20021019

DHL GLOBAL
LOGISTICS
CUSTOMER
Brussels, October 19, 2002

Sacha Van Hoever, Senior Logistics Consultant, DHL Global Customer Logistics
Contents
Introduction to GCL DHL Global Customer Logistics Vision & Strategy DHL & Partners Service Parts Logistics Reverse Logistics Service Parts Logistics Survey 2002 Case Study

The business environment is changing

Globalisation Focus on core competencies E-commerce Customer Service Explosion
Time to market compression
Organisational Integration
Creation of virtual enterprises One stop shopping

4
PLC Reduction
Global Customer Logistics
DHL International
DHL Airways
Created in 2001 for addressing the needs and requirements of DHL s global customers
GCL
developing
GAC National Advantage
implementing proactively managing
Large National Regular
integrated express distribution and logistics solutions on a regional and truly global level
6
DHL Global Customer Logistics

Vision
long term preferred partner of choice for the leading global companies
To enable DHL to become the long term preferred partner of choice for global express distribution and express supply chain solutions for the leading global companies within DHL s target industries
7
Global Logistics Organization Structure

Global Virtual Teams
Global Logistics
Logistics EMEA
Logistics AP
Logistics NA Global Partner Alliance Global Business Acquisition Support Global Pricing & Profitability Analysis Global Logistics Infrastructure
Geographical Logistics Organization
Partner Alliance
Business Acquisition Support Pricing & Profitability Analysis Logistics Infrastructure
Global Virtual Functional Team
Quality After Sales Program Management
Global Quality Global After Sales Program Management
DHL GLOBAL
LOGISTICS
Global Logistics Vision and Strategy
CUSTOMER
DHL Global Logistics

Vision
DHL Global Logistics will be the Global Leader in (time-sensitive) parts distribution with real-time information technologies supporting consistent global offerings. DHL will develop integrated solutions targeted at high value, high impact goods.
10
DHL Global Logistics

Our approach
Brain Consultative Services
Customer Relationship Management
Build expertise ourselves
How will DHL tap into the total SC market..?
IT Capability Consultancy Manage Partners Special reporting

Call Center Management
DHL
Heavy Weights Defd. services Core transportation <250 kg
Build expertise ourselves
Use partners and joint bidding
e.g. DPWN and Others
Door-to-Airport
Sameday NFO
Muscle Physical Services
Airport-Airport
Warehousing
IT systems
Domestic
Repairs
11
DHL GLOBAL
LOGISTICS
DHL and Partners
CUSTOMER
Our Partner Relationships
START
Global/Regional

No. of shared Services Larger Investments Longer Duration Enhanced Process Integration Geographical scope Importance Number of Projects
Shareholder Partners Strategic Partners
Selection Protocol

Local
Third Party (3PL) Service Providers

Number of Partners
13
DHL Shareholders
1%
76%
Two Investment Trusts = remaining 23%
14
Deutsche Post World Net
33 bln EUR turnover, 318 k people
Germany

Europe

Worldwide

Germany

69 Mio letter items per day High speed
Pan-European parcel network
Danzas, AEI 150 countries 38,000 people
130 bill. Euro on balance sheet 10 Mio clients 13,500 branches

Worldwide

DHL in 228 countries & territories
15
3 Types of Logistics Service Offering
Single DHL 3PL Solution

Customer Division/ Account
Partner Joint Bid Solution

4PL Solution
DP Bus. Unit Service Provider
LSP expertise (CRM) Logistics Consultant Joint Bidding IT Capability
4PL Service Platform
DPWN Bus. Unit
DPWN Bus. Unit
DPWN Bus. Unit
Partner
DPWN Bus. Unit
DPWN Bus. Unit
Partner
Single Managed
CRM Management Tender coordination amongst members
DPWN 4PL service platform
DPWN 4PL Platform
A Joint Venture between:
17
DHL GLOBAL
LOGISTICS
Service Parts Logistics
CUSTOMER
The importance of supply chain management
As we are moving from competing brands to competing supply chains, logistics has become one of the key drivers of competitive advantage. Some companies have recognised this, however they have been focussing on the supply chain driving the production and sales of finished goods (e.g. Dell). Yet there is another supply chain within these companies, also heavily affecting customers and business results, which is often largely being ignored:
The Service Parts Supply Chain

