#WeAreDigital

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Óscar López Tresgallo

Thank you so much, Rafa, Roberto, for joining us at this session as we try to dig deeper, we’re basically going to talk about technology and visibility in shipping processes, visibility in logistics operations.

In general, about the necessary visibility around the work of a logistics operator.

And who better than DHL Supply Chain, which is the number one logistics operator in the world.. and in Spain, of course.

I’d like to start by sharing something that is quite interesting and that I’m sure many of the people who are watching us are not aware of.

And that is that DHL Supply Chain does not have its own trucks, which is obviously part of a strategy, which is to have maximum flexibility, relying on an enormous network of partners which allows you to adapt your service capacity to the level of demand from your customers at any given moment. But it’s still a remarkable aspect and from the point of view of technology and challenges, something that adds an extra layer of complexity.

And this is an aspect that I think is relevant and that is probably going to be a bit of a common thread in this talk. How has it impacted you?

First I’d like to go back a bit to the origins of all this in the year 2014, which is when this digitization initiative started, where…well, at that time we were talking  more about Track and Trace.

Today we’re probably talking about things that are much more evolved.

I think that even for you, the cherry on top of all this has been launch your Connected Control Tower, right?

Which in the end is like the culmination of this whole process, which has been a very long journey and which I think is a very relevant example of how far you can go and what has been the path that you’ve followed in all of this.

Going back, to 2014, to the origin of this whole project, I think there were several challenges surrounding this project at that time.

One is that the use of technology was not what it is today, which added a certain complexity because smartphones already existed, but there was not yet the penetration that we have today, nor were corporate cultures as technologically advanced as they are today.

On the other hand, there was another factor that we’ve already mentioned, which is the scenario where many or most of the services, especially shipping services, are outsourced and handled by partners, which also adds another layer of complexity… because it’s not the same for a company to have its own fleet with its own resources as it is to have a network of collaborators. This obviously adds a certain, a certain complexity to the equation.

I think the third factor, which is another thing that I always find very, very attractive about the DHL Supply Chain project, is that for us, at the end of the day, it’s as though DHL Supply Chain were many different companies in one.

We’re talking about a company, a logistics operator that provides full truckload service, groupage, multi-customer, distribution services, in other words, it touches on practically all types of shipping.

And that is obviously a challenge in and of itself.

I’d like to start this talk by posing basic question and that is: what were DHL Supply Chain’s objectives in 2014 when embarking on an initiative and launching a digitization process like this one?

Rafael Muñoz Rubio

As you’ve noted, we are a service company and service is what we have to prioritize.

From the very beginning,  when we started with the digitization process, we knew that this would have a significant impact on our customers.

From the point of view of visibility, traceability and order tracking.

At the end of the day, shipping is something that you don’t see, but that the customer and the supply chain needs to happen with the same efficiency and with the same certainty as if it were happening inside a warehouse.

So there was a clear interest in controlling and improving the level of service to our customers.

There’s another important objective, which is the sustainability of the shipping business.

And in that sense, from a sustainability point of view, we’ve worked along very important lines from a digitization perspective.

The first is resource optimization.

We have optimization systems that calculate the routes that are most efficient and the ones that are not, not only in terms of the route itself but also the contents of the trucks so that they only have to travel, let’s say, the lowest possible number of kilometers per ton.

And then economic sustainability.

In the end, when we talk about environmental sustainability we’re talking about consuming resources and that’s spending money. So this optimization has brought us two things, both environmental improvement and economic improvement.

And then, there’s a third thing which I believe is the efficiency of general, administrative and financial processes, which the whole issue of digitization brings us.

I’d say that it’s a cash flow accelerator.

The sooner I get confirmation that I’ve delivered, the sooner I can tell my customer so that he can invoice his customer, so that I can invoice him and so that he can pay the carrier which, as you correctly mentioned, is a fully outsourced network.

Because we believe that our carriers are the real specialists in the actual shipping, whereas we are the specialists in coordinating and optimizing operations.

Óscar López Tresgallo

I think that this aspect, apart from the more operational ones, this aspect of cash flow is something where we can really have a lot of influence.

