Seeing new opportunities in Latin American trade, DHL Express is raising its stake in the region.
The company, whose Americas headquarters is in Plantation, invested tens of millions of dollars in its Latin American operations in recent months, including $25 million for its hub in Mexico City, $7.3 million for a new distribution center near Santiago, Chile, about $1.7 million for its Colombia hub and more than $1 million for a new operations center in Guadalajara, Mexico.
At the end of last year, DHL Express, a division of Germany’s Deutsche Post DHL, also completed a $20 million investment in a new 140,000-square-foot facility at Miami International Airport, a critical point for its Latin America and Caribbean business.
These and other investments form part of DHL’s strategic plan for the region, aimed at meeting growing demand for cargo services and continuously expanding its network.
“Latin America is a key market for us, with growing trade between the region and the rest of the world,” said Stephen Fenwick, the Plantation-based CEO of DHL Express Americas. DHL Express reported a 14.4 percent increase in shipments between the U.S. and Latin America between 2011 and 2012.
Fenwick, who took over as CEO of the Americas in early 2011, pointed out that Latin America is expanding its trade horizons.
A decade ago, he said, “the trend in Latin America was North-South trade. But now trade patterns have changed and we’re seeing North-South and East-West trade. And this trend will continue as small and mid-sized companies increase their imports and exports.”
For example, U.S. trade in goods with South and Central America has grown substantially over the past five years despite a decline in 2009 due to the recession, according to the U.S. Department of Commerce’s Census Bureau, which tracks international trade. Exports from the U.S. to this region were $137 billion in 2008 and imports were $160 billion. In 2012, exports rose to $183.2 billion and imports to $171.8 billion. For the first seven months of 2013, exports were $106.1 billion and imports $94.5 billion. And trade between the Miami Customs District and the rest of the world grew from $79 billion in 2007 to $124.7 billion in 2012, according to U.S. Customs figures compiled by WorldCity.
The company is preparing for more trade between Latin America and Asia, he noted, especially in countries like Mexico, Colombia, Peru and Chile. And intra-regional business is expected to expand as more people use online shopping.
“We’ve followed international and domestic trade patterns in the region and have expanded our network well beyond the major cities, setting up service centers in provincial centers,” Fenwick said.
To meet current and future demand for its services in the region, DHL has increased processing capacity for small packages and air freight, adding new flights, personnel and fuel-efficient ground delivery vehicles. “We’ve made significant investments to increase capacity at our Miami hub, as well as in Mexico, Colombia and Chile,” said Fenwick, who began his career with DHL in the Middle East.
For example, DHL has added direct flights from its Cincinnati hub to two high-tech manufacturing centers in Mexico — Guadalajara and Querétaro — and increased overnight service to several Latin cities and the Caribbean. The company in June completed a $47 million expansion of its Cincinnati hub, which also handles a share of traffic with Latin America.
DHL does not break down its capital investments by region for competitive purposes, but Fenwick said that this year’s total corporate investment worldwide would be 1.7 to 1.8 billion euros (about $2.2-2.4 billion) and that “a fair share was going to Latin America.”
Most of DHL Express’s business in the region still comes from multinational companies and large Latin-based enterprises (multilatinas), but the share of small and medium-sized enterprises (SMEs) is increasing and DHL is working to capture this business segment.
“With international and intra-regional trade expanding in Latin America, a lot of companies in the logistics space and their customers are growing and doing well,” said Ken Roberts, president of WorldCity, a Miami media company that tracks international trade and the impact of the global economy on local communities. “It’s never straight up, but there are continuing opportunities and it looks well for the region. DHL wants to position itself for handling additional volumes of cellphones, computers, perishables, car parts … all the things that are moving through Latin America. They have undoubtedly done their research on where the best growth opportunities are in Latin America and are targeting their growth and investments.”
DHL Express offers assistance to SMEs that want to navigate complex national and international trade regulations, as well as advice on entering international markets. Earlier this year, it also announced a new initiative with the U.S. Commerce Department that provides DHL customers in Latin America with a range of business resources, including trade and marketing information, business leads, access to new suppliers in the U.S. and access to potential buyers and distributors. U.S. embassies and consulates provide this new service to DHL customers in the region.
While DHL works with a range of sectors — automotive, energy, manufacturing, life sciences and technology — it is paying special attention to health and life sciences. DHL research indicates growing business opportunities for supply chain companies in areas such as high value, specialty drugs, innovative standard drugs and medical devices, as well as low-tech devices and over the counter medications.
Some products require special, temperature-controlled handling from production centers to final delivery, while others can be shipped normally by ocean freight and truck. DHL is fine-tuning delivery services for each category to manufacturers, laboratories, distributors and retailers.
While about 80 percent of pharmaceutical sales are made in high-income countries, DHL expects the globalization of clinical trials will offer a new opportunity to provide delivery services.
“This is an important growth sector for us and we are working closely with customers to address the changing shape of the industry,” said Roger Crook, CEO of DHL Global Forwarding, the freight division of Deutsche Post DHL.
One example of the company’s focus on temperature -controlled shipments is its new station at Miami International Airport, called Thermonet. This center, which builds on existing cold-chain shipping technology, receives temperature-sensitive materials — such as vaccines, specialized medications and materials used in clinical tests — and attaches a radio frequency identity sensor to each package. The sensor stores information on the specific temperature requirements of the contents and alerts DHL if the temperature parameters are not correct. Shipment temperatures are monitored all the time, DHL says.
Each center has temperature control equipment for cargo and personnel trained to monitor and control temperature levels. DHL is developing new Thermonet centers throughout Latin America and other international markets.
DHL Express and DHL Gobal Forwarding are units of German logistics company Deutsch Post DHL. DHL Express has expanded its operations in the United States after a major cutback in 2008, when it discontinued its domestic express services and fired more than 9,500 employees. The company decided it would no longer compete with UPS and FedEx in the domestic market and would concentrate on international service. Worldwide, DHL Express, global freight and supply chain businesses have a network in 220 countries and territories and 285,000 employees.
“In general, we think DHL Express has been smart to invest in building out its Latin American infrastructure, as we see that region of the world as one of the global trade growth leaders over the next decade, along with Asia and Africa, where DHL also has a significant presence,” said David G. Ross, an analyst with brokerage and investment firm Stifel Nicolaus, which had a “hold” rating on DP DHL stock in its most recent report.
A local trade expert also lauded DHL Express’ Latin American strategy.
“The increase in nearshoring [moving manufacturing from China to Latin America] is a key factor in DHL’s philosophy,” said Gary Goldfarb, executive vice president of WTDC, a Miami-based logistics company specializing in international distribution and global transportation management. “The driver is the fact that wages have gone up in China and countries like Chile can now offer high-value manufacturing and no tariffs.”
Goldfarb also pointed out mining in Mexico has “exploded” and mining in Peru has rekindled, and these industries constantly require parts and equipment. “Companies like these need parts yesterday and DHL can provide them,” Goldfarb said.
Politically stable countries like Panama, Colombia, Chile, Mexico and most of Central America are growing tremendously, and once the expanded Panama canals open up there will be no impediments to East-West trade, he noted.
“DHL has been working and investing in Latin America for a long time. They know their market well and they’re right on the money.”