Interview

“Consistent world-class quality for our customers”

Contract Logistics is DB Schenker’s most successful segment. However, its rapid growth has created plenty of potential for further improvements to efficiency. The “Go-for-Performance” global excellence program initiated by Board Member Tom Schmitt and Program Director Jonas Mehrhoff has proven to be a successful measure to achieve these improvements. Good for the company, good for our customers!


In a nutshell: “Go-for-Performance” was launched in 2015 to add consistent excellence to the growth momentum of DB Schenker’s Contract Logistics segment and to provide world-class quality at consistently high levels to customers at all sites around the world. “Go-for-Performance” is built around the entire customer interaction process and consists of six modules:

 

 

– SELECT the right customers

– IMPLEMENT robustly

– XSITE for world-class operations

– HEAL unprofitable sites

– KEEP profitable customers

– AMPLIFY to grow together


Following its successful completion, the program was embedded into the line organization. As a result, everything that was developed within the program has now become part of the DNA of DB Schenker’s Contract Logistics.


Tom Schmitt, Chief Commercial Officer and Contract Logistics at Schenker AG, joined DB Schenker in 2015. He previously sat on the board of various companies in the USA as well as in Canada and Germany. Photo: Jet-Foto
Tom Schmitt, Chief Commercial Officer and Contract Logistics at Schenker AG, joined DB Schenker in 2015. He previously sat on the board of various companies in the USA as well as in Canada and Germany. Photo: Jet-Foto

Mr. Schmitt, when you launched “Go-for-Performance,” you did so with the aim of providing customers with a consistent level of world-class quality. Has that been achieved?

We are well underway. The program was a key factor in bringing us a significant step forward. We identified best-practices that have been proven and applied successfully in pockets and made them available for our global organization. This allowed us to bring excellence and consistency to all our operational and commercial processes and to establish a new culture with a clear customer

and quality focus. Just to give you an example: when we enter into a contract with a customer, clean and well-paced implementation is a must – but it is also complex. We were forced to recognize that there were some cases where we did not deliver the quality we committed to. As a result, we refined the entire implementation process and rolled it out globally within the frame of IMPLEMENT, one of our six “Go-for-Performance” modules. The upshot is that everything has run smoothly so far this year. Disaster implementations, as we call them? None!

 

The second goal was to grow profitably. Did that succeed?

The figures are good, but they could be even better. In the first half of 2017, we grew by 6.8 percent, which is clearly above market. At the same time, we achieved to become the most profitable contract logistics service provider. And we’re getting better every month. That is not solely due to “Go-for-Performance” but certainly to a considerable extent.

 

Even prior to the launch of the program two years ago, Contract Logistics could hardly be termed a problem child. Why was “Go-for-Performance nevertheless necessary?

Through our “Go-for-Growth” program initiated in 2009, our business doubled within a few years. DB Schenker’s Contract Logistics segment, which in the early 2000s generated only a few hundred million euros in revenues, is a EUR 2.5 billion business today. So, we have grown fast. However, our consistency in execution sometimes has not kept pace with the growth, resulting in underperformance, inefficiencies and inconsistencies within our operations and implementations. This also impacted certain customer relationships. Our motivation to initiate “Go-for-Performance“ was to add consistent excellence to our growth momentum and to provide world-class quality at consistently high levels to our customers at all our 750 sites, all over the world.

 

What issues did you tackle and what did you achieve?

Three out of our six “Go-for-Performance” modules target the commercial side while the other three target the operational side of our business. And all of them are supposed to bring sustainable excellence and consistency into our processes. Module number one is SELECT. A company that wants to grow profitably while simultaneously working at an excellent level needs to pick the right customers and seek business that adds true value. That is why we identified the most promising sectors and regions for further profitable growth. Let me give you two examples: First, although the vast market of Brazil had previously been a blank spot on our contract logistics map, we gained our first customer there in 2016, a large manufacturer of flavors and fragrances. And second, in March 2017, the Board of Management approved an investment in a new, 36,000 square meter warehouse in Dubai. This will be our largest site so far in this region and will increase our contract logistics footprint in Dubai sixfold.

 

How is the sites’ operational performance reflected within the program?

Operating consistent world-class facilities is our key task in Contract Logistics. And with XSITE, our global excellence module, we will get there! XSITE focuses on continuous process improvement and people development at our sites. Let me give you just two out of many examples: First, we managed to create more than 900 additional pallet positions at a warehouse in Poland simply through stock rearrangement and consolidation. Second, at a location in the US we automated the wrapping process for consignments and also optimized the security processes and equipment. As you see, it’s not always a question of rocket science. And yet, through XSITE, we made a number of improvements that benefited our customers at numerous sites around the world. And we are just at the beginning of a lifelong journey.

 

“If we work in a profitable way,
it ultimately also benefits the customer!”

Tom Schmitt, Member of the Board of Management,
Chief Commercial Officer and Contract Logistics


What role does the sites’ respective profitability play?

It plays a crucial role, which is why we launched the fourth module entitled HEAL. When we got “Go-for-Performance” started, around 200 of our 750 locations were either not bringing in any money or were operating at a loss. We analyzed the reasons for this at selected pilot sites and introduced a range of corrective measures that included optimizing workforce planning and terminating lease agreements for little used spaces in logistics centers. Thanks to efforts like these we have already reduced the number of unprofitable sites significantly. Moreover, we have decreased the average loss of all unprofitable sites by more than 30 percent year-on-year in the first six months of 2017 while at the same time delivering the quality our customers expect from us.

 

That leaves two modules from the commercial side. What is their function?

The first is KEEP, which deals with the proactive, profitable renewal of our customer contracts. We successfully managed that in 73 cases in the first half of 2017. One example here is in South Africa, where we extended the contract with a globally active customer in the fashion industry. And lastly: AMPLIFY, the sixth module. The focus here is on expanding existing customer relationships as well as developing new business opportunities in such a way that they encompass not only contract logistics but also transport services.

 

Who was responsible for implementing and achieving these measures – and how did you galvanize support among your colleagues for “Go-for-Performance”?

Right from the beginning, we set up a dedicated Program Management Office led by Jonas Mehrhoff. In addition, we formed a dedicated global team for each module, made up of commercial as well as operational experts from our four regions and head office. With regard to support, one of our key success factors was that we incorporated feedback and recommendations from approximately 1,000 colleagues around the world at a very early stage, enabling us to deploy an agile change management in the development, pilot and rollout of “Go-for-Performance.

 

You’ve already mentioned that “Go-for-Performance” will continue to have a long-lasting effect – how?

The program might have drawn to a close, but all modules will continue as an inherent part of our line organization. That means that all new processes and improvements that we have achieved over the course of the two-year program will now be transposed onto our everyday activities. In so doing, they will benefit our current and our future customers. The results of “Go-for-Performance” have already become an integral part of our contract logistic DNA. And what is more: we are certain these results will act as a role model even beyond the confines of the business unit as a benchmark for the way we do business at DB Schenker.

Passionate commitment, significant boost: Teams from all over the world worked hard to make “Go-for-Performance” the success it turned out to be. As a direct result of the program DB Schenker’s Contract Logistics services have become far more efficient or, quite simply, better

Photos: DB Schenker, Michael Neuhaus (homepage)



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