The decision by Deutsche Post to restructure its DHL U.S. Express business by "outsourcing" its air freight shipments to rival UPS and cutting back its ground network (Purchasing, July 2008, p. 28) has some logistics buyers and market watchers re-evaluating the small parcel market's competitive landscape. Shippers are trying to determine if the moves will make DHL a more competitive player in the market or if the restructuring is a sign that competition in the parcel market is on the decline, giving logistics buyers less leverage.The restructuring didn't surprise many in the logistics field. But while most logistic industry watchers were expecting Plantation, Fla.-based DHL Express to make a major move given its performance in the U.S. (and DHL's parent had given indications that it would make a move this year) the air freight deal with Atlanta-based UPS did catch many off-guard.
"It's really different than what a lot of people thought they might do," says analyst David Ross of Stifel Nicolaus in Baltimore. "There was more talk of a deal with FedEx before this deal came out."
In the short period since the deal was announced in late May, customer reaction has been mixed. On the one hand, some DHL customers perceive the move as their getting "UPS service at DHL rates" in the words of Mark Kolde, vice president of InSource Logistics in Hillard, Ohio. On the other hand, some shippers and analysts see the move as a sign that DHL is no longer going to compete for market share and that it simply wants to hold a presence in the U.S. And less competition could mean higher rates, if UPS and FedEx don't feel quite as threatened by the aggressive stance DHL took in the period following its Airborne acquisition.
"There has been some freight diversion since this deal was announced," Ross tells Purchasing. "And customers may continue to shift away from DHL. We expect there to be more market share loss than DHL is anticipating."
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