Home » One-on-One: E-Commerce’s Rapid Expansion Is Changing Express Delivery

One-on-One: E-Commerce’s Rapid Expansion Is Changing Express Delivery

DHL Express settling in for a long-term and further growth of its super hub at CVG, Senior Vice President Travis Cobb says

By Mark Green

Travis Cobb is the senior vice president - network operations Americas for DHL Express.
Travis Cobb is the senior vice president – network operations Americas for DHL Express.

Editor’s Note: This is a longer version of the interview than what appears in the magazine.

Mark Green: Please cover for us briefly why DHL came to CVG first in 1983, left for Ohio in 2005, but then returned to CVG in 2009 and appears to be sinking its roots there for the long run.

Travis Cobb: Sure. Thanks for the opportunity to highlight a little about DHL Express and what we’ve got going on, not only in Cincinnati, but around the world. We’ve had a longstanding relationship with the Cincinnati/Northern Kentucky International Airport authorities at CVG airport. We opened our first hub anywhere in the world at Cincinnati back in 1983, a manual-sort facility on the north side of the airport. It’s no longer there, but we remained in that facility for the first 19 years. Because of growth and expansion, we built the current CVG facility in 2001 and started operations there in 2003. We remained in that facility until late 2005.

During that timeframe, we acquired a large domestic delivery company in the United States, Airborne Express, which operated its central U.S. hub in Wilmington, Ohio. After an evaluation as to which facility was better suited or required less investment to handle the combined DHL international and Airborne domestic volumes, and we made a decision to go to Wilmington in late 2005. We remained there until the summer of 2009.

In late 2008, we exited the domestic business in the U.S. Another evaluation looked at what was the better go-forward facility for our international network on the DHL Express side. Cincinnati had been our long-term hub operation. That facility had been purpose-built for international volumes, and we were excited to relocate back into CVG in June 2009. A couple of years ago we announced a new, 30-year lease at that facility and plan to establish and maintain our capabilities at that Cincinnati hub for the long-term.

MG: Tell us about the expansions that DHL has had at CVG. What is its total investment, and how many employees do you have now?

TC: Since re-establishing operations in 2009. we’ve made eight major investments there totaling $281 million. They have included everything from ramp extensions, of which we’ve made two; additional warehousing and expanded space, which we’ve made significant advancements to our material handling equipment; a complete refresh of our IT infrastructure; etc. We’ve invested that amount of money for the long haul and see a bright future at Cincinnati airport. We’re currently housing more than 4,000 employees there, and we see that continuing to grow.

MG: Does DHL have other Kentucky presence?

TC: I’m not sure if you’re familiar with our corporate structure. DHL Express, the company I work for, is part of a family of companies underneath the Deutsche Post DHL umbrella. Our sister divisions, DHL Supply Chain, DHL Global Forwarding, and our e-commerce division, all four come together to form the company of Deutsche Post DHL. So for DHL Express, our Cincinnati hub at the airport is by far our largest presence or facility in Kentucky.

We have three other service center locations, one in Northern Kentucky, one in Louisville and one in Lexington, that house pickup and delivery operations, which is essentially where our couriers making the deliveries and the pickups from our customers are domiciled and dispatching to and from. In our other divisions, DGF also has presence in Cincinnati. The e-Commerce division also has a hub right down the street in Hebron, Ky. DHL Supply Chain I’m not sure about.

MG: What is the annual budget of DHL’s Kentucky operations?

TC: We maintain confidentiality around that. It’s significant; I’ll say that.

MG: Prior to our conversation today, I inquired about Amazon and how much DHL Express is at liberty to discuss regarding its collaboration on the $1.5 billion Amazon Prime Air hub announced for CVG across the street from DHL. I received a one-paragraph statement:

“DHL has been contracted to provide a range of services to Amazon at its DHL hub at the Cincinnati/Northern Kentucky Airport, including sorting operations and ground handling for the Amazon air network. DHL is handling the Amazon operations with a new daytime shift. The DHL operations will continue at night as usual. We look forward to further supporting this global customer.”

Are we able to get into that in any further degree?

TC: Well, it depends on what the question is. What I would say is that Amazon has had a longstanding relationship with DHL; they’ve been a customer of ours for nearly 30 years. We’ve been supplying small-parcel services to Amazon. And we’re happy to support them with the services arrangement that we have in Cincinnati. Any big supplier and customer relationship has quarterly business reviews and annual business reviews. The Prime Air hub collaboration came out of one of our ongoing of those sessions, and we’re happy to support them.