19
The Service Parts Supply Chain
Traditional bases of competitive advantage no longer suffice; the search is on for new opportunities for differentiation Competitive advantage is sought in parts of the value chain that thus far have been overlooked or under-addressed. After sales is one of those areas: Traditionally too fragmented Poorly linked with other parts of the organisation Received little management attention However, by reengineering the service parts supply chain companies can: Create competitive differentiation Improve customer retention Increase earnings from after sales support Reduced cost of after sales support Customer satisfaction
20
Do you leave money on the table?
Poor utilization of physical and people assest
Excess service parts inventory
High service logistics costs
Unnecessary scrap and obsolescence
Penalties for missing service level agreements

21
Poor coordination with suppliers, customers and other companies
Strategic importance
Initial equipment sales High sales costs No relationship Poor customer info Low profitability
Operational after market service Relatively low sales cost Ongoing relationship Good margins High support costs Back to square 1 Missed opportunity for customer loyalty Repeat sales will be just like the initial sale Lost after market service account
Poor AMS performance
Repeat equipment sales Low sales costs Established relationship In-depth customer info Increased profitability Good AMS High switch costs performance
22
Revenue and Profit life cycle
Finished Goods Relationship Service
Time
Finished Goods
Revenue Profit
Service
Time
23
SC impact on shareholder value
Service logistics has a significant impact on shareholder value

Revenue Profitability Obsolescence First time fix High margins Customer retention
Costs
Shareholder value Working capital Invested capital Fixed capital Outsourcing Centralization Inventory pooling Speed instead of inventory Virtual warehousing Information instead of inventory
24
The significance of Service Parts cannot be neglected
,,Spare parts represent $700 billion in spending and 8% of GDP in the United States alone
Piper Jaffray, U.S. Bancorp
25
Service Logistics in after market service
Service logistics is an important enabler to improve after market service
Customer
Call center
The goal: Is to get the right person with the right skills at the right place at the right time with the right parts for a first time fix at the LOWEST COST
Field service
Service control
Logistics based activities can account for more than 90% of the total costs of delivering after market service - source: Accenture.
26
Building blocks for service logistics
Several building blocks are added to build service logistics related supply chain configurations:
Operations
Vendors Plants DC Platform VAL Call centers Field engineers Repair centers Disposal centers
Transport
Modes Inbound Inter DC Outbound
Inventory
Plant DC In transit Consignment Strat. Inv. Depl. Parts replen.
Handling
Handling in Handling out VAL Repair Recycle Upgrade Re manufacture De manufacture Refurbish
Others
Duties Info. substitute
27
SL typical process description
Call management
Call reception
Field service operation
Diagnostic
Job assignment Job acceptence by fieldservice Match field engineer & part Repair on site Return part
Call closed
Part request at warehouse

28
Part delivery
Return part received in repair center
Service Parts Supply Chain strategy Demand/Supply characteristics
Long lead-time: +3 days Supply characteristics: Service level agreement 24-48 hrs
Plan & execute (lean)
Hedge & deploy (hold inventory)
Short lead-time: 2-4 hours
Continuous replenishment
Predictable
SERVICE React & PARTS execute LOGISTICS (agile)

Unpredictable
Demand characteristics
29
Drivers / characteristics of a service parts supply chain

Large number of sku s (DC - optimization) High percentage of slow or non-movers (forecastability, obsolescence) Large variation in form / size / weight (handling) Relation with finished product serial number (information) Long term service obligation (end of life decisions) High standards for: product availability responsiveness / speed (cost of downtime) Service Level Agreements (SLA) common Consumables versus spare parts

30
Key customer support logistics area

Service parts inventory management Service parts warehousing Service parts transportation Services parts order processing and fulfilment Service parts sourcing Service parts procurement Service technician capacity planning Service technician scheduling Service technician dispatch End-user service requirements determination End-user customer service management
Primary logistics challenge

Maximising parts availability with minimum inventory and costs Maximising order fulfilment effectiveness while minimising costs Providing rapid parts delivery while minimising costs Maximising order entry and processing while minimising costs Finding and developing low-costs/high-quality sources of supply Ensuring timely delivery of high-quality parts at minimum costs Maintaining the appropriate number of technicians to support demand Ensuring service technician capacity is effectively utilised Managing deployment of service technicians on an hour-to-hour basis Accurately identifying customer satisfaction needs and expectations Managing appropriate response to customer service issues
31
Characteristics - trade off required
Business profit
Cost to service
Customer satisfaction
Service quality
Cost elements:
y Inventory costs y Downtime costs y Repair costs y DC operating costs y Transport costs y (Second) call costs y Human resources costs y Distribution costs What drives my ability to.. - compete on price - meet profit margin targets?
Quality elements:
y First time right (diagnosis and repair y Minimum downtime (response & repair) y Simple communication (hassle free, 24/7) y Parts availability y Job planning (part, engineer, site) y Right tools and skills utilized y Right parts
How do I deliver quality service?
32
Trends

