DHL SUPPLY CHAIN STRATEGY 2020

Transcription

1 Deutsche Post DHL Capital Markets Tutorial Workshop DHL SUPPLY CHAIN STRATEGY 2020 Defining the Industry London, 13 November 2014 SUPPLY CHAIN

2 Agenda 1 Introduction 2 Supply Chain Business Overview 3 Financial Performance 4 Market Position 5 Supply Chain Vision and Strategy 2020 a. Overview b. Case Studies BREAK c. Focus d. Connect e. Grow 6 Financial Aspiration 7 Conclusion 2

3 Our tutorial workshops providing valuable insights into our operations Recent Capital Markets Days and tutorial workshops Capital Markets Day May 2012 DHL Supply Chain November 2012 Pension and provisions accounting April 2013 DHL Express September 2013 Capital Market s Day Strategy 2020 April 2014 Capital markets tutorial workshops to come DHL Supply Chain Post - ecommerce - Parcel DHL Global Forwarding Today tbd tbd 3

4 Our aspiration for 2020: Defining our industry As introduced at 2014 Capital Markets Day When people think of logistics, we want them to think DPDHL EBIT FY base PeP ~3% CAGR EUR 1.286bn WE are the most global WE are the quality leader WE are most customer-centric DHL ~10% CAGR EUR 1.997bn CC/Other < 0.5% of Group revenue EUR -422m Group >8% CAGR EUR 2.861bn 4

5 SUPPLY CHAIN: Successful member of DPDHL family of divisions What we have achieved so far SUPPLY CHAIN contributes to Group success with strong ROCE and resilient business model A valuable member of our family of divisions - but still the least understood SUPPLY CHAIN Strategy 2020 can take performance to the next level Increase level of standardization while continuing to focus on customer centricity Leverage Indirect/overhead cost and establish high performance culture Focus on high value services, sectors and geographies Supported by restructuring costs with an expected EBIT impact around EUR100m in 2015 How SUPPLY CHAIN will contribute to our 2020 targets Revenue growth assumption: 5 6% Unchanged low capital intensity at 2% Capex/Sales EBIT margin increase to 4 5% by 2020 Supply Chain will be a strong contributor to DHL s 10% EBIT CAGR target of Strategy

7 Global SUPPLY CHAIN management board # Years of service at DPDHL Business units CEO SUPPLY CHAIN John Gilbert 20 Global functions North America Scott Sureddin Europe, Middle East, Africa Paul Graham Latin America Jose Nava Service Logistics, Life Sciences & Healthcare Graham Inglis CIO, Products, Solution Design Alex Pilar COO Paul Graham CFO Dietrich Franz Human Resources Rob Rosenberg Asia Pacific Oscar De Bok Williams Lea, NHS Supply Chain Dan Ellerton 24 CDO Graham Inglis UK & Ireland Perry Watts 7

8 SUPPLY CHAIN Number one global contract logistics provider DHL Supply Chain presence Other DPDHL operations ~150,000 Employees Automotive Consumer 56 Countries Energy & Chemicals Engineering & Manufacturing 2,700 Locations Life Sciences & Healthcare 13,740,000 Retail Square meters Technology Corporate Information Solutions (Williams Lea) Plan Source Make Deliver Return >6,000 Customers 8

9 Supply Chain Solutions across the value chain Plan Source Make Deliver Return Supply Chain Consulting Inbound Warehousing Outbound & Distribution Aftermarket Our core services: Warehousing Transportation Value Added Services Management Services 9

10 DSC Solutions Video What we do for our customers Sony Pfizer Konica Valero Lowe's Sky MSD JLR BA Virgin Trains Australia Australia Japan USA Mexico Brazil Benelux UK UK UK 10

11 We have come a long way Integration Consolidation & Turnaround EBIT Growth 2005 Exel acquisition 2008 Supply Chain as standalone division 2010 Strategy Strategy 2020 DHL Supply Chain, EBIT margin 1.8% 2.7% 2.9% 3.1% -4.9% -1.7%

12 Strategy 2020 is driving the Earnings Growth Model Sales Revenue Gross profit EBIT Value Proposition Ops Efficiency & Standardization Overhead Leverage 12

14 Over the past five years, we went from turnaround to continuous top and bottom line growth while rationalizing our portfolio Financial performance 1) Comments Revenue, EUR bn -2% +3% EBIT, EUR m % EBIT margin CAGR +24% % -1.7% 1.8% 2.7% 2.9% 3.1% Turnaround managing financial crisis and customer insolvencies Portfolio rationalization & divestments Strong cost reductions Profitable growth through sector & product focus 1) As reported and including Williams Lea 14

