Reaching the trigger point

Five questions to Kelvin Leung, CEO Asia Pacific, DHL Global Forwarding

Shanghai, Beijing; a few years ago the focus for business in China was along the coast. Why is everyone moving west?
Leung: Prices are rising, so businesses are moving inland, encouraged to do so by the government, which is trying to shift economic development to the west and north.

How established is DHL in western China?
Leung: We have been established for a long time in Chengdu, for example, and more and more customers are moving in there. We have an experienced team of staff and strong local relationships with customs offices for example, to help manage any issues that arise, such as processing issues, or the opening times of the offices, and so on.

Trucks with license plates from one city cannot always make deliveries in another city. Why is that?
Leung: At the moment no single foreign company has a countrywide road freight license. All foreign firms have to apply for that city by city. There are a lot of local players, but they do not always comply with the safety standards required of foreign companies. Customers who make high end goods are willing to pay for reliable transport. Customers who make lower or mid-range commodities have to consider whether they want to take that risk. For us, it isn't ideal that we can't get a nationwide license but we apply on a city by city basis so that doesn't stop us.

What about rail freight, is that an option?

Leung: Our multimodal product connects China with Russia and from there to Europe. It is an option for some customers. We have a telecom customer who is trying this, and a telecom equipment manufacturer has also used this route. It's not a mature product yet. But the total cost and total journey time mean it's worth considering. If you look at sea freight, from the coast to Europe is easily 30 to 35 days plus inland. Goods sent by rail via Urumqi can reach Moscow from South China in about 17 or 18 days. That doesn't include the modal switch.

The product is still in its infancy but DHL is trying different combinations of operations and testing different routes.

How far can customers to predict demand?

Leung: We beg our customers to try and forecast better. That's crucial for us to plan our business but often this is difficult. The market here is very volatile. In developed economies it is more predictable, and changes tend to be gradual - but in a dynamic market, things can go well or badly in the double digits. It's not easy to plan because there are a lot of factors we cannot control, from natural disasters to political disputes. We are in the middle, and we have to be very agile.

Any firmactive inwestern China struggles to find the right talent. Generation Y – born in the 1980s and early 1990s – is particularly challenging,with high  expectations and limited loyalty. HR departments find, for example, that employees resign by sending a textmessage, rather than by sending a letter. Or they go away on holiday and do not come back. Once people are trained, it is very difficult to keep them when they can earn higher wages elsewhere.

DHL counters this by providing prospects as well as pay. “We have training programs, university partnerships and exchange programs,“ says Gordon Simpson, SVP Human Resources, Asia Pacific DHL Global Forwarding. “We give people tools to help them manage their careers and we explain howtheir careers will develop if they stay with us.“