Increasing customer demands Dramatic expansion in range and sophistication of service offerings Increasing complexity in service techniques requirements Global service requirements due to globalization Integrated service chain planning and operations (parts, repair, DC, transport, engineer, installed base) Ability to turn logistics errors into marketing and sales opportunities Increasing differentiation of similar products Remote diagnosis / pre- alerts (self diagnostic capabilities) Inventory pooling Design consistency across product offerings Full parts inventory visibility (network-wide)

33
Example: remote diagnosis
Real time transmission of data analysis
Service centre
Scheduling of service and part requirements of next maintenance stop
Spare parts
Aircraft engineers
Next maintenance stop

Big reduction of unplanned stops and aircraft downtime
34
Example: Inventory pooling
Cycle stock
Cycle stock
Safety stock
Company x
Safety stock
Company y
Pooling
Cycle stock Lower safety stock and lower average inventory
Safety stock Company x & y
35
With same service level!
DHL GLOBAL
LOGISTICS
Reverse Logistics
CUSTOMER
Service Parts Supply Chains
Engineers Service Event Parts & Materials
Repair
Returns
37
Network Design Multi-level decoupling points

High service level: 2-4 hrs
Replenishment
Replenish
2-4 hrs
Service level
Replenishment
Direct delivery (24-48 hrs)
Lower service level
Direct shipment
Suppliers
Production
Regional distribution Repair Centre
Strategic parts centre
Service event
Return Cycle
38
Different models within service parts logistics
Distribution Models

Ways to Influence TAT

Repair and Return Retrieve defective unit Repair defective unit Send back repaired unit Inbound and outbound item are identical Exchange / Replacement Retrieve defective part Send spare part Inbound and outbound item are different Consumable No Return only outbound
Early delivery Before 9:00 Before 12:00 Delivery the same day Bullet van On board courier/NFO Private jet renting Repair at the central hub End of runway Stocking Locations Regional storage location Strategic parts centers
39
Different DHL products
Transportation & Real Time Info 3 Leg Repair and Return (No packaging available) 2 Leg Repair and Return (Packaging available) End of Runway (12 h repair window) Transportation, Warehousing & Real Time Info Return Repair Inventory (4 leg RMA from central stock) Direct Express Inventory (Consumable from central stock) Strategic Inventory Management (Consumable from strategic stock) Variations of the above
40
Effect on the Total Turn around time by combining models and infrastructure
5 days
4 days
3 days
1 day
hours
Transit Time
3 Leg Repair and Return 2 Leg Repair and Return
End of Runway
Advanced Exchange from strategic stock
Advanced Exchange from central stock
41
Parameters influencing the model choice
Customer organisation The service mindedness of the organisation

Do you see service as a means to gain a competitive advantage?
Availability of local field engineers Willingness to hold stock (value of the items)

Item type Consumable vs. serviceable High end vs. low end High value vs. low value
Customer s customer What does the enduser expect (management of the expectations) High value vs low value
Installable by customer Impact of the product Physical aspects
42
DHL GLOBAL
LOGISTICS
Spare Parts Logistics Survey
CUSTOMER
Barkawi & Partner and DHL are currently conducting a global study on spare parts Barkawi & Partner and DHL are currently conducting a global study on spare parts logistics logistics
Spare Parts Survey 2002
Major issues Major issues