15 Our well balanced portfolio and business model with long term outsourcing contracts adds to DPDHL s overall resilience 2013 Revenue by Geography 2013 Revenue by Service Comments Europe Retail Asia Pacific, Middle East & Africa 14% 58% 28% Americas 2013 Revenue by Sector Consumer 20% 25% 19% 11% Life Sciences & Healthcare Technology Automotive (9%) Williams Lea (9%) Other (7%) Warehousing > 200m m 47% 25% 18% 17% 9% Williams Lea 2013 Revenue by Account Size 20% 21% 16% m Value Added Services 27% < 15m Transportation 15-50m Resilience through long term contracts (average is 2-3 years) and a balanced portfolio across: Geographies Sectors Services Customer Account Sizes 15

16 We continuously reduced indirect cost while revenue has grown and significantly improved Gross Profit to EBIT conversion Global Overhead, EUR m 1) -170 (-20%) % Indirect cost as % of revenue Comments Driven by IndEx (Indirect Expenditure) program % Strengthened Gross Profit to EBIT conversion 4.7% ) At constant exchange rates 16

17 Low capital intensity is enabling a strong conversion of EBIT to Earnings After Asset Charge (EAC) DHL Supply Chain, Capex/Sales ratio 4% 3% 2% 1% 0% Gross Capex intensity, average EXPRESS ~4% PeP ~3% SUPPLY CHAIN ~2% FORWARDING ~1% GROUP AVERAGE ~3% Asset-light business as main operating assets (real estate and material handling equipment) are leased or outsourced (e.g. transportation) 17

18 SUPPLY CHAIN is a strong contributor to DPDHL s shareholder value Asset mix, year-end 2013 Intangible Assets (mainly customer lists) Operating Assets (mainly fixed assets) Goodwill (100% = EUR 2.8bn) 16% 14% 70% Comments Asset light and resilient business model 2013 ROCE excluding Goodwill was 39% Return on capital employed, including goodwill 12% 13% 14% 16% Strong and sustainable contribution to the DPDHL s shareholder value M ROCE = Rolling 12M EBIT / average capital employed 18

19 SUPPLY CHAIN divisional results Q Divisional results Q EUR m Q Q Chg. Comments Revenue 3,519 3, % EBIT % FX turned positive, mainly reflecting stronger USD and GBP. Organic revenue up 0.6% supported by new business in APAC and UK retail Good growth reflects increase in volumes and new business start-ups Operating Cash Flow % Cash flow in line with previous year s performance Capex % Slightly lower than last year due to phasing of investments 19

21 DHL in Gartner s global 3PL magic quadrant study 2014 Key strength of DHL Ability to execute Challengers DHL DB Schenker Kuehne+Nagel Expeditors Ceva UPS Supply Agility Chain Solutions UTi DSV Damco SDV Pantos Logistics Niche players Completeness of vision Leaders Visionaries Wide range of industry-leading solutions across DHL s focus sectors Global reach of 3PL capabilities (220+ countries) Strong understanding of market dynamics and execution along evolving customer/industry needs Track record in executing on solution design Forward-looking talent management Robust technology platforms Healthy financial position Source: Gartner (May 2014); Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose 21

22 The majority of industry leaders trust us to manage their supply chain Best rated supply chains are served by DHL 1) Serving the industry leaders across all sectors 2) GARTNER TOP 25 Automotive 13 Retail 13 Life Sciences & Healthcare 12 24/25 Technology Consumer Energy & Chemicals 8 Engineering & Manufacturing ) 2014 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates, share of DHL customers on top 25 supply chains 2) Sector rankings top 15 by revenue, figures taken from Annual Reports and Onesource 7 22

23 DHL Supply Chain s profitability is amongst the industry leaders EBIT Margins FY 2012 FY 2013 Annual revenue 2013 one-off 4.2% Comments There are four global players whose contract logistics performance can be monitored 2.9% 3.1% 1.3% ~12% 2.3% 1.6% 2.1% 2.8% 2.7% DHL Supply Chain s EBIT margin 2013 excluding 1.8bn EUR of pass-through revenue from procurement business was 3.5% EUR 14.3bn EUR 3.6bn EUR 2.1% 3.6bn EUR 1.8bn 1) 2) Source: Financial statements of comparable business segments of competitors; 1) Ceva EBIT margins after estimated depreciation & amortization allocation; 2) DB Schenker Contract Logistics EBIT & margin is substantially higher in H and may include significant one-off benefits 23

