Beyond Outsourcing: The Demand Supply Transformation at DHL

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Beyond OutsourcingThe Demand - Supply
Transformation at DHL

• Ron Kifer, SVP and CIO DHL Express U.S. / Canada

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Introduction to DPWN

• DPWN ranks number 70 on the 2005 FORTUNE Global
  500 (up from 75 in 2004).
• DPWN Revenues exceed 55B

Deutsche Post World Net
FINANCIAL SERVICES
EXPRESS/LOGISTICS
MAIL

• Leading retail bank
• 10 millioncustomers
• Strong business unit
• Financiallogistics solutions

• 72 million mailitems per day
• High transit timequality
• Global mail International mail dispatch solutions

1 International Express Company
1 Worldwide Air Ocean Freight Logistics
Strength in Domestic Products and Services
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Why Does IT Reorganize?
De-centralization
Centralization
What drives the changes from one extreme to
another?
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Why Did DHL Reorganize?
Centralization
Decentralization

• Alignment with business
• Time to market
• Responsiveness to customer
• Flexible / adaptive
• Visibility to spend

• Economies of scale
• Ease of integration (MA)
• Standards
• Compatibility
• Global

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Classic Centralization Issue
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Classic Centralization Issue
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Stopping the Pendulum Demand/Supply Model
Business IT
IT Services
Management of demand for IT Services
Supplier of build and run services
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Benefits of the Model Best of Both Worlds

• Demand
• Alignment with local business
• Time to market
• Responsiveness to customer
• Flexible / adaptive
• Visibility to spend

• Supply
• Economies of scale
• Ease of integration (MA)
• Standards
• Compatibility
• Global

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The Value of Business IT
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The Value of Business IT
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IT Governance Before
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IT Governance After

• Express

• Express

• Mail

• Corporate Functions

• Express

• Logistics

CIOs
CIOs
CIO
CIO
CIOs
CIO
Demand
Supply
Clear responsibilities and interfaces

• IT Services

Build/Run
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Demand / Supply New Organization Model
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Demand / Supply Focus

• Supply Role
• Specify application system and acquire or build
  solution
• Define technical and physical architecture
• Manage supply portfolio and cost
• Manage demand priorities and resolve conflicts
  for supply
• Manage IT infrastructure and operate IT services
  for the business
• Interface to business demand and Third Party IT
  Vendors

• Demand Role
• Specify application requirements, volumes and
  growth
• Define business and application architecture
• Manage demand portfolio and cost
• Manage business priorities and resolve conflicts
  for demand
• Mediate service-cost trade-off in Service Level
  Management
• Interface to the business and supplier of IT
  services

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Service Catalog

• Service level categorized as high, medium, low
• Price variably based on service level
• Primarily for maintenance and support

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DHL Key Success Factors

• Highly centralized IT infrastructure
• Highly distributed business governance
  (regional/country PL based)
• Strong core competencies in
• Vendor/Outsourcing management
• PMO (project, program, portfolio)
• Demand management

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Conclusions

• More than an IT organization model
• Demand / Supply is not a one size fits all
  solution
• Global organizations
• Highly geographically distributed organizations
• Can offer a balance between organization extremes
• Is not a new or unproven model

We are not alone.
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Who Else is Pursuing this Strategy?
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Questions Answers