It is a relevant aspect that also has an impact on the whole chain. In other words, everybody wins.

That’s right. Because they get their money or they’re able to invoice faster, because administratively everything is much lighter, because it is arranged through a digital process.

I think it’s like the icing on the cake

Rafael Muñoz Rubio

Especially because we try to ensure that each administrative act and each piece of information is only processed once.

From the carrier with his PDA or smartphone, who even sends you a photo of the goods as he’s delivering them.

And you can manage incidents much better when your customer has a photo of the delivery note instantly in order to issue the invoice.

So there’s no reprocessing or wait times.

Óscar López Tresgallo

And from a technological point of view, because I talked about three challenges and two of them were mostly technological.

So…

Roberto Gamero Gómez

I’d also like to go back to something you mentioned earlier, Oscar, that now in 2022 it’s very easy to talk about sustainability and digitization.

When I say it’s very easy, I mean that everyone is talking about it.

But you mentioned earlier that the commitment to sustainability and digitization at DHL dates back to before 2014, right?

That’s a clear reflection of DHL’s leadership in the sector in these two areas, which are basic pillars of our strategy.

Óscar López Tresgallo

Speaking a little bit.

To summarize, those big goals at DHL Supply Chain, to achieve visibility in order to improve customer service, optimize processes and routes, have greater operational sustainability.

Developing your “GoGreen” strategy, which was a core part of the company and that cherry on top was the cash flow.

Now the question I’d like to ask you is this: as it relates to your partners, how did you manage to develop this initiative, how did you get them involved? In those, in that change and get them on board with your objectives.

Rafael Muñoz Rubio

Look, Oscar, when you don’t have anything, you think that the most difficult piece is the technology, but in the end that’s the easiest part of the process.

The most difficult thing is using it, right?

Using it in an environment where we, where more or less 97-98% of our shipping is done with about 300 companies of different sizes with varying levels of digitization as well. So we realized that there would have to be different levels of integration.

So there are companies that are not very big, that don’t have a digital system at all, where you implement your own system on a PDA.

We think it’s very easy, you say, just hit a button and that’s it. Well, it’s not that simple.

Then there are other companies that have a certain degree of digitization and maybe they already use their own systems and you have to integrate with theirs, because

it’s hard enough for the driver to use one, let alone telling him he has to use a different one for DHL and then a different one for another supplier or customer.

So we’ve put a great deal of effort into training and intensifying the benefits for the carriers.

One of the benefits for the shipping companies is how quickly they get paid.

In the shipping industry, everything gets paid at the end of the month, the leases, the diesel and the payroll.

So, the more we speed up the possibility, at least for them to have the possibility of getting paid. We believe that this is one point, and then there are other customers with whom other providers, with whom we’ve had to integrate with their own systems.

Because what we’ve tried to do is to make the level of integration with our suppliers transparent for our customers.

And today we can say that about 80% of the documents that we process in our network come through digital photography.

And then there’s another part that we’re still struggling to get there.

And there’s another part that is spot freight, where we don’t use this system.

Óscar López Tresgallo

Yes, I think this is a recurring issue.

Rafael Muñoz Rubio

To give you a figure, in the last quarter of last year we provided more than 130 training courses for drivers or companies, in other words, a great deal of effort goes into

training and integration.

But it’s worth it, because I believe that whoever is not doing this nowadays stands out in a negative way, when before it was positive. Today, anyone who doesn’t have it, that’s a mark against you.

Óscar López Tresgallo

I was going to say that I think it’s a recurring theme in practically all the talks, when we talk about the world of shipping and logistics, that heterogeneity that exists between… between  shipping service providers.

Indeed, some are, you can find some that are technologically advanced because they are large companies, others are in the middle and then you have many niche companies that are much less technologically advanced and their capacity to do so is much more limited.

I think this is a recurring theme and we often find ourselves talking about the change management associated with these types of projects. But when we talk about these scenarios, it’s not traditional change management, it’s change management that has to be adapted to the different characteristics of your suppliers. You can’t take the same approach with a shipping company that has 2,000 vehicles as one that has maybe five.