Position of SPL division within organization Key performance indicators Level of SPL Globalisation Scope of outsourcing IT systems and Supporting technologies Best practice features Trends
44
Participants (excerpt) Participants (excerpt)
Interlog2002 15-16.05.2002 - 1
The initial phase of the study revealed interesting findings The initial phase of the study revealed interesting findings
Preliminary results of "Spare Parts Survey 2002" (1)
Spare parts logistics is not yet considered a core competency in more than 50% of the companies Spare parts logistics is not yet considered a core competency in more than 50% of the companies interviewed interviewed Major KPI's used in SPL division's are still isolated logistics metrics rather than customer Major KPI's used in SPL division's are still isolated logistics metrics rather than customer satisfaction measures (e.g. systems uptime) satisfaction measures (e.g. systems uptime) More than 60% of the companies still lack global stock visibility More than 60% of the companies still lack global stock visibility Less than 30% of the study participants have incorporated central ownership of spares Less than 30% of the study participants have incorporated central ownership of spares None of the companies interviewed are currently pooling inventory with third parties None of the companies interviewed are currently pooling inventory with third parties
45
Interlog2002 15-16.05.2002 - 2
The initial phase of the study revealed interesting findings The initial phase of the study revealed interesting findings
Preliminary results of "Spare Parts Survey 2002" (2)
More than 50% of the service organisations are still working on proprietary IT systems More than 50% of the service organisations are still working on proprietary IT systems Most of the companies are currently adding material planning tools to their ERP landscape Most of the companies are currently adding material planning tools to their ERP landscape Less than 20% of the companies claim to have a full-loop part tracking system in place, Less than 20% of the companies claim to have a full-loop part tracking system in place, but more than 60% of the companies are in the process of establishing it but more than 60% of the companies are in the process of establishing it The opportunities of Web based enhancements are clearly not exploited The opportunities of Web based enhancements are clearly not exploited A very low percentage of SPL costs are managed under global contracts A very low percentage of SPL costs are managed under global contracts The variable (i.e. transaction based) share of SPL costs are below 50% on average The variable (i.e. transaction based) share of SPL costs are below 50% on average
46
Interlog2002 15-16.05.2002 - 3
Most of the companies interviewed have ambitious goals for the future Most of the companies interviewed have ambitious goals for the future
Preliminary results of: "Spare Parts Survey 2002" (3) Stock turn rate Stock turn rate
-
Costs1) Costs1)
-
Service level Service level

-%-
Return lead time2) Repair lead time Return lead time2) Repair lead time
- Days - Days -
+58%
2.30
100
-14%
+2%
96
-61%
22,5
-49%
94 86
15,1
1.46
11,5 5,8
Today
47
Target
Today
Target
Today
Target
Today
Target
Today
Target
1) Inventory reduction target: 17%, cost reduction target: 14% 2) Average for the EU
Interlog2002 15-16.05.2002 - 4
Outsourcing will be extended to value added activities such as planning, Outsourcing will be extended to value added activities such as planning, procurement and inventory ownership procurement and inventory ownership
Scope of Outsourcing by Function
-%-
100
100
67 60
64
69 56 38 23 13 13 0
Transportation Warehousing 1)
Repair
Planning
Procurement
Inventory ownership
Percentage share of companies which outsource this function today Percentage share of companies which believe that this function could be outsourced in the future
48
1) Central warehousing, 57%/ 61%, local warehousing and depots 62%/ 73%
Interlog2002 15-16.05.2002 - 5
DHL GLOBAL
LOGISTICS
Solution Components
CUSTOMER
DHL Global Logistics Solution Elements
Total Quality System State of the art IT systems Warehouse Network (ELC/SPC)
Logistics Call Centers Skills/ People Transportation Services
Total Quality System
50
DHL Global Logistics Solution Elements
DHL s logistics solutions consist of:

Strategically positioned storage locations Express Logistics Centers Strategic Parts Centers Logistics Customer Service Center DHL Worldwide Express Transportation network Same day dedicated transportation Group of dedicated people offering support on day-to-day operations Comprehensive IT solution

51
Logistics Capabilities


52
ELC vs SPC Products Coverage Stored

Express Logistics Center (ELC)

Speed of Transport

Main Function
Value added services Distribution Repair (EOR) Bonded stock

Regional Center
(Semi) finished Repair parts Spare parts High product value or high opportunity cost

Overnight (International)
Strategic Parts Center (SPC)
Local/Area WH
Spare parts Very high product value or very high opportunity cost

(domestic) same day
Distribution
53
Global Network SPCs & ELCs

9 Express Logistics Centers 273 Strategic Parts Centers
United States
45
Europe, Africa Middle East
109
Asia Pacific
93
Latin America
35
54
Developments subject to change August 2002
SPC Network Europe - ME - Africa

106 SPC locations as at 01/08/2002 3 ELC locations as at 01/08/2002 (Brussels, Johannesburg, Bahrain)
BGO SVG BFS GLA
Skelleftea
OSL STO GOT
HEL
(NOT INDICATED ON MAP):

