Global express delivery carrier DHL says it will expand its U.S. regional sort network by adding seven hubs in 2004 and another five in 2005. Though the carrier declines to comment on which cities had been selected, a spokesman says plans are well along for those new sites.
In addition to the expansion, DHL says it will invest in its legacy Airborne Express hub at Wilmington, Ohio, to make various improvements to ramp facilities and other operations as it moves its main sortation there from Cincinnati.
The carrier has operated the Cincinnati hub since 1983 and in the late 1990s had embarked on a $200 million expansion it said would double the package handling capacity to approximately 2.5 million pounds per night, making it the largest in DHL's global network.
The Wilmington facility is just 72 miles from Cincinnati. As partial justification for the move, Steve White, senior vice president for hubs and gateways, says the Wilmington facility is seven times the size of the Cincinnati operation. The Cincinnati facility will be used as a backup for the Wilmington hub, according to White. Despite the redundant systems, DHL expects to realize a $150 million to $160 million cost savings
DHL's express operation holds a 6% to 8% market share in the U.S., according to Bill Ashby, vice president of operations integration. The market is extremely desirous of an alternative to the two giants in document and parcel shipping, UPS and FedEx, he claims. DHL hopes that its offerings will translate into a 15% market share, or even 20%, in the next several years.
DHL, which is part of a $26.8 billion global logistics organization, has been a relatively small player in the U.S. market, in contrast to its position in global transportation and distribution. Its strength in Asia has helped its global position, but it will have to be an indirect beneficiary of the U.S.-China agreement that will expand landing rights for U.S. carriers.
Unlike FedEx and UPS, DHL will not immediately gain landing rights. It operates through Northwest Airlines, which does have significant landing rights in Japan and throughout Asia, says Dan McDonald, senior vice president of network planning. DHL expects to continue to operate with Northwest and through other forwarders that are in the market today. DHL will certainly be vying for additional opportunities, McDonald notes, especially where those opportunities allow DHL to improve transit time.