Business Monday

Q&A with Frank Appel of Deutsche Post DHL

Deutsche Post DHL CEO Frank Appel is shown after a Town Hall meeting with employees at the DHL Global Forwarding facility at 1801 NW 82nd Ave., Doral. The meeting capped a two-day visit to DHL facilities in South Florida by Appel in February.
Deutsche Post DHL CEO Frank Appel is shown after a Town Hall meeting with employees at the DHL Global Forwarding facility at 1801 NW 82nd Ave., Doral. The meeting capped a two-day visit to DHL facilities in South Florida by Appel in February. MIAMI HERALD STAFF

Deutsche Post DHL, the world’s leading postal and logistics company, is in the business of moving letters and parcels and freight as quickly as possible from one destination to another.

So it probably should come as no surprise that the company is looking into the potential of self-driving vehicles, drones and electric vehicles.

The use of drones is already a reality, said Frank Appel, chief executive of the global giant. DHL is using a drone, or “parcelcopter” as the company calls it, in a pilot project to deliver emergency medications from the mainland city of Norddeich, Germany, to Juist, an island in the North Sea. Its partner on the island is the Seehund pharmacy.

Appel discussed parcelcopters and more during a wide-ranging telephone interview with the Miami Herald from Bonn, Germany.

Earlier this year, Appel made a swing through South Florida, where the company has three divisions: DHL eCommerce in Weston, DHL Express in Plantation and DHL Global Forwarding in Doral.

Q. How do you see the world economy shaping up in 2015?

A. I see the economy on the same level as last year. That means modest growth. I think we’ll see a continuation of what happened in 2013 and 2014. I don’t expect low oil prices or the conflicts we have in Europe and the Middle East will trigger either significantly worse or much better developments. We’re missing a trigger point for economic growth.

If you look at history, there are two reasons why economies have grown fast. One is that you have significant growth in population that we don’t see at the moment; the second is a really significant increase in productivity. That took place in the last 20 years through the leverage of China and I don’t see any reason for that to happen again. If oil prices stay at a very low level, and we don’t expect that in the mid-term, then we might see more growth.

Through 2020, we will probably see what we’ve seen in the last two years and have seen this year, but not tremendous big growth.

Q. Which will be your best markets this year?

A. Probably the same ones as the past year. Asia definitely will be very strong. Having improved service quality across the board, we have seen market share gains everywhere. We even have seen good growth in Europe for most of our products. The most attractive market will remain Asia, but Africa is attractive, the Middle East is attractive, Latin America. Even in Europe and the U.S. our business has developed pretty well.

Q. Does DHL provide services in Cuba? And could the new, limited commercial opening of the United States toward Cuba create new opportunities for DHL?

A. Yes, we are active in Cuba but we only offer our express business. The [second] is a tricky question because first of all the U.S. has to decide what it wants to do with Cuba, and we follow their regulatory approach and comply. If the U.S. really decides to open up the market, opening markets always creates opportunities for the countries that are participating. But I’m no expert on the Cuba situation to be honest ... and it’s a decision of the U.S. government.

But in principle, if you think about TTIP [the free trade and investment agreement now being negotiated between the United States and the European Union], I’m a very strong ambassador of that. I believe that open markets, free trade are good for development. We have done a study called the ‘DHL Connectedness Index’ and what we see is that countries that are well connected have a high human development index. I believe that opening markets is good. If the government decides to open the market to Cuba more, to reduce sanctions — and I’m not saying that is good or bad; it’s a government decision — in principle, both sides would benefit. What we have seen in the last 20 years is that countries that have opened their markets have benefited significantly from that. You have some countries in Latin America, like Colombia, that have done that pretty well and that has led to nice organic growth.

Q. One thing I’m rather curious about is that you have degrees in chemistry and neurobiology. How did you end up in the logistics field with that academic background?

A. It was easier for me to find a job at McKinsey than in the chemical/pharmaceutical industry after my PhD. I ended up as a McKinsey consultant and started to advise Deutsche Post. My predecessor at DHL Deutsche Post asked me if I wanted to join the group, after I had become a partner at McKinsey. I joined the group and the rest is all history.

There is still some learning from my education [that I can apply]. Not only can I deal with a lot of facts and figures, because that’s what you learn as a scientist, but more importantly, I believe that the behavior of people has a lot to do with the functioning of the brain. Certain behaviors are all embedded in the brain. I believe if you better understand how people behave, you can better lead an organization. I think it would be good if more senior executives understood more about neurobiology because our brain is fundamentally important to what we do.

Q. DHL is looking into self-driving vehicles. What kind of potential do you think they might have?

A. It’s a bit too early to say. But let’s look at what mail carriers are doing today. They are stepping outside their cars to deliver mail or a parcel. If you are in a small village, why should you have to drive a car 100 meters, then stop and step out again. Instead, you could be walking the streets and the car is following you. It’s still too early, but if you think about this, it is really a great idea. This could happen.