Rafael Muñoz Rubio

I think that’s the key when we talk about why we have outsourced fleet.

I think that’s what DHL provides is that technological umbrella that standardizes all the processes and that,  from our customers’ perspective it’s a completely integrated and transparent process for them and that we obviously try to improve all the time with our partners and the truth is that we’re lucky to have the carriers we have with their level of integration.

Óscar López Tresgallo

And I understand that Roberto, that also, from a technological standpoint, well as you mentioned before, the fact that you provide different types of services.

And that adds a certain technological complexity to the scenario because, because there are different systems that can support it.

And on the other hand, there’s also the whole scenario of partners that in some cases must also be orchestrated technologically.

In all cases, but sometimes from a training point of view and sometimes from a purely technological point of view.

Roberto Gamero Gómez

Yes, that’s right, because we’re talking about the heterogeneous nature of our suppliers, but also, and going back to 2014 as we were talking about before, when we started with all this.

Due to the company’s policy and the acquisitions that have taken place over the last few years, there was also this heterogeneity in the internal management systems, which is why, in order to start building everything that we’ve achieved to date, at that time we started standardizing…, we started on this journey to standardization with our Track and Trace platform. This way, all suppliers, regardless of the sector in which they were providing the service, were all working under the same platform.

At that time, organizationally and operationally, it was like we were working in silos, wasn’t it? We were divided by vertical markets.

Each vertical market had its own shipping management tools, so the first thing we decided was that we were going to start standardizing and we were going to start with the Track and Trace platform, which is ultimately the one used by our suppliers.

Óscar López Tresgallo

Because at the end of the day, behind that, something that Rafa mentioned is, behind the technology and that is this.

I’m a big advocate of this, behind the technology is the process.

And at the end of the day the technology is a channel to establish the process.

In this case the process.

How it’s done at DHL Supply Chain.

And although technology is often the excuse, it is the perfect opportunity to tackle a standardization process, isn’t it?

Standardization in that scenario, that process.

This process, which began, as we’ve said, in 2014, has really reached a kind of culmination, although in technology there’s no such thing as culmination.

Roberto Gamero Gómez

It never ends, we never finish.

Óscar López Tresgallo

But in a way it did reach a very relevant point at the end of last year.

I know you inaugurated your Connected Control Tower.

It’s an infrastructure that combines the physical, technological and human aspects of these technological concepts.

What can you tell me about that initiative or what that milestone meant for you?

Rafael Muñoz Rubio

It all started in 2014.

As Roberto was saying, that’s when we started with the digitization.

But there’s another important milestone that’s more, let’s say, more strategic in terms of DHL’s shipping business. That happened in 2018.

Before 2018, our shipping business was organized by silos. Our operations by silos. Each sector had its own organization for shipping, warehousing, handling or whatever service we provide.

From 2018 onwards, the company understands that the shipping itself is an important business, and that we should pay attention to it and that maybe it’s the most synergistic business between the different sectors.

Synergy not only in terms of costs, but also of processes and service, with a focus on efficiency and good customer service.

For us, shipping is 40% of the business at DHL Supply Chain.

So in 2018, we decided to create an organization where shipping is a cross-cutting business for all sectors.

And that’s when, let’s say, this idea of bringing everything together came about, right? To have a single strategy, which was this, which is, that the shipping service is a basic product for DHL and accounts for almost half of our sales.

Another important piece is to have a single organization that responds to this and the shipping business unit was created, and within this shipping business unit we went from organizing it by sectors or by types of shipping to organizing it by processes.

As a result, we now have a team that specializes in planning, demand forecasting, contracting and customer service.

And now we also have a single information system that manages all sectors, which is, well, what we’re talking about today, digitization and what has culminated in a single location, a location that is very appealing to us, which is here in Las Mercedes, next to the airport, where all the shipping equipment that used to be downtown is now concentrated here and we believe that this is important from a technological point of view, but also very attractive from a personnel point of view, for the resources that we need.

We do a lot of training with our teams because we have to keep changing and adapting.