DUB
Livingston KLL
MOW
Existing SPC Locations: Tel Aviv Israel Cairo Egypt Dubai Dubai Dahrain Saudi Arabia Jeddah Saudi Arabia Riyadh Saudi Arabia Kuwait Kuwait Larnaca Cyprus Las Palmas Canary Islands Lausanne Switzerland Indicative SPC locations Ankara Turkey Belgrade Yugoslavia
MAN ORK Plymouth BRS
Middlesbrough Leicester LHR (3) AMS BRU
CPH HAM HAJ FRA STR BER LEJ DRE GDN WAW POZ WRO BT S BUD ZAG BEG IST BRI NAP ESB BUH KTW
Rennes NTE La Coruna OVD OPO LIS MAD BCN VLC Bilbao BOD TLS
LIL CDG (3)MZM Tours SXB Dijon LYS BSL GVA
DUS
NUE PRG BRQ MUC LJU Padova VIE
ZRH MIL
Grenoble MRS NCE
TRN QPG
BLQ AOI ROM
XVQ
XML
PAL CTA ATH
55
Sapporo
Hushiro
SPC Network APAC
Urumqi
Islamabad
Aomori Sendai Tokyo Matsumoto Atsugi Kanazawa Shenyang Nagoya Seoul Osaka Okayama Beijing Kiheung Hiroshima Pusan Oita Fukuoka Xian Shanghai Wuhan Taoyuan Chengdu Hsinchu Taipei Futian Tainan Guangzhou Hong Kong
Delhi Ahemabad Bombay Bangalore Pune Dhaka Calcutta
Hanoi Manila Ho Chi Minh
Hyderabad Bangkok Madras Penang Colombo Kuala Lumpur
Johor Bahru Kuching Singapore
Jakarta
Darwin
Active/live SPC Available SPC Planned SPC ELC

Perth Adelaide Brisbane Sydney Canberra Auckland Wellington Christchurch
Melbourne Hobart
-1
56
SPC Network US
Seattle Portland Boise Minn/St. Paul Detroit Chicago Sacramento San Francisco Fresno Los Angeles San Diego Phoenix Dallas/Ft. Worth El Paso Austin Houston San Antonio Tampa Las Vegas Salt Lake City Denver
Burlington Rochester Boston Hartford New York Teterboro
Philadelphia
Cleveland Columbus Pittsburgh Indianapolis St. Louis Cincinnati ELC
Baltimore Washington
Albuquerque
Nashville Atlanta
Raleigh Durham
Orlando Miami
San Juan Myaguez
Guam
3 Existing/Operational Express Logistics Centers (Cincinnati, Miami and San Francisco) DHL owned and operated regional distribution facilities offering a complete menu of value added logistics services 6 Existing/Operational Strategic Parts Centers -Local parts centers offering a selected menu of value added logistics services 36 Planned Strategic Parts Centers (2002) -Local parts centers offering a selected menu of value added logistics services 57
SPC Network Canada
Toronto
Planned Strategic Parts Center (2002) -Local parts centers offering a selected menu of value added logistics services 58
SPC Network Latin America

Ciudad Juarez Monterrey Guadalajara Mexico City
Bermuda Hamilton Miami US
Mayguez PR San Juan PR Santo Domingo DR Nicaragua Jamaica Valencia Venezuela Columbia Ecuador Quito Recife Salvador Brasilia Bolivia Brazil, Rio De Janeiro Chile Santiago Cordoba Cordoba Rosario Argentina Buenos Aires Belo Barbados Trinidad & Tobago
Guatemala El Salvador Costa Rica Panama
Existing/Operational Express Logistics Centers (Miami) -DHL owned and operated regional distribution facilities offering a complete menu of value added logistics services 15 Existing/Operational Strategic Parts Centers -Local parts centers offering a selected menu of value added logistics services 19 Planned Strategic Parts Centers (2002) Local parts centers offering a selected menu of value added logistics services
Peru Lima
Sao Paulo Curitiba Porto Alegre
59
Global ELC Network Coverage
Brussels Europe Cincinnati USA

San Francisco USA
Latin America
Bahrain Middle East
Hong Kong Asia Pacific
Miami
Singapore Asia Pacific Johannesburg Southern Africa Sydney Asia Pacific
60


61
Logistics Customer Service Centers
Brussels Europe Phoenix US Singapore Asia Pacific
62
Fact file:

Regional Logistics Call Center Located in Brussels, Singapore & Phoenix (AZ) Provides Multi Lingual Call Center Services 24 x7 Coverage Emergency order handling Remote Call Collection RMA Handling Single Point of Contact into multi SPC network The heart of many DHL Logistics Solutions
63
Languages Covered
Brussels
English French Dutch German Spanish Italian Finnish Polish Russian
Phoenix
English Spanish
Singapore
English Cantonese Korean Japanese
64


