For logistics giant DHL, innovation is about surviving

12 March 2018

As the biggest logistics conglomerate in the world, DHL knows a thing or two about the importance of networks, locations and accessibility when it comes to moving people, things and ideas around.

That is why Singapore, with its excellent infrastructure, central location and highly educated workforce, has become a key node in its network. Setting up its regional headquarters for two logistics business units – DHL Global Forwarding and Supply Chain on the island in 2007, the group raised its presence in Singapore by another notch in April 2016, opening its S$160 million Advanced Regional Centre (ARC) at the Tampines LogisPark.  

The new ARC also houses the nerve centre for its research efforts in the region – the Asia Pacific Innovation Centre which is only the second outside of Germany and plays a critical role in equipping the company with the tools and knowledge to confront the most serious challenge to its business: Disruption.

“In today's environment, I don't think any company can afford to just rest on the products and solutions and the kind of market leader position it may have,” said Ms Tamana Dahiya, DHL’s Director of the Asia Pacific Innovation Center.

“Unless you keep up with the changing technologies and innovate, you could lose those positions very quickly.” DHL sees collaborations with its partners and customers as a big part of anticipating what is to come.

In this regard, Singapore offers the company the ideal platform for collaboration because it is the regional home to some of DHL’s biggest customers in Asia Pacific, and the base of some of Asia’s premier research institutions.

360 degree vision

“Innovation has always been a big part of DHL’s culture. We have to innovate in order to keep our operations running smoothly, or what we call continuous improvement,” said Ms Dahiya.

This tends to be driven by people on the ground. If they see something, a process or a tool that can be improved, it gets done. Continuous improvement ensures that the company continues to work as a finely-tuned machine, delivering excellent service and improving processes so the company can move faster and more efficiently.

But it is not enough. The company also has to continuously scan the environment for potential disruptions in order to survive.

“Innovation is crucial to our industry and our customers. Our customers drive innovation themselves and they are looking for areas for continuous improvement and value creation. We need to be thinking about that and are always asking ourselves what is next,” she said.

In other words, the company is constantly on the look-out for innovation in areas that could have an impact on the industry. And because the logistics industry cuts across nearly every other industry in the global economy, it needs to have a 360 degree field of vision.

The DHL Asia Pacific Innovation Centre in Singapore plays an important role in creating that field of vision for the company. The centre, which has hosted some 4,000 people since inception, is aimed at spearheading the development of future logistics and supply chain solutions, such as self-driving vehicles and robots, as well as the Internet of Things (IoT) and augmented reality (AR).

It does this in three ways.

One is trends research. The objective behind this is to continuously scan and sense emerging trends that could have an impact on the industry. The company does this via the Logistics Trend Radar by DHL, in which it looks out into the horizon and picks up on key areas related to logistics.

Some of the key topics explored in recent years include 3D Printing, Big Data and Self Driving Vehicles, among others.

The Logistics Trends Radar looks out into the horizon and picks up on key areas related to logistics.
Credit: DHL

It relies on its business units, partners and customers by surveying and regularly talking to them in order to sieve out the most relevant trends to its industry. After it identifies the critical trends, the team moves onto the next step: Developing solutions to address these challenges, or opportunities.

“We have defined a structured approach to how we analyse the trends that are most relevant for us before testing them and developing them into solutions,” said Ms Dahiya.

Two, ensuring that its research remains relevant to the rest of the company by spreading awareness of the research, and its implications to the business units.

“What we are trying to do is encourage these patterns of innovation by recognising them at the regional and global levels, and also making sure they are getting shared across the other countries which may be seeing similar trends. This can speed up the adoption of these innovations in different markets,” she added.

Third, raising awareness of the importance of the trends to the company’s wider network of partners and customers. This is where the physical space of the Innovation Centre comes into play. So far, some 4,000 people have visited the Innovation Centre since it was launched in December 2016.

Singapore the multiplier

In such a model of innovation, where external interaction is crucial to its efforts, it is easy to understand why the company chose Singapore to house its innovation centre. The location of the innovation hub is a critical element in ensuring that DHL gets the right access to the people that it needs to speak to.

