Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter.”     Ayn Rand

February 3, 2009

Managing to Fail

by Chris

The alarmist, emotionally manipulative tone, and shallow nature of this report offends me; but I have to say, if anything, the picture they paint of DHLs operations is actually nowhere near bad enough. They’re only focusing on the impact of the closure here without ever asking why.

I know from the inside.

I was a contractor at DHL for over a year (and excuse me if I’m a bit vague. I have to be careful what I say and how I say it, so as not to violate my confidentiality agreements). During that time, I and my team re-architected their entire security infrastructure; along with much of their data warehousing operations, and the open systems components of their dispatch and tracking systems. We made several hundred million dollars in capital expenditures, and spent well over a hundred thousands man hours (at anywhere from $75 to $150 an hour) in doing so.

At the end of the project, what we had was 4 or 5 times more efficient and effective than what they had before, and would have saved the company hundreds of millions of dollars; and they scrapped it, because it would have cost several hundred jobs in Germany and the EU.

Instead, they took a special inter-EU deal with the Czech Republic, and started over from the beginning; spending several hundred million more dollars to redo the work we had already done (and several billion dollars in total), only with mostly EU workers, in Prague.

DHL took a profitable, growing, fortune 500 business in Airborne Express; and they ran it into the ground from the beginning.

I don’t believe I’m violating my confidentiality agreements to tell you that DHL was the worst managed company I have ever seen; and that’s really saying something, as I’ve worked primarily in financial, medical, defense, and government.

The essential conflict was that at all times, DHL was managing to the interests not of making the American operations successful (or rather keeping those operations successful, as they had been originally); but of protecting the jobs of German workers, in Germany.

I’m dead serious. Every single decision management made was expressly in the best interests of German workers (or to a lesser extent Swiss workers, formerly of Danzas overocean); not for the company as a whole, not for profit, not for any benefit to the American operations.

During the time I was there, it was entirely acceptable to spend a million dollars to protect a single German job. We constantly had to work around the systems they had in place, and go through these arcane rules for finance, staffing, personal interactions… everything.

On the other side of things, we couldn’t EVER do anything more efficient if it would threaten a single German job. The company would rather lose ten million dollars, than a single German job; and that is no exaggeration. We presented management with many such opportunities, and in every case, the decision was made to protect German jobs rather than the company.

In the process, all the contracts and relationships that Airborne had built up over the years in the fulfillment industry, in the computing industry (EVERYONE used to use Airborne for their RMAs), in the film industry, in heavy shipping; all of them were flushed down the toilet.

Every interaction DHL had with its major customers, and its major vendors, was loaded with arrogance and condescension. Everything was slow and ponderous and loaded with red tape and doubletalk. Everything had ridiculous reams of paperwork and layers of approval and huge convoluted contracts associated with it.

Why?

Because DHL is a division of the “Private” (private in name only) German company Deutsche Post; who assumed the German postal monopoly. I say private in name only, because controlling interest in the company is held by the German state owned “development bank”.

The entire ethos of the company was that of a civil service, semi-socialist, state sponsored monopoly. All major decisions were made by German (and other EU) bureaucrats, guided by that ethos. They managed not as businessmen running a business, but as politicians pandering to their constituents.

This is what happens when the state controls private businesses. Every time. The state acts in the interest of the state, not of the business; and that business will fail, in this case taking an Ohio town down with it.

TrackBack URI: http://www.thelibertypapers.org/2009/02/03/managing-to-fail/trackback/
Read more posts from
• • •

5 Comments

  1. This sounds like what my father experienced working at Arthur D Little Inc. They eventually closed the German subsidiary and fired everyone – the management never seemed to understand that they were supposed to turn a profit, not provide job-security.

    Comment by tarran — February 4, 2009 @ 3:55 am
  2. Louis Glunz Beer Inc., a Lincolnwood distributor, sent over 4,000 bottles of Schlitz beer to troops in Iraq for The Super Bowl. The free suds, along with 2,000 pizzas from Lou Malnati’s, were packed up Friday and flown overseas courtesy of none other than….DHL.