65
DHL Global Network Fact File
Region
Number of countries/ Territories
Number of offices
Number of Employees
Number of Courier Vehicles 7,266 6,360 519 387 5,034
Number of Owned/Leased Aircraft
Numbe r of Hubs
E&A/ME -Europe -Africa -Middle East The AMERICAS (incl. US, Canada, MEX) ASIA PACIFIC TOTALS
130 70 49 11 58
1,350 880 366 104 1,165
32,037 28,238 2,166 1,633 18,963
122 94 21 7 125
16 11 3 2 17
40 228
3,424 5,939
17,732 68,732
4,026 16,326
7 254
3 36
66


67
Network of Sprinter Couriers

Same Day Service
Bullet
Vans Dedicated transport 24 x 7 service 365 days per year Escalation Procedures Direct contact with LCSC
68


69
Day to Day Support

Account Management
Global Coordination
Network Global Account Manager
Regional Offices
Regional Global Account Manager EMEA
Regional Global Account Manager Americas
Regional Global Account Manager APAC
Countries
Key Account Managers

Responsible for all communications with Global and regional customers Ultimately responsible for resolving functional issues within its respective regions Resolve, deploy, and mobilize the individual functional areas to deliver against action
70
Day to Day Support

Business Acquisition Support Group
Business Acquisition Support Group
Andr Benning
Supply Chain Systems Consultancy Group Reninca Verbrugghe
Project Implementation Group Thierry Veys
Logistics Consultants RFQ Coordinators

Design high-level supply-chain solutions RFQ response management Coordinate development of proposal Supply chain studies
Logistics Systems Consultants

Roll-out of IT systems Design customer IT solutions Develop functional IT specifications Coordinate implementation of IT solution
Implementation Managers
Design process models Design of detailed solution Implementation of the solution

71
Day to Day Support

Program Management
Global After Sales Program Manager
Regional After Sales Program Manager EMEA
Regional After Sales Program Manager Americas
Regional After Sales Program Manager APAC
Program Analysts
Program Analysts
Program Analysts
To as per a set of pre-agreed service level agreements. Performance measurement will be done against Key Performances Indicators (KPI). To be the for all follow-up activities requested by global or regional customers.
72


73
RMA IT System: Main features

Full RMA-RTV tracking and visibility Customer Business rules embedded in software License plate technology (bar codes) Event driven Exception management through various alert mechanisms Target Stock Level management Web based

Advantages

Better allocation of capital expenditure Vendor consolidation Expand capability and coverage Single point of contact for total solution (LCSC) Total visibility on RMA cycles across partners Increase scalability and flexibility Increase field engineer productivity Decrease in costs stock reduction shorter turn around times simplified processes Improve customer satisfaction ...

75
The Solutions
76
DHL Logistics Solutions
STRATEGIC INVENTORY MANAGEMEN (SIM)
The complete control of physical and information process flows involved in managing a time-critical service contract on behalf of our Customers
DIRECT EXPRESS INVENTORY (DEI)
The management of centralised inventory, related information and express distribution of products and/or component parts within a promised time window
RETURN REPAIR INVENTORY (RRI)
Management of the pick-up and delivery cycles: the packaging and the documentation required to move defective, repaired and replacement parts between the Customer, an Express Logistics Centre, a repair centre and a supply centre; and, the management of inventory and shipment information throughout the process
77
Direct Express Inventory (DEI)
78
D.E.I- Direct Express Inventory

CUST Suppliers
13 14
LCSC
7 9 8 12
ELC
4 6
Event Info flow
10
11
Physical flow
CUST
CUST Customers/Engineers
8 9 10 11 12 13 14
1 2 3
Breakdown occurs Customer request spare part CUST validates order (Optional :
request can be direct to LCSC)
Pick & Pack Dispatch Confirmation

Optional (EDI only)
: Dispatch Confirmation to CUST
4 5 6
Transmission to DHL LCSC DHL LCSC validates order Order confirmation Order to pick and pack
Delivery of part to destination Stock level ELC drops below reorder level Parts ordered New parts delivered to ELC Optional
79
7
DEI Key Benefits

Improved consistent service levels Late cut-off times Reduced Inventory Cost Maximized Profit Window Less Capital Investment Improved Cash Flow Shorter Distribution Increased efficiency, control and transparency Rapid Customer Response Reduced Communications Cost Allow concentration on core activities
80
Strategic Inventory Management (SIM)
Customer
81
S.I.M - Strategic Inventory Management : Detailed