MG: Lots of change is happening in the commercial world and the way people are buying and selling, especially a shift to e-commerce. Amazon has enlisted DHL Express to help handle this. What are some of the new issues other customers are asking you to address?

TC: A lot of this is being driven by e-commerce and the explosion of e-commerce in the industry – I’ll highlight two. DHL operates in 220 countries and territories around the world, and we pride ourselves on being the international specialist. As companies that have historically been operating only in a domestic arena, whether in the United States or in any country, are looking to expand cross-border, they look to DHL to provide that regulatory and customs expertise that allows them to expand their business at a rapid rate, but be fully compliant with each government’s regulatory policies and procedures. We have invested in our capabilities and our teams in supporting customers as they take advantage of what’s going on within e-commerce.

The other way e-commerce has changed our industry is that it’s placed a much larger percentage of our deliveries at a residential address instead of a business address. We have heavily focused on making it easier to achieve a successful residential delivery and developed a system called DHL On Demand Delivery. ODD allows us to very nimbly communicate with the end consumer, which in many cases is at a residence, to create the most flexible and optimal delivery times and locations for them to successfully receive the shipment they’ve ordered online.

MG: What are DHL’s current expectations for growth in its operations at CVG?

TC: We do expect continued expansion at our hub location in Northern Kentucky. There is a variety of planning items that go into that, but it’s hard to project what the next five or 10 years may look like. So I would just leave it as, we expect continued growth and expansion.

MG: Is the CVG freight operation mostly outgoing, or is there a lot of incoming volume as well? What is the divide between incoming and outgoing?

TC: Cincinnati has three purposes: CVG is the largest import gateway for the United States that DHL Express has in the U.S. It’s the largest export gateway that the U.S. organization has. But it also serves as a transit point location for us globally. We run a number 11 intercontinental, wide-body aircraft – 747-gauge, 777-gauge aircraft – from Europe to Cincinnati, and from Asia to Cincinnati, and we transit through our Cincinnati hub location and service up to our gateways in Canada, our gateways in Mexico, down through our Miami facility that then connects the Caribbean as well as all of Central and South America.

So you’ve got import operations for the U.S., you’ve got export operations for the U.S., and you’ve got transit operations for beyond U.åS. countries but also countries in the Americas region of the world.

MG: Are you able to describe what proportion goes to import and export and transit?

TC: No.

MG: What are the main types/classes of product that ship through DHL’s hub at CVG?

TC: We certainly have everything from financial and legal documents up through small parcel and anything that our customers are ordering online with our major customers likes of the Amazons, the iHerbs, the Borderfrees, etc. And then it goes much larger than that as well. So we have a lot of nonconveyable or heavyweight type of shipments, things that fit on a forklift-loaded pallet, or things that are much larger in size. One of our biggest customers in the United States is the Department of Defense, and so we’re shipping military supplies and mail back and forth to Afghanistan and the Middle East for our troops abroad. Anything or any size or shape that people want to ship globally. Our mantra at DHL is “We connect people and improve lives.” We are the mechanism for them to connect to another part of the world with anything that they want to ship.

MG: What portion of the business is B-to-B as opposed to residential e-commerce?

TC: It’s different by every country. Globally, e-commerce represents about 20 percent of our business these days.

MG: Kentucky’s largest export category is aerospace and aircraft parts. Is that something that constitutes a significant piece of your business?

TC: We certainly enjoy partnerships with customers like GE Aviation, right there in Northern Kentucky, Festo (US) manufacturing. There are a number of automotive and aerospace customers that we enjoy relationships with, and they utilize our services shipping their materials around the world.

MG: Is there a point in size or weight at which an item of cargo shifts from being a good candidate for air freight and instead go to ocean container shipping? Is there a rule of thumb?

TC: The size or weight isn’t necessarily what depends on whether a customer will ship something ocean freight or air express. It’s really the time-sensitivity of those commodities or shipments. If they’ve got an urgent need to send something around the world in two or three days, that drives that solution an air-express type solution that DHL Express provides. If they’ve got an inventory system that’s set up for a 30- or 45-day cycle, and they can optimize their supply chain network by utilizing ocean freight, then that’s where you’ll see customers use one of our sister divisions, DHL Global Forwarding, for that type of a shipping solution.

So it’s really a time-driven requirement. In regards to size and weight, certainly we can handle any size, anywhere, anytime, but we certainly are more conducive with the design of our network to handle documents and conveyable-type shipments not to exceed 30 kilos (66.14 pounds) per piece or, in total, a shipment of over 300 kilos. Now, we will handle shipments greater than that weight, it’s just at a different price point. But there is no restriction – if you’ve got a piece that weighs more than 30 kilos, we’ll still handle it; it’s just that we’re in a different commercial arrangement.

