In a move it hopes will put DHL on the road to significant market share growth in the North American market, the company announced it would spend $1.2 billion to expand its U.S. operations. The investment includes addition of seven hubs by the end of 2004 and another five by the end of 2005. This would bring the total number of hubs to 24.
In addition, DHL will move its sortation operation from the Cincinnati airport to the former Airborne Express facility at Wilmington, Ohio just 72 miles away or just over on hour’s driving time. As partial justification for the move, Steve White, senior vice president for hubs and gateways, said the Wilmington facility is seven times the size of the Cincinnati operation.
DHL embarked on an expansion of its Cincinnati hub which was completed in 2003. Its former facility was turned back to the airport for possible lease to another operator. It’s current Cincinnati operation will serve as a back up for the Wilmington facility. Despite the redundant systems, DHL expects to realize a $150 million to $160 million cost savings “Our planned expansion of North American operations represents a key step toward building the most efficient and competitive infrastructure to support our extensive air and ground portfolio in North America,” said White.
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 continued. DHL hopes that offering “flexibility, innovation, and choice” will translate into a 15% market share, or even 20% in the next several years. DHL, which is part of a Ä22 billion ($26.8 billion) global logistics organization, has been a relatively small player in the U.S. market, in stark contrast to its position in global transportation and distribution. It’s roots, company spokespeople are quick to point out, go back to San Francisco where the company was founded in 1969. Prior to the Airborne Express acquisition last year, DHL lacked the ubiquitous ground network its two U.S.-owned rivals have built.
DHL’s strength in Asia has helped it position globally, 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, said 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, he continued, especially where those opportunities allow DHL to improve transit time.
In a separate announcement, DHL Danzas Air & Ocean said it had relocated and expanded its main warehousing and distribution center and it’s Canadian country head office in Toronto. The new 89,721 square-foot facility is located in Mississauga, Ontario.
All of the logistics division’s Toronto operations are located within 15 minutes of the city’s international air and ocean freight terminals, the company pointed out. The move does not impact the express side of the business, according to DHL. DHL Danzas Air & Ocean operations handle the heavy weight domestic and international, heavy weight air & ocean, transborder, Customs brokerage and associated value added services.