But we also want to attract new talent to the organization, more familiar with this world, more digital, more modern, let’s say, and more adapted to the times.

So, this combination of people with a great deal of experience who’ve been trained in digitization, and people who come from the digital world who are learning the business, we believe this gives us a competitive edge in the market and we’re very excited about this.

And the truth is that we’re delighted.

Óscar López Tresgallo

I know.

I know it’s a very, very relevant initiative for you and well, it’s really a reflection of that transformation.

Rafael Muñoz Rubio

That’s right.

Óscar López Tresgallo

In a way.

I want to talk a little bit about the technological part, because I also think the background is very interesting and we started out talking about visibility, I towards

the introduction we were going to talk about visibility, but I think there’s much more

to the Connected Control Tower. To me, it’s not only about visibility…

… I always say that that model of visibility, of supervision, those eyes on the road that you were talking about before, Rafa. Shipping is something that we don’t see, well now we’ve managed to see it, but above all we’ve managed to standardize the information that we’re able to collect from the process.

And I know that technologically speaking, the Connected Control Tower is not only focused on visibility, it’s also focused on the exploitation of the information you are receiving.

I don’t know what you can tell us….,

Roberto Gamero Gómez

We, taking advantage of the Control Tower and we have many Data Analytics initiatives, data analytics and to give you examples, in each one of them.

We’ve already implemented in our fantastic Control Tower.

We have everything from descriptive analytics, the more traditional stuff that tells you what has happened, such as our shipping KPIs, for example.

Then we have analytical and diagnostic tools to determine, why did this happen?

To analyze a little bit the quality of service that is of such interest to us.

Where we have failed. To see why things have happened.

This type of tool helps you to analyze that a little bit.

We have what Rafa mentioned before, we have analysis tools for predictive analytics.

The one that we’re using the most is to anticipate the volumes that we’re going to need due to the seasonality of our business or our customers’ business.

There are certain times of the year when the demand for shipping peaks, such as the end of the month or the dates leading up to Black Friday, Christmas. You have to take the holidays into account because carriers also go on holiday.

With this type of tool you can anticipate, we help Rafa’s team anticipate the carriers that will be needed for these services, in order to ensure both the quality of the service we provide to our customers and also the economic part.

And then the fourth analysis, which may sound a little more like science fiction, is prescriptive. That is, well, and OK.

You’ve analyzed all this, all this has happened, you know why. You know what’s going to happen. But tell me what I have to do, right?

So we already have tools that help us optimize the routes, not only when you already know where you have to go, but a little bit  analyzing everything that has happened and this is changing.

We see a trend that is changing and we already know that maybe we have to optimize the route differently than we’ve done in the past.

Óscar López Tresgallo

Yes, yes, even adapt the management model of these routes or the synergies that you mentioned before between the whole shipping universe that you manage on a daily basis.

Rafael Muñoz Rubio

And, above all, because not only, you see… for us it’s very important to do round-trip circuits.

So we can accomplish that today between the different sectors, which sounds normal, but in the past it was difficult for us, wasn’t it, to have that vision, and also to keep moving, moving the volumes.

In the summer there are more shipments to the coast. Consumption is focused more in the center or on the coast.

So all of that… all of this anticipating and seeing where things might be going in the future… It helps us and it also helps us to prepare ourselves with our own partners.

If Black Friday is coming we know what to expect.

We know that we’re going to be busier in technology than in other sectors.

For example, automotive, which is also a very important piece for us, depends on the production plans of our customers.

We can also continue to anticipate in shipping.

Then along came the pandemic and we had to readjust everything, of course.

Óscar López Tresgallo

And the chips.

Rafael Muñoz Rubio

And the chips, that kind of thing.

But what I say is that it’s just as important to have the information, the information is, let’s say the excuse or the reason to sit down and talk about something.

What do I mean by this? If you have a predictive system, the demand, you look at it and you say this doesn’t look right or this does look right.

If you don’t have a system, you’re at the mercy of individual people who may or may not take that proactive approach. So I think we’ve moved from reactive to proactive management.

