Realigning Service Operations Strategy at DHL Express
University of Wollongong – Centre for Business Service Science, Wollongong, New South Wales 2522, Australia firstname.lastname@example.org
Macquarie University – Macquarie Graduate School of Management 2000, New South Wales, Australia, email@example.com
DHL - Express Global Head Office, Bonn, Germany, Stuart.Whiting@dhl.com
This paper describes the approach that DHL used to respond to aggressive revenue and profit targets set by its Asia-Pacific regional management board. DHL’s reaction to these targets was to redefine its strategic service vision by systematically aligning its internal support functions with distinct buyer behavior structures. Specifically, we developed a model based on the tangible and intangible factors that directly influence a customer’s choice of a third-party logistics provider. Next, we reverse engineered the service provider’s delivery system to align with each customer’s preferred buying behavior. DHL’s share of wallet and profitability immediately improved, enabling the company to maintain its leading position in the market. Quantitative and qualitative results show an improvement in DHL’s market share, customer satisfaction scores, and employee opinion survey results. Key words: third-party logistics; service concept; survey research; discrete choice modeling; latent class segmentation. History: This paper has been refereed. ___________________________________________________________
Improved trading conditions within the Asia-Pacific region prompted DHL’s regional management board to embark on an aggressive strategy to achieve substantial revenue and profit targets in its 2015 strategic plan. The management board recognized that country-level managers would need to make hard-line decisions about (1) ―who‖ should be the right customers in DHL’s target market, (2) ―what‖ product bundles would be contracted or promised to customers via the service concept, and (3) ―how‖ the service components would be executed throughout the service delivery system. These three concepts represent the basics for any service operations strategy (Heskett et al. 1987, Goldstein et al. 2002, Roth and Menor 2003). A high level of strategic fit, congruence, or alignment between all three concepts usually leads to greater customer satisfaction and desirable performance. Historically, DHL has pursued practical ways to provide the right product bundle to the right customers at the right price. The company must continuously align product, customer, and price to permit its day-to-day survival; however, the primary focus of most alignment activity is tilted toward tangible product features when positive local feedback from customers is readily available. These features include greater choice of air or ground services, reliability of overnight or second-day delivery, and door-to-door pickup and delivery. DHL devoted less attention to finding the most optimal service response based on specific customer expectations, needs, and corresponding buying behavior primarily because identifying customer needs and preferences was difficult to achieve in practice. DHL Express (Taiwan) recognized an opportunity to quickly differentiate itself in the marketplace by redefining the alignment concept based on the customer’s expressed buying behavior, instead of on the standard product bundle. This approach to alignment and the subsequent systematization of service encounter support—
especially the customer operations and key account functions—has its challenges; in some sense, it has turned the DHL business model on its head. Accurately identifying the service attributes that customers value during their third-party logistics (3PL) buying experience is the greatest challenge to redefining the alignment of the service concept. The 3PL industry presents several challenges to alignment. The key service components (e.g.,...
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