“For one thing, Singapore is DHL’s regional headquarters. As such, it makes sense for the company’s Asia Pacific innovation hub to be co-located in Singapore as well. This allows the innovation efforts to be championed by the heads in the region,” said Ms Dahiya.

“This innovation we are driving is a bit of a top-down approach where we identify which trends and technologies are important. Being close to our regional management helps so that we can bring the trends and technologies identified to the right level of importance and make sure we take them forward,” she said.

Externally, Singapore is home to some of the most advanced research institutions in Asia and the regional base for many of its clients and corporate partners. This is exactly the kind of network DHL needs for innovation to thrive.

In 2013, DHL inked an agreement to create a Green Transformation Lab with the Singapore Management University. Its objective is to accelerate the evolution of sustainable logistics across the Asia Pacific region. Among others, the lab has launched projects such as the Eco-Planning system, which is a supply chain management system with visual analytics of a company’s supply chain network and sustainability targets. 

Another major initiative to come out of the lab is a sustainability tool called “Carbon Dashboard 2.0”. Utilizing a high-intuitive user interface, the supply chain management tool allows customers to visualize and analyse carbon emissions across complex supply chains.

Aside from providing a visual breakdown of a supply chain’s carbon footprint, it provides users with interactive data reports across time periods and trade lanes along with scenario simulations, high-level analysis reports and web-based customer facing analytics.

In a bid to focus on other key areas apart from sustainable logistics, the lab has rebranded itself as the DHL-SMU Data Science Lab. Aimed at promoting and accelerating the application of big data analytics and supply chain management, the lab specializes in providing advanced data science and big data analytics to empower businesses in the logistics industry.

Apart from performing advanced predictive and prescriptive analytics on pools of data to optimize DHL’s delivery and warehouse management activities and processes, the lab also offers tailor-made solutions to customers by providing them with operational insights, highly-developed predictive capabilities, and business solutions on how to better manage their operations.

Singapore’s ability to attract big global companies to set up their regional headquarters has also added to the multiplier effect. With big companies situated in the same small island, collaboration becomes much easier.

“IBM or SAP - many of them either have some kind of a research presence or their regional offices here so that helps to drive the discussion forward,” she said.

Much of the research at the Innovation Centre is geared towards supporting the company’s global business but some of the projects are targeted towards addressing the challenges it sees in the Asia Pacific region.

One such issue it has studied is the rise of e-commerce in busy Asian cities owing to high mobile penetration. This has, in turn, paved the way for mobile commerce and digital payments systems to support cash-on-delivery and shared platforms.

Sustaining a logistics business

For DHL, the long-term goal is to create a truly sustainable business, and not just in terms of its bottom line. The company is aiming to reduce all logistics emissions to zero by 2050 across the globe.

It is doing this through several key innovations.

For instance, a green initiative that DHL has embarked on is the incorporating of carbon-low eMobility solutions into its everyday operations with the addition of hybrid and electrical vehicles to their existing transportation fleet.

Innovative eMobility solutions include the Teardrop trailer—an aerodynamically sound vehicle with reduced air resistance. The trailer consumers 10 per cent less fuel than normal trucks.

Another is the DHL Express Bike which saves up to 208 grams of carbon dioxide for every kilometre travelled.

DHL has also developed a smart system which determines the fastest and most green route by combining one or more different types of modes of transporation including air, sea and land.

In pursuing innovation, the company also embraces the idea of failure. Out of 10 projects, maybe two might result in a proof of concept, with the rest failing to get any real traction.

“But this is an acceptable state of affairs,” she said. “The goal of this type of research is about learning the new technology and understanding how it can be applied further, not necessarily to produce a winner every time”.

Said Ms Dahiya: “The goal is that we must at least test and we must learn from the test results. So maybe the first test doesn't give us a great outcome but we would have learnt about the technology and capabilities, and that helps us define where we should be looking next so we continuously move forward.”