And I think that sometimes, like the end of this year, which is quite a difficult time for the shipping sector, it has helped us to provide a high level of service under very difficult circumstances.

It’s been very helpful, especially to make sure we are providing our customers with the best and highest quality service we can.

Roberto Gamero Gómez

The capacity and the impact it has.

Back to sustainability.

In other words, the impact of optimizing the routes, beyond the effects we were talking about before on costs, on quality of service, is the reduction of the carbon footprint that this entails,

Rafael Muñoz Rubio

Of course…

Óscar López Tresgallo

The fact that back in 2014 we were, we may have mentioned this before, but one of the cornerstones of the project was the development of the  “GoGreen” strategy or initiative at DHL and the ability to monitor our entire network of partners.

Because I always think, well, in order to reduce your carbon footprint the first thing you have to know is what kind of a footprint you’re leaving and when, and from there take action.

Rafael Muñoz Rubio

And find the drivers that make you change.

At DHL as a group, there’s been a clear policy and some very sizable levels of investment for quite some time.

Our goal is zero emissions by 2050.

And in 2021-2030 we’ll be investing €7 billion in the search for more efficient fuel for aircraft, for example.

So it’s not something that we just talk about in a theoretical way, but something that that’s real that we’re investing in, a real dedication on the part of our teams to make a business like ours, which needs energy, as do almost all businesses, more sustainable.

Óscar López Tresgallo

I know that you’ve recently developed a sustainable packaging system for pallets that doesn’t use plastic …

Rafael Muñoz Rubio

Exactly, to recycle pallet packaging.

Roberto Gamero Gómez

We developed what you’re talking about with a customer.

Fortunately, as I was saying in my introduction, this is a reflection of DHL’s leadership.

Fortunately, since 2014 and still today more and more companies in the sector are getting on board and  announcing sustainability strategies that are similar or almost identical to the that DHL announced in 2014, as Rafa said, of zero carbon neutral emissions by 2050.

Óscar López Tresgallo

Yes, it’s clear that you’ve been pioneers in this area and you’ve actually been one step ahead in sustainability initiatives.

As a conclusion to everything we’ve been talking about, I’d like to ask you a question: What has it been like from 2014 to the end of 2021 using a model that has been evolving over the years and that has allowed you to complete this very important digital transformation around operations?

I’d like, Rafa, I don’t know if you’ve actually measured or how the application of technology has changed, how the way in which in internal resources are used, which we like to talk about the  concept of management by exception.

That technology helps people in the sense that they don’t have to worry about everything they are managing, because the technology itself provides the inputs and identifies the risks that occur in daily operations and tells them what they actually have to worry about in the end.

Right? So that is basically the conclusion.

As far as internal resources are concerned.

But also the way you relate to your customers has also changed, how you provide them with information about your customer service, etc.

On that score there must be some tangible returns.

Rafael Muñoz Rubio

Well, yes, it’s true, it’s true that as part of the whole change of model, in the end you change your model.

The change is made by your teams and the basic objective is to serve your customers.

From a customer perspective, we’ve made important gains in our relationship with them, which is to get it right and to anticipate.

I think the worst thing that could happen to us is that someone, is to find out about an incident after the fact, and sometimes from the customer, even our own customer.

Today, our systems allow us to anticipate, to exception and, therefore, to focus on the information by exception of those incidents that may occur.

And so today I think we know many things in advance that in the past we would have found out about after the fact.

Today we’re ahead of the curve and if you’re able to handle a delayed truck in time you may or may not be able to change the delivery window at the destination, but at least there is a level of operational coordination and not a lack of knowledge or information vacuum.

This is good news. Because I believe that in shipping it’s better to have as much information as possible.

Óscar López Tresgallo

Yes. Also, the key is the early warning.

I don’t want a system that tells me when I have a problem. I want a system that tells me in advance when I might have a problem.

Rafael Muñoz Rubio

And in that sense I think that route tracking and traceability systems are very helpful. Anticipating all of this.

And then, from the point of view of our teams there is a tremendous focus on service (as you can understand) and on monitoring activity.