CUST Supplier
15 16
LCSC
14
ELC
13 9
Event Info flow
10
SPC
11
12
SPC
Physical fl.
CUST
1 2 3
CUST Customers / Engineers

9 10 11
Breakdown occurs Customer request spare part CUST validates order (Optional :
Dispatch Confirmation
Optional (EDI only)
: Dispatch Confirmation to CUST
Delivery of part to destined person Stock level SPC drops below reorder level New part delivered from ELC (either automated in SELIS, either via replenishment order by customer to LCSC Stock level ELC drops below reorder level Parts ordered at CUST manufacturing New parts delivered to ELC Optional
4 5 6 7
Transmission to DHL LCSC LCSC determines SPC & ETA Order confirmation & ETA Order to pick and pack Pick & Pack + Order Bullet Van
12 13
14 15 16
82
SIM Key Benefits

Free up capital to focus on core competencies Unleash management time and in-house resources Add flexibility for changing market conditions Speed cycle times for faster market response Lower costs of inventory storage and handling Enhance customer service regionally and globally Simplified and centralised information and communication Reliable high speed delivery 24/7/52 Global coverage
83
Return and Repair Inventory (RRI)
84
R.R.I - Return Repair Inventory: Detailed

CUST Supplier
16 17
CUST Repair Centre

13 14
LCSC
4
7 9
15
Event Info flow
ELC
10
12
11
Physical fl.
CUST
1 2 3
9 10
Breakdown occurs Customer informs CUST CUST validates request (Optional :

Dispatch Confirmation Delivery of part to destined person Defective part sent to ELC Defective parts consolidated Defective parts sent to Repair Centre Repaired parts sent to ELC Stock level ELC drops below reorder level Optional Parts ordered at CUST supplier New parts delivered to ELC
Optional: defective parts can be sent directly to repair vendor
11
12 13 14 15 16 17
4 5 6 7
Transmission to DHL LCSC Order Validation Order confirmation Order to pick and pack Pick - Pack & include Return kit
85
RRI Key Benefits

Improved customer service levels Increased efficiency and transparency in the logistic pipeline Reduced total pipeline costs and length Allows concentration on core activities Simplified and centralized information and communication Effective and efficient returns of parts Synergy effects through central repair instead of local repair action Detailed reporting of services and failures
86
E.O.R - End OF Runway

CUST Supplier Repair Centre
15 16 12 13
LCSC
4
7 9
14
Event Info flow
ELC
10
11
Physical fl.
CUST
1 2 3
9 10
Breakdown occurs Customer informs CUST CUST validates request (Optional :

Dispatch Confirmation Delivery of part to destined person Defective part sent to ELC Defective parts immediately sent to Repair Centre (in or next to ELC) Repaired parts sent to ELC Stock level ELC drops below reorder level Parts ordered at CUST supplier New parts delivered to ELC Optional
11
12
4 5 6 7
Transmission to DHL LCSC Order Validation Order confirmation Order to pick and pack Pick - Pack & include Return kit
13 14 15 16
87
DHL GLOBAL
LOGISTICS
Case Study
CUSTOMER
Who is Lucent ?

Revenue $34 billion in fiscal year 2000 Employees 87,000 people worldwide as of June 30, 2001 Leading global supplier of communications networking equipment, Internet infrastructure for service providers, Optical networking, Wireless networks and Communications networking support and services. June 16th, 2000 DHL - Lucent contract signed DHL Logistics program include: Strategic Inventory Management, Direct Express Inventory & Repair Return Inventory

89
How does the designed solution work ?

Advanced Exchange Business Model
Manufacturing
7
New Stock process
Repair
6
Defective Repair process
DHL CRC
3
Order attributed to SPC or ELC
DHL ELC
4
Auto replenishments from ELC to SPC
DHL SPC
4
2 or 4 hour Order delivery from SPC
Defective Returned to ELC
Overnight Order delivery from ELC
Lucent Customers (FLM)

2
Lucent EMEA CRC triggers maintenance order via DHL web
Lucent Customer suffers maintenance failure
90
What has been the biggest impact since Lucent changed strategy ? Before

After

Service Logistics seen as a costly necessary evil Inventory scattered throughout the countries Duplication & lack of structure in work efforts Lack of inventory & performance visibility
A source of competitive advantage (& future revenue streams) Centralized & controlled inventories Professional & dedicated support structure Immediate real time visibility on performance
91
What are the highlights of the solution ?