MG: Do your rates vary dynamically with seasonal demand?

TC: Historically, DHL Express has not placed any type of surcharge for peak season in our rate matrix, and we’re not doing so this year.

MG: DHL has 350,000 employees globally in 220 countries and territories. You are a “logistics solutions provider.” But the term “solutions” can be vague. What are DHL’s main operations areas globally, and in Kentucky?

TC: Let me speak specifically for DHL Express. We connect those 220 countries through a series of hubs, gateways and service centers. Globally, we have 21 total hubs, of which three are by far our largest. Cincinnati is our largest facility both in the United States and in the Americas region, this part of the world. In Europe, our principal air hub is in Leipzig, Germany. And in Asia-Pacific, our principal air hub is in Hong Kong.

So those three are the super-hubs that connect the shipments moving to all 220 countries, but they’re supported with the other 18 regional hubs that we have around the world. Those 21 hubs are connecting over 300 gateways and 4,000 service centers globally where all of the pickup and delivery operations occur. For DHL Express, that largely describes kind of our infrastructure, our network. We’ve got aircraft of all shapes and sizes that make those connections to 220 countries. Regarding Kentucky, as I said earlier, we have service center locations in Northern Kentucky, in Lexington and in Louisville.

MG: There are now more than 4,000 employees in Northern Kentucky. Is DHL able to find the workforce skills and the numbers of people that it needs for its operations at CVG? Is this region’s personnel market different (if at all) from other areas?

TC: We have been very pleased with the capabilities of the employable market in Northern Kentucky to meet our needs, which are vast with the 4,000 jobs we have there. This is something that we meet about regularly with now-Gov. Matt Bevin and his staff. I hosted Gov. Bevin in our facility along with several cabinet members three months ago, and this is one of the topics that we spoke about. We have active discussion not only with the state but with the local community. We regularly meet with the superintendents and principals and guidance counselors in the various schools along with the universities in the local market to highlight the fact that DHL Express is a top employer. It’s a great place to work; we’ve received external recognition from organizations that highlight that. We take a lot of pride in providing very competitive salaries and benefits and creating an employee-centric culture there in Cincinnati.

MG: How STEM-intensive are most of the jobs now? Do DHL workers need math, robotics or computer programming skills yet?

TC: We’ve got a variety of professional as well as front-line logistics and warehousing positions at the hub – everything from IT professionals, finance professionals, supervisors and operations management professionals, engineering, clearance, administrative, as well as the aircraft handling, maintenance and front-line warehouse and logistics professionals. It depends on an individual’s profession as to whether the skill sets inclusive of math or robotics or computer programming would be applicable or really position them to compete for one of those jobs.

MG: What are your worker retention rates in Kentucky, and overall?

TC: We’re pretty happy with them. We do a lot of benchmarking in this area with like-for-like companies in the industry, in transportation specifically sector, and they’re in line with the industry and the market. Always room to improve, and that’s where we’re continuing to focus on, with our engagement with employees and active leadership with our supervisors and management team to improve that.

MG: We get occasional news releases about some of the unique jobs you’ve had, like delivering a giraffe. What are some of the ongoing, perhaps more unique supply chain solutions DHL offers in the U.S. and Kentucky, that people might not know about?

TC: I don’t remember the giraffe, but we’ve moved panda bears to China, we’ve moved tigers to Australia. When the Cincinnati Zoo has some need to move an exotic or a protected animal around the world, they look to DHL Express and trust us from a security and a capabilities perspective to support them. We’re not specialized in one thing or another. Whether it’s live specimens out of Central America that travel through the Cincinnati hub, or providing samples the next morning for testing in a lab environment in Indianapolis, we’ve got urgent, time-sensitive shipments. Our slogan here is, we want to be the last out of the market and the earliest to deliver in the market. For customers in that Northern Kentucky catch-basin, no other company in the world can offer them the latest pickup times available for their shipping requirements or needs. Perhaps that’s manufacturing, allowing them to run a full second-shift operation and still produce those goods, have the DHL courier pick them up and check them into our Cincinnati hub operation, and five or six hours later they’re on a plane to Europe, Asia, Mexico, Canada or down into Central America. That latest pickup capability is something we pride ourselves on, as well as the import requirements of shipments that come in. We pride ourselves on making the earliest possible delivery. We want to do that to meet customer expectation and what their delivery requirements are the next morning.