And when I talk about monitoring, I’m not just talking about when the truck arrives, right? We’re monitoring whether all the trucks are available, whether we’ve received all the orders we were expecting,… but all by, let’s say, by exception.

So, little by little our team has been changing.

I’ll give you an example: what used to be the main job of freight agents? They were the schedulers who sourced the trucks.

When there were and… when did they look for the trucks? Once you had the order in hand, that’s when the whole process began.

Today the process begins a month before, a week before, two weeks before,  depending on the demand forecast that we’ve discussed.

So our teams have moved from scheduling to parameterizing a system for better predictions.

Take the planners, for example:  In the old days, these were people who had all the delivery points in their head, who knew the products and so on.

Today, the people who work in planning parameterize a system that has all the information, even at the product level, to know what can be negotiated and what can’t, how to optimize routes and, above all, the order of the deliveries required to guarantee the level of service.

So we’ve gone from working on  everything to working by exception.

And we’ve gone from working reactively to working proactively.

Óscar López Tresgallo

I think those are the two fundamental changes that technology has helped us make.

I think there couldn’t be any better outcome as a result of that process, right?

The fact is… The fact is that it’s a total change.

Rafael Muñoz Rubio

There’s still room for improvement, as there always is, and we’re still working on it but I think we’re on the right track.

Óscar López Tresgallo

At the end of the day I believe that in technology, as we talked about before, right? There will always be, there will always be room for improvement.

I imagine that you also have a number of other initiatives. I don’t know if they’ve been launched but I’m sure they’re in the pipeline.

We’re talking about aspects such as digital documentation, e-CMR, all kinds of technologies and changes, because it’s also true that in order to make a technological change there has to be a driver.

If we talk about e-CMR, or even the regulatory driver, we all know that in 2024-2025 there’s going to be a change.

And progress is being made along those lines. But there are many others.

Roberto Gamero Gómez

Yes, as part of the digitization piece linked to sustainability, as you say, aside from paperless, zero paper.

Here I have a firm supporter of this who’s  pushing me to put more and more emphasis on this area so that we don’t see a single sheet of paper in our offices, but also with my innovation hat on, I can tell you about some of our in-house initiatives.

We have a program called “Accelerated Digitization”, where we have several areas of innovation and digitization of our supply chain in general, not just shipping but also on the counter-logistics and warehouse management side.

So, to mention two, because we have several, to mention two, we have one: Everything related to the world of data that has already been talked about this morning, the different analytics that we have in place in the shipping area and everything related to robotics.

Robotics, both in the warehouse setting, more collaborative robotics, more physical robots that help us with order preparation, but also when we talk about robotics, we have to talk about robotics with with more applications, in the shipping realm, for example.

The software robotics, RPAs, that we’ve already implemented in Rafa’s area, in shipping. In fact, that was the first one we did here in Spain in 2017, with Rafa’s team.

And we’ve been introducing more robots that help us with these repetitive daily tasks, which are done by a machine instead of a person, so that the person spends their time providing more value.

To supplement these digitization initiatives in the area of sustainability.

We haven’t discussed e-CMR or the initiatives that Rafa’s team is working on. With the inclusion of mega trailers on certain routes.

We also have a fruit and vegetable section where we’ve included the use of trains for deliveries in Europe.

This obviously reduces the impact on the carbon footprint considerably.

Óscar López Tresgallo

They are different types.

In this sector there is the more IT technology or software but then there are other types of technologies that are more focused on production.

Indeed, robots, cobots, all these kinds of solutions or technologies that are more closely related to the auto sector, for example, which is also changing a lot.

This has been a summary or a vision of this project, or rather what the journey has been like, rather than just a project.

I think it’s more than an accumulation, it’s a strategy, more than a project, a journey,

Roberto Gamero Gómez

a journey,

Óscar López Tresgallo

a journey that started in 2014 and has brought you to this point, which is surely not the end.

You’re absolutely right.

So,  thank you, Roberto, Rafa, for being with us today and for sharing this journey with us.

Roberto Gamero Gómez

Many thanks.

Rafael Muñoz Rubio

Thank you.