Spares delivery anytime day or night within 2-4 hours Repair times monitored and managed Certification of deliveries immediately fed back to Lucent All daily movements visible on-line New spares placed anywhere in Europe within 2 days
92
Delivery Performance Q1 2002

Number of orders
500 400 300 200 100 0 Jan Feb Mar SameDay order NextDay orders
Delivery performance
100% 95% 90% 85% 80% 75% Jan Jan Feb Feb Mar Mar SD ND SD ND SD ND total stock value in millions of US$
$70 $60 in repair in field good on hand $50 $40 $30 $20 $10 in repair in field good on hand
delayed on time
number of parts
20000 15000 10000 5000 0
93
Jan
Feb
Mar
$0
Jan
Feb
Mar
What are the 3 driving forces behind the success ?

Centralized logistics
The power of
Information Technology
Lean & flexible logistics
Looking at these 3 forces in detail...

94
The Power of Centralized Logistics ?

Cost visibility & efficiencies End-to-end business process set to Lucent s Business rules Customs clearance invoices automatically All Logistics information accessible on line Inventory levels Delivery performance Customer entitlements Inventory turnover Significantly reduced Repair cycle times Standardized metric and management reporting


95
The Power of Lean and Flexible Logistics?
Immediate access to any stocking location, anywhere in the world with a limited amount of time Ability to turn on/off logistics operations anywhere in the world with a limited amount of investments by customer Ease of stock repositioning within 1 day Customer service contracts are no longer dictated by logistics limitations, now lean & flexible logistics accommodates and drives the service contracts
96
The Power of Information Technology?
Orders, reports & inventory can be queried via the web any time, any place Shipment delivery information automatically sent to your Mobile or PDA via SMS Inventory moves automatically reflected on Customer Data repository for financials An all bar code driven logistics operation ensures 100% error free process Automated material planning ensures stock level efficiencies
97
What is the key component ?
PARTNERSHIP ?
Information Technology Lean & flexible logistics
98
After Sales Program Management enablement

Navigation & evolution of shared open actions via Weekly conference calls Continuous improvements on flows through performance KPI s & availability of information Value added services illustrated through implanting DHL key decision maker into the Lucent organization Honest and open communication Shared objectives & goals are driving the team forwards through new challenges

99
DHL GLOBAL
LOGISTICS
Thank you for your attention Questions?
CUSTOMER

20021019

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DHL GLOBAL

Brussels, October 19, 2002

The business environment is changing

Time to market compression

Creation of virtual enterprises One stop shopping

Global Customer Logistics

Global Customer Logistics

implementing proactively managing

Large National Regular

DHL Global Customer Logistics

Global Logistics Organization Structure

Geographical Logistics Organization

Business Acquisition Support Pricing & Profitability Analysis Logistics Infrastructure

Global Virtual Functional Team

Quality After Sales Program Management

Global Quality Global After Sales Program Management

DHL Global Logistics

DHL Global Logistics

Build expertise ourselves

How will DHL tap into the total SC market..?

IT Capability Consultancy Manage Partners Special reporting

Build expertise ourselves

Use partners and joint bidding

e.g. DPWN and Others

Muscle Physical Services

Our Partner Relationships

Shareholder Partners Strategic Partners

Third Party (3PL) Service Providers

Two Investment Trusts = remaining 23%

Deutsche Post World Net

33 bln EUR turnover, 318 k people

69 Mio letter items per day High speed

Pan-European parcel network

Danzas, AEI 150 countries 38,000 people

130 bill. Euro on balance sheet 10 Mio clients 13,500 branches

DHL in 228 countries & territories

3 Types of Logistics Service Offering

Single DHL 3PL Solution

Partner Joint Bid Solution

DP Bus. Unit Service Provider

LSP expertise (CRM) Logistics Consultant Joint Bidding IT Capability

4PL Service Platform

DPWN Bus. Unit

DPWN Bus. Unit

DPWN Bus. Unit

DPWN Bus. Unit

DPWN Bus. Unit

CRM Management Tender coordination amongst members

DPWN 4PL service platform

DPWN 4PL Platform

A Joint Venture between:

The importance of supply chain management

The Service Parts Supply Chain

The Service Parts Supply Chain

Do you leave money on the table?

Poor utilization of physical and people assest

Excess service parts inventory

High service logistics costs

Unnecessary scrap and obsolescence

Penalties for missing service level agreements

Poor coordination with suppliers, customers and other companies

Poor AMS performance

Revenue and Profit life cycle