    Comment by ahrcanum — February 4, 2009 @ 11:49 am
  3. Ahrcanum,

    As far as international shipping goes, I still think DHL is the best. They deliver to more destinations and have a better on time record than anyone.

    Most significantly, they will not only ship where the other major carriers wont; they will guarantee a delivery date in areas where the other carriers will deliver, but won’t give guarantees.

    The problem is with how they managed U.S. operations.

    Comment by Chris — February 4, 2009 @ 12:10 pm
  4. Hello,
    I’m a college student currently in Columbus, OH. I lived in Wilmington for about 9 years, and worked at DHL (just doing grunt work) for about a year. I’m very interested in what you’ve written here. Do you live in the area?
    Also, are you aware of the “energize clinton county” movement, that is pushing to make the area a “green zone” with state regulated businesses? Basically, it’s a nightmare. I’d love to hear your opinion of it!
    http://www.energizecc.com
    Why respond to DHL’s false incentives with more?

    Comment by Adam — February 4, 2009 @ 6:10 pm
  5. I know alot about DHL as I have worked with them in Europe as a contractor for several years, and as an employee in the 1990s when they were “white DHL” (before DPWN bought them out). I think the writer of this post has some valid points, but some of it tastes bitter.

    - DHL is huge in rest of world but despite having spent millions (I believe >$3billion since 2003) they still rank 4th after UPS, FedEx and USPS within the Americas. They invested in the Americas to win a share of the business – after four or five years, and millions and millions of dollars and absolutely no sign of improvement its understandable that they reduce their exposure and retreat from the Americas.

    - Be it millions or billions, the money invested came from outside the US. It came from profits made elsewhere within the DHL world and invested on infrastructure within the US and on salaries and overheads. I’m sorry so many folk have lost their jobs, but when is enough enough?

    - All their investment into the US fell by (at least) half because of economic downturn. It was good money after bad. Capitalism and competition killed DHL in the Americas… UPS, FedEx and USPS are what worked against DHL, not bad management. Its sad, but its life.

    - Chris (the writer of the above piece) neglects to mention that DHL started life in America in the late 1960′s but from day one it sought success away from the Americas because of the dominent force of FedEx and UPS. It never stood a chance against the competition. Never. But it did try.

    - The writer neglects to mention DHL created 3 worldwide data centers. The Czech Republic is the HQ for IT, then Malaysia, then Scotsdale Arizona. Before all this, the IT center was based out of London, England and lesser so, Brussels, Belgium.

    - Chris forgets to mention that millions spent on the IT infrastructure in Scotsdale, Arizona (the third piece in the DHL IT world). Remember, the millions of investment came from profits generated elsewhere in the world and ploughed into the year after year loss making Americas.

    - The writer mentions the work he participated in. This would be great for AEI, but the majority of AEI systems duplicated existing systems within DHL’s existing environment – it would be poor business sense to use AEI’s (lesser used) systems when savings can be made using existing DHL infrastructure from Europe.

    - Centralising the DHL world from within the US would have been daft in terms of return on investment and the writers arguements are based on misplaced national pride. It’s a giant in EU, Middle East, Far East and Africa but is a relative unknown in the Americas. Why would a European dominent entity run the world from the US? That does not make good business sense.

    I have worked as a contractor for many years – Logistics, Telecoms, Pharmaceuticals, Banking and Travel industries all come to mind. I have seen a fair number of folk loose jobs because of mergers or bankruptcy – its hard – I wouldn’t wish it on anyone, but business is business and four plus years and millions of dollars hasn’t made the slightest positive hint of return on investment – eventually a line had to be drawn to stop the red ink from bleeding. For DHL and its divisions in the Americas, it just had to happen sometime. Sad, but true.

    Comment by R — February 5, 2009 @ 12:27 am

Comments RSS

Subscribe without commenting

Sorry, the comment form is closed at this time.

Powered by: WordPress • Template by: Eric • Banner #1, #3, #4 by Stephen Macklin • Banner #2 by Mark RaynerXML