The more imminent application is probably with self-driving vehicles outside warehouses. It’s a common theme where driven vehicles are moving trailers to a gate, pushing them out and then moving them back again. Why should you have to do that when a self-driven vehicle could?

We are looking into these things as well. Will it happen in the next two to five years? Well, I think there’s a way to go before this will have a more massive application. We have developed our own electric vehicle. It was developed by a German university. It’s on the road in our headquarters city and it works very well. We have actually acquired the company because we’re confident.

We’ve also had a pilot with drones between mainland Germany and a pharmacy on an island. That’s up and running, and I’m very pleased that we were the first company with a commercial application.

These things you have to watch. I think it’s less important to predict when they will happen than that you understand the potential impact they will have and that you are testing them yourself. We believe we should always be on the forefront of these types of innovations.

Q. Could you tell me a little bit more about that drone pilot project?

A. It started in late 2014. I have been on the board for 12 years and I have never seen such overwhelming positive press coverage. It is amazing. I believe it will remain a niche product for the time being because we haven’t really finalized the regulation of it. But remember the typhoon in the Philippines about 1 1/2 years ago; we sent our disaster relief people there. But if we had had a drone then, it would have been much easier. Instead of flying over areas and throwing relief supplies from planes, you could easily fly in drones. Also think of drilling platforms. Why are you sending in helicopters with supplies?

There are some applications for the drones and that’s why we’re looking at them. But we don’t believe they will soon be used for mass delivery of parcels to households.

Q. Please tell me about the future of your Packstation concept.

A. We started that in 2001 believe it or not. We now have 2,750 lockers rolled out. It’s working excellently; our customers like them. Now we’re saying maybe these lockers should be put in front of private homes. Why should you have to go to a Packstation? If we put a locker in front of your house, even if you’re not there, we could put the parcel in and the locker could also be used to send things back. It works in a country like Germany where you have a lot of private houses in small villages. You don’t even have to be home any more. That’s the next level of convenience. In Germany, we are the private postal operator, so we have the scale. It’s a fantastic product.

Q. Do you think there will be a TTIP (TransAtlantic Trade and Investment Partnership) agreement by the end of the year?

A. I hope all the politicians will line up because it would be good. We believe there would be trillions of dollars in additional growth for each side, the U.S. and Europe. It’s complex and it’s easy to argue for protectionism because protectionism is no change. It’s very difficult to argue for change. Those who argue against it are usually more vocal and visible than those who are supporting it. Concern about change isn’t rational. And support of TTIP is based on facts and figures. If you have a discussion, the emotional stuff is often more convincing than the facts and figures.

I hope both [the United States and the EU] will make progress. I believe there is strong support in the U.S. and also strong support from most countries in Europe. I haven’t given up hope that something can be done by the end of the year. I’m still optimistic because I think there are tremendous arguments for getting it done.

Q. You’ve talked a little bit about the development of an electric vehicle. You’ve now become a strategic partner with the FIA Formula E Championship, the electric car racing series. Why is that a good fit for the company?

A. We believe that we should support things that are linked to our attributes. On the other side, we’ve had this green program where we’ve reduced our carbon footprint since 2010. We’ve made tremendous progress.

We think Formula E racing is a perfect fit because it reflects our attributes: leading edge, on time, speedy, as well as passion and trying to make business more sustainable. We are also providing the logistics services for Formula E racing as we do for Formula 1. This combination of attributes makes it very attractive to us.

[There was a Formula E race in downtown Miami on March 14, and after an April 4 race in Long Beach, California, the series returned to Europe].

It’s not as noisy as other racing. It’s spectacular because it is in the city. It’s only at the beginning, but I have no doubt it will be a fascinating activity for spectators.

Deutsche Post DHL Group finances

Deutsche Post DHL reported a 3.5 percent increase in 2014 operating earnings to 2.97 billion euros and a net profit of 2.07 billion euros, down 1 percent from the previous year. Although the world economy is only expected to grow at a moderate rate this year, the German company projects operating earnings between 3.05 billion and 3.2 billion euros.

In 2014, all four operating divisions — post, eCommerce and parcel; Express, which provides international express mail services; supply chain and contract logistics; and global forwarding and freight — contributed to growth, said CEO Frank Appel.

The eCommerce, post and parcel division provides postal service for Germany, delivering about 64 million letters every day during the work week. “Now we have a clear strategy to export the success we have seen in Germany to other European and non-European markets,” said Appel. He’s also enthusiastic about the company’s eCommerce prospects. “eCommerce will change the world,” he said.

DHL is also the largest global player in its global forwarding and freight division. “But at the moment we have some challenges because we are transforming our processes to more standardization and efficiency,” said Appel.

“Overall we’re optimistic for all our four divisions,” Appel said, “but for one we definitely still have challenges.”