24 In a fragmented market, we are by far the market leader 2013 market share of top 4 truly global contract logistics players 1) Total Outsourced Market = EUR 168bn ~13% 8% 2) Comments With 8% market share in this highly fragmented market we are in a unique position to define our industry and generate growth 87% ~13% 2% 2% 1% Largest providers Strategy 2020 will enable best in class services via a globally standardized platform and further leverage our economies of scale 1) Other large players do not report Contract Logistics revenues or do not have a global scope; 2) DHL Supply Chain excl. Williams Lea 24

25 The contract logistics market is large and growing with significant outsourcing potential remaining Total addressable market size 1), EUR bn Outsourcing through more customercentric services 1, (15%) 905 Outsourced Contract Logistics In house logistics 1, (17%) 1,022 CAGR 6% 3% Comments Contract logistics market is growing faster than GDP due to structural outsourcing trend More customer-centric services will further accelerate outsourcing With our leading scale and geographic reach, we are uniquely positioned to prioritize the most profitable market segments (sectors, services and geographies) and grow selectively ) DHL analysis based on Transport Intelligence data 25

27 Challenges / Opportunities External complexity Supply chains and customer requirements are getting more complex and increasingly diverse by sector Internal complexity Customer centricity has grown business yet bespoke nature of each contract increased complexity Shift of market opportunity Customers have become increasingly mature in outsourcing core logistics services while opportunities in VAS are not yet fully utilized 27

28 DHL Supply Chain vision & Strategy 2020 VISION Define the logistics industry globally through standardized, cost efficient, high quality and innovative solutions Focus Drive standardization and reduce complexity Connect Create an effective organization globally Grow Shift the portfolio to increase efficiency to enable change to address attractive segments 28

29 To deliver our Strategy 2020, we have 9 initiatives Focus Drive standardization and reduce complexity 1 Improvement of underperforming business Connect Create an effective organization globally 4 Efficient and effective functions Grow Shift the portfolio 7 Value added services 2 Operational standardization 5 Consistent and lean organization globally 8 Global sectors and products 3 Commercial standardization 6 Culture and mindset shift 9 Geographical shift to increase efficiency to enable change to address attractive segments 29

30 To give you some concrete examples for some of our initiatives, we will show you three case studies Plenary session / webcast continues 12:10 pm GMT Focus Drive standardization and reduce complexity 1 Improvement of underperforming business Service Logistics Case Study Connect Create an effective organization globally 4 Efficient and effective functions Grow Shift the portfolio 7 Value added services 2 Operational standardization 5 Consistent and lean organization globally Shared Services Case Study 8 Global sectors and products 3 Commercial standardization 6 Culture and mindset shift 9 Geographical shift to increase efficiency to enable change to address attractive segments Life Sciences & Healthcare Case Study 30

33 Our commercial and operational standardization agenda covers a broad range of aspects Comments Reporting Product portfolio Standardization benefits : Clear customer value proposition Operations Commercial & operational standardization Solution design Improved efficiency and productivity leveraging economies of skill Reduced complexity and greater coordination Pricing/sales Internal costing Creating space for innovation Support functions and site services A Global Solution Design function and a Global Operations Excellence function are key enablers for standardization 33

34 Our Global Operations Excellence Function will drive the operations standardization agenda Standardization We drive simplicity into our sites globally by streamlining our activities and tools Continuous improvement We actively promote best practice sharing and innovation in our operations We standardize our service offerings and operations management capabilities Simplification We engage all of our people and tap into their enthusiasm and expertise to make continuous improvement part of our DNA 34

35 A top priority is to deploy a standard approach to resource management in our operations globally Average efficiency improvements from standardized resource management in the Americas 1) Labor productivity 2) Before +13% After Comments Planning resources accurately is a key capability to run efficient and productive operations Standardized resource management systems and processes implemented in 100+ sites across the Americas -12% Cost per case Before After 1) Based on 12 months tracking per site after introduction of standardized resource management 2) Measured in direct cases per hour 35

38 To enable change, the top management structure of Supply Chain with 650 roles has been re-organized over 8 months 8 months March May July October New Divisional CEO Global Board Board Direct Reports Next Organisational Level We designed the management structure for the first three levels of the organization addressing approximately 650 roles The new Top Management structure is fit-for-purpose built to enable and implement the required strategic change 38

39 Our strategy will be enabled and implemented by an efficient and effective organization that is globally consistent Distribution of FTEs Top Management Middle Management Lean Management structure Comments Create a lean and consistent organization to: Eliminate activity overlap Site Level Consistent and efficient site structures Leveraging Shared Service Centers and Centers of Excellence Simplify decision making Strengthen links across the organization Leverage local specialist knowledge in global Shared Service Centers and Centers of Excellence 39

