoke system

New Network Design: Hub and Spoke System

Green Lines – Aircraft Connection required

Orange Lines – Trucks to and from Stations

Red Lines – Interhub truck moves

Dhl s hub ground network 19 hubs 450 stations

DHL’s Hub Ground Network (19 hubs/450 stations)

Transportation economic reality

Transportation Economic Reality

  • Package Density is essential to success in this industry

  • Each added package that moves over network (265,000 lane segments) translates into a marginal decrease in unit cost

  • Current loads are either loose-loaded or a combination of pallets and roll on/roll off containers

  • As density builds, we will transition to a more loose-loaded truck network

    • Transportation costs offset the additional labor costs

  • One power unit can move a 53’ trailer or Double 28’, 45’, 48’ trailers, thus driving favorable economics

  • As density builds, we will transition to more double trailers on high density lanes

States that allow double trailers

States that allow Double Trailers

  • With less than 40% of states allowing double trailers on their Interstate highways, carriers would need locations to where they could deconsolidate and reconsolidate trailers

  • If we don’t have locations to do this, it would be virtually impossible to use double trailers on only but a handful of lanes.

States that allow Double Trailers

Interstate Highways that allow Double Trailers

Performance management

Performance Management

  • In the small package industry, transit times are quoted in business days.

  • Thus pickups made toward the end of the week have a higher on-time service rate than one’s picked up at the beginning of the week due to weekends

    • With weekends, we get 2 free days to move our product without incurring service penalties

    • Since the industry treats every day the same, weekends give us the opportunity to recover from any delays in transit

  • Since failures are bound to occur during the middle of the week, recovery via aircraft is our only other option.

    • Many of our current hubs have aircraft that are used to move our 2nd day product and recover any failures that occur on the Ground side

    • Our long term goal is to have a fully optimized intermodal system to provide a variety of service offerings to our customers

  • Adhering to schedules is essential to on-time service

    • Hub to hub truck movements will be within 15 minutes of the schedule

    • Service center to hub truck movements will also be with in 15 minutes of the schedule

Dhl continually evolving future plans

DHL continually evolving (Future Plans)

  • Qualcomm tracking

    • DHL’s goal is to trace every truck in our network just like we are able to pinpoint where each one of our aircraft at any given time of the day.

  • Optimization Modeling software

    • By using state of the art modeling software, we are able to identify areas of opportunity

  • Linking North America with an extensive ground network

    • Our goal is to have a network that can move a package from the southern tip of Mexico to the northern edge of Canada in a seamless integrated network

    • By setting up cross border points and customs clearance locations in strategic locations throughout the country, DHL will be able to offer it’s customers a more robust product offering

  • Refleeting our network

    • Currently DHL has been refleeting our courrier vans, but our goal is to expand this to include outsourced tractor-trailer fleet

  • Outsourcing

    • DHL’s core business is moving packages, so we continually plan to outsource our linehaul to companies that have proven they can support the rigid standards that our customers expect out of the #1 express service in the world

Help from the dot

Help from the DOT

  • Locations to consolidate and deconsolidate double trailers

    • Doing this could help bring down the number of tractors running over the interstate road system

    • Example – Florida Turnpike: DHL cannot implement doubles because breakdown locations do not exist off exits near our service centers

  • Additional direct Interstate connectivity between major cities

    • Memphis to Atlanta, Kansas City to Memphis, Denver to Phoenix, Tulsa to Kansas City, Dallas to Denver, Salt Lake City to Phoenix

  • Hours of Service

    • Finalize the changes for the Jan. 1, 2004 hours of service

    • Switching back and forth is costing our carriers millions of dollars in software upgrades, drivers, and equipment. This in turn is passed on to DHL and our customers



  • DHL is expanding its Ground Deferred Business

  • Changing from a Centralized Super Hub network to a a National Hub & Spoke network

  • Overall there will be little change in truck traffic on the National Highway System

  • Existing carriers – 160; Truck runs per day – 1,750

  • Volume market share shifts among the Top 3 package companies

  • Will use more “doubles” which will reduce the number of power units on the highway system

  • Identified areas where we need support from the DOT

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