And the pouches, tubes and parcels while you're at it. DHL Express wants your domestic small package business. And it's willing to spend big bucks to get it.
"Would you DHL this for me?" The question doesn't quite roll off the tongue, but if DHL Express has its way, "DHL" will someday be shorthand for overnight delivery. As anyone with a television is aware, the carrier burst upon the scene last year with a land and air assault on the U.S. domestic package delivery business. Not only does the carrier seem unfazed by the prospect of taking on two titans, Federal Express and UPS, it appears to be enjoying the attack. DHL's TV ads depict FedEx and UPS drivers slack-jawed with amazement at their competitor's rapidity and omnipresence, even style. One print ad emblazoned in DHL's signature yellow and red proclaims: "Yellow. It's the new brown." Another screams: "The Roman Empire. The British Empire. The FedEx Empire. Nothing lasts forever. "Clearly, the gloves are off.
Challenging FedEx and UPS, which together own upwards of 75 percent of the domestic express delivery market, may sound like madness. But there's a method in it. DHL, which was founded in the United States but is now part of the Germany-based Deutsche Post group, has long been the market leader in international express shipping (and international air freight). But to achieve true world domination, it needs a strong presence in the United States, which is the world's busiest parcel market. And it's willing to spend well over a billion dollars in that quest.
DHL may actually have a shot at it. As Dick Metzler, DHL Americas' executive vice president of marketing, is fond of pointing out, the battle for package delivery dominance is about more than the United States alone. "We think it's not just a U.S. issue, it's a global issue," says Metzler, who was formerly CEO of APL Logistics. Though DHL casts itself in its ads as a cheeky upstart with something to prove ("Fat and happy. Meet lean and hungry"), the company, which dominates overnight package delivery everywhere else on the planet, is more Goliath than David. "We're the global player who's always been the UPS and FedEx to the rest of the world,"Metzler asserts. "I like the prospect of taking on one much more homogeneous market like the United States better than their prospects of taking on all the other countries in the world."
Gaining ground?
For all of Metzler's saber rattling, his new boss, John Mullen, who became DHL Americas' new chief executive officer Jan. 1, won't find this an easy market to crack. Not only does he face formidable competitors, but the domestic parcel delivery market itself is a market in transition. Over the past seven years, there's been a steady shift toward ground as opposed to air delivery for all but the most urgent packages. Figures from The Colography Group, an Atlanta-based transportation industry research firm, show that since UPS and FedEx introduced ground delivery guarantees in mid-1998, the proportion of U.S. expedited cargo moving via ground service has risen to just under 60 percent from 52 percent (and is expected to keep rising). Air, by contrast, has slid to 38 percent from 44 percent (and is expected to keep falling).
That's not the most auspicious of openings for DHL, which has always been firmly associated with air service in the public's mind. DHL's main bid to grab a bigger share of the U.S. parcel market, in fact, was the purchase, finalized in August 2003, of Airborne Express, which, as its name implies, largely gave DHL leverage in the air delivery market. And the markets where DHL dominates—Asia and Europe—are ones that remain largely geared toward air delivery of urgent packages (just try driving fast through rural China or urban England).
So, is DHL ready to be a ground delivery company? Absolutely, says Metzler. "To compete, we've just finished our 19-hub road network, and that gives us the ability to interconnect the continental United States by road."
DHL has publicly announced it's investing $1.2 billion in infrastructure over the next two years. October '05 should see the opening of its 300,000-square-foot West Coast air and ground hub in Riverside, Calif. Once that hub opens for business, says Fred Beljaars, executive vice president of operations for DHL Americas, the carrier will no longer have to route packages traveling from, say, San Francisco to Seattle through the company's hub in Wilmington, Ohio. "The ground network is completely built out. As a consequence, we can move 50 percent of all we do, whether 2nd day or conventional delivery, by ground, playing to the everincreasing demand for ground services," Beljaars says. DHL has recently opened seven new ground delivery sortation centers, bringing the U.S. total up to 19, if you include Wilmington.
But at least one stock analyst isn't so sure DHL can catch up with its well-entrenched rivals anytime soon. In its thirdquarter 2004 shippers survey, stock analyst Bear Stearns estimated that DHL had 10 percent of the U.S. domestic air market (by revenue), but only 1.5 to 2.0 percent of the ground market. And although analyst Ed Wolfe predicted in that report that DHL would be able to build up that share quickly by steep discounting, he cautioned that it would take "many years to implement the necessary ground infrastructure to compete and grow in order to take material market share."
Does size matter?
Naturally, DHL's much-vaunted expansion is a mere bagatelle if you listen to FedEx and UPS. "UPS isn't responding to competitors. Competitors respond to us. We lead the industry," says Steve Holmes, a UPS spokesman. "Compared to their $1.2 billion over the next two years, during that same period UPS will invest $4.8 billion in infrastructure, technology and operations."
FedEx Ground, too, downplays the threat, pointing out that though DHL may have 19 regional centers, it has 26 hubs and more than 500 local terminals in the United States and Canada. The company also notes that it's in the middle of a $1.8 billion expansion plan of its own, announced in October 2002, which involves building nine new hubs and expanding 22 others by the end of 2010.
Sheer physical size is one thing. End-to-end supply chain management capabilities are another. And just as Metzler insists the U.S. package delivery market can't be looked at in geographic isolation, so UPS's Holmes counters that you can't look at package delivery without considering other aspects of the supply chain.
"We at UPS try not to look at it in a fragmented way.We try to look at it holistically, especially in terms of what we're doing for customers through our supply chain solutions and technology, "Holmes says. "Those have all been successful and we're expanding our relationships with customers. For example, when we engaged with Home Shopping Network and Williams Sonoma, right from the start it was about much more than getting small packages to their customers."
Metzler, of course, counters that UPS isn't the only one with affiliate divisions, pointing to DHL's brotherhood of service providers under its owner, Deutsche Post AG—the old Danzas network, which the company bought in 1999—plus a newly grown DHL Logistics arm. But he's aware that becoming a major player in the United States means big changes for DHL.
"There's no doubt that to optimize our global position in the long run we needed a more scalable and robust infrastructure," Metzler says. The sheer size and scope of UPS's and FedEx's networks in the United States have driven their cost per package down "significantly below DHL's," Metzler admits. "Plus they were bundling their international services with domestic services and that was putting us in a difficult situation, much as we do with our services in Europe and Asia, which is difficult for them." So the only way to genuinely compete is to scale up too. And bundle up.With a $52 billion parent behind DHL, that's entirely possible.
Meanwhile, will DHL's market assault prove, as its ads suggest, not just bad for the competition, but great for you? "It's going to be much more apparent to people like distribution center managers that they have a choice," says Metzler. Within the 10 percent of shippers' supply chain spend that goes to ground parcel, express and export, they only have two choices, he says (though the U.S. Postal Service might take exception to that statement). If they're using truckers, they've got thousands of choices, he says. If they're shipping via LTL or air or ocean containers, they've got hundreds of choices, which gives them negotiating leverage. "So, the whole idea was to tell distribution center managers that they do have a choice," Metzler says. Market research has shown that shippers would welcome another player in the market, he notes. "They need a DHL in this market—is what one guy said—to keep the other two honest."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."