40 We will further leverage economies of scale through global shared service centers and centers of excellence Global Shared Services & Centers of Excellence Site Functions HR, IT, Finance HR, IT, Finance HR, IT, Finance HR, IT, Finance Shared Service Centers HR Finance IT Centers of Excellence HR Finance IT Comments Shift from independent sites towards sites leveraging common backbone of shared functions, leveraging economies of scale Improve efficiency and standardization in our support functions through more global use of shared services centers Boost effectiveness of expertise focused functions with globalized reporting structures and Centers of Excellence 40

41 The Certified Supply Chain Specialist program will increase employee engagement to enable the required cultural change Employee Engagement Program Certified Supply Chain Specialist Other modules (Leadership, Skills+, ) Functional modules PjM Sales Transport IT HR Warehouse Finance DSC Foundations Supervisory Comments Strengthening mindsets and behaviors that enable DHL Supply Chain to achieve success through customer and market focus Win hearts and minds to strengthen employee engagement Build "certified" capabilities to be leading practitioners in the industry Program built on DHL Express experience 41

44 To increase margins, we will focus on the most attractive market segments and shift the portfolio along three dimensions Global sectors and products Value added services Sectors Geographies Geographical shift 44

45 Drive growth through more customer-centric, specialized solutions in less commoditized i.e. higher margin and fast growing segments Strategic Initiative Global Sector Example Global sectors and products Sectors Current Focus Setup of dedicated and truly global organizations for: - Life Sciences & Healthcare - Service Logistics Global Product Example Unlocking the full potential of our global customer base and to scale up innovative solutions across regions Service Logistics Product 45

46 Enhanced value proposition through increased share of value added services offered through a globally standardized platform Strategic Initiative Example Value added services Medical devices Temperature assured transportation Current Focus Creation of dedicated global function for Solution Design Industry practice groups working as agile and expert partner to Business Development and Operations Global Solution Design is our engine for creating competitive advantage, driving state of the art solutions based on globally standardized modular components Hospital logistics Warehousing Core Transportation 46

47 We shift our portfolio by prioritizing investments into fast growing economies where we already have a strong existing footprint Strategic Initiative Our top 4 Emerging Markets Geographical shift Geographies China India Current Focus Further increase the share of revenue from Emerging Markets (>20% in 2013) Nominated dedicated board members for Latin America and Asia Pacific Heavy investments into infrastructure and talent, strengthening local capabilities ahead of growth Brazil Mexico 47

48 The GROW pillar of our strategy will be supported by a focus on highly valuable deals to increase our return on sales investment Sales Focus Annual Gross Profit Focus on large total contract value Comments In addition to a portfolio shift towards the most attractive sectors, services and geographies we focus our sales efforts on deals that offer the largest total contract value to: - Increase our return on sales investment - Enable amortization of bigger investments for more sophisticated, longterm solutions Contract Length 48

49 Agenda 1 Introduction 2 Supply Chain Business Overview 3 Financial Performance 4 Market Position 5 Supply Chain Vision and Strategy 2020 a. Overview b. Case Studies BREAK c. Focus d. Connect e. Grow 6 Financial aspiration 7 Conclusion 49

50 Strategy 2020 takes EBIT performance to a new level Today

51 Strategy 2020 driving the Earnings Growth Model Sales Revenue Gross profit EBIT Grow Focus Connect Increased growth and profitability of new business and renewals Higher return on sales investment Improvement of operational efficiency and effectiveness Minimization of underperforming business and start-up issues Better overhead leverage Overhead growing slower (about half the rate) than gross profit 51

52 SUPPLY CHAIN: 2020 growth & margin aspiration Selective revenue growth ahead of GDP, driven by outsourcing Strategy 2020 revenue growth aspiration 5 6% Supply Chain will be a strong Further margin improvement to 4 5% by % % 2020 contributor to DHL s 10% EBIT CAGR target of Strategy

54 Conclusion Strong contributor to DPDHL s shareholder value through excellent return on capital and a resilient business model Unrivaled market leader with a proven track record and major opportunities for further profit growth Clear vision, ambitious goals and the right plan to achieve them 54

55 Deutsche Post DHL Capital Markets Tutorial Workshop DHL SUPPLY CHAIN Q&A London, 13 November 2014 SUPPLY CHAIN

56 Deutsche Post DHL Capital Markets Tutorial Workshop DHL SUPPLY CHAIN STRATEGY 2020 Defining the Industry London, 13 November 2014 SUPPLY CHAIN