MG: With retail trends moving increasingly to online shopping, that means growing demand for last-mile delivery. Might DHL Express move back into that sector in the U.S.?

TC: DHL Express provides last-mile delivery today for all of our international shipping coming into the United States. so we’re already in that business. And we also make pickups for our customers who need to export shipments out of the United States. If your question is would DHL ever go back into the domestic business in the United States, I would say no. We have no plans, either short-term, medium-term or long-term, to re-enter that domestic business in the United States.

MG: How much is Big Data, cloud computing and the Internet of Things transforming the air freight/shipping/fulfillment/delivery business?

TC: We’ve been in business for 48 years. When you look at some of the classical sectors that utilize air express services – aerospace, medical/life science, technology, automotive is another big one for us – it has taking those sectors nearly 50 years to grow to the size of the businesses that they are today. E-commerce has grown to be similar in size in a far less period of time. While it’s taken these historical sectors nearly 50 years, e-commerce has grown to that same size in the last five years.

That has changed the express-delivery business. It has shifted more of our focus, as I mentioned earlier, to residential delivery capability and connecting with the end consumer, utilizing tools we’ve created for that on-demand delivery as I said earlier. That has changed the last-mile delivery piece of the business.

Regarding Big Data, as an industry we’re taking advantage of the data available today versus what was available 10 years ago to optimize our supply chain and network development. Maybe that is helping our courier go out and deliver his route in the most optimal manner; we’re seeing benefits there. We’re seeing benefits in aircraft utilization and utilizing data from a historical and from a forecasting perspective to optimize and to plan out the size and the expansion capacity required of our air network as well as the size and the capacity requirements of our service centers and gateways and even a location as big as Cincinnati hub. As data has become more readily available and usable, that has helped us to be more nimble and reactive and proactive to the demands of this fast-growing e-commerce industry.

MG: How active is DHL in implementing sustainable resource use practices? Is this a priority?

TC: We place a significant focus on standardization. DHL Express has an acronym called GSOP, Global Standard Operating Procedures. You’ll find the process is the same whether you’re shipping from New Zealand, Japan, the United States, Ecuador, Brazil, South Africa or somewhere in Europe. Go into a service center in any one of those countries and you will see a very similar setup, the exact same processes taking place to gather the information we need off the commercial invoice and shipping document so that as that shipment moves through the network and arrives at an import country or an import gateway operation, we have all of the required data and information to clear that shipment, meet all the regulatory requirements and make that full last-mile delivery. What’s great about this is, if there’s a new better way of doing something that the guys in Japan or the guys in New Zealand or the guys in the United States think about, we will not only implement it in that country. We’ll make that a part of our standard where it gets implemented in all 220 countries around the world and all 4,000 service centers and all 300 gateways or all 21 of those hubs, so that the entire network, the entire DHL Express platform, benefits from that best practice. It doesn’t matter what part of the world any good idea that provides service improvement or optimization into our platform comes from, we’re going to standardize that and move it across the entire DHL network.

MG: What are the key opportunities for others in the Northern Kentucky region to do business with DHL currently?

TC: First, as I mentioned, we’ve invested $281 million or so the past eight years at the Cincinnati hub facility. That growth, that expansion, has created significant business opportunities for other companies. Just to kind of conceptualize a few of those, we’ve got a large aircraft maintenance operation there, and you’re seeing companies pop up in the Cincinnati airport providing aircraft maintenance. We’ve done a significant amount of the material handling installations and upgrades, so you’ve seen companies grow that specialize in material handling on the backs of those investments that have been made under the DHL Express umbrella. We fly ourselves nearly 50 aircraft a day in and out of there. While our people down in Florida are dealing with hurricanes, guys up in the Midwest are getting ready for winter operations and de-icing aircraft, so we’ve attracted companies into the Northern Kentucky airport that specialize in de-icing aircraft that without our presence wouldn’t be there. Our presence brings economic development of the entire region. We do all of our training in Cincinnati. Any new hire anywhere in the U.S. is brought to Cincinnati so they can experience the hub and see how impressive it is. That adds commercial air traffic into Cincinnati, fills hotels and restaurants in Cincinnati and Northern Kentucky.

What I would say secondly is that any business looking to expand their business internationally and overseas, DHL Express is the international specialist; no company operates and does what we do all around the world. We’re there, local, and we’re eager to support that company’s aspirations to expand their capabilities and their business model anywhere in the world. So take advantage of it.

Mark Green is executive editor for The Lane Report. He can be reached at [email protected]