Questions
1) Brief History of DHL
2) Effects of COVID-19 on companies like DHL
3) How has the past pandemic affected the supply chain of companies like DHL
4) How would a company like DHL mitigate the impact and prevent more severe crises?
5) How are competitors (FedEx & UPS) handling similar problems?
Answer
The Impact of The Corona Pandemic on DHL’s Supply Chain
Introduction
Success in the business world relies on several factors ranging from the formulation of sound managerial and fiscal policies to the identification of the right market, recruitment of the appropriate human resource, and meeting customer demands. However, even though companies go to great lengths to ensure due diligence and enact the proper structures, several factors undermine their ability to operate optimally, making it challenging to meet organizational objectives. For instance, the corona pandemic has caused significant disruptions in the business landscape since governments and the WHO require people to limit their interactions and movements to reduce the rate of infections. While such measures are intended to safeguard people’s health, their impact on businesses is enormous. The global supply chain is one of the sectors that has borne the brunt of the pandemic. This paper will analyze the impact of the disease on DHL, a major stakeholder in the supply chain sector.
A Brief History of DHL
The company, Dalsey, Hillblom and Lynn international, known as DHL, is one of the world’s largest logistics companies. The company was founded in 1969 in the US from where it expanded its services to different parts of the world (“Our Story”, n.d.). Initially, the firm’s primary activity was to transport customs by air, which by then was a relatively unexplored market. By the 1970s, DHL had carved a niche in the market, a factor that led to rapid growth and expansion. At first, the company concentrated on the American market, with the bulk of its planes plying between San Francisco and Honolulu (“Our Story”, n.d.). The demand for cargo transportation led to the establishment of other transport routes not only in America but in different parts of the world (“Our Story”, n.d.). The rapid expansion, coupled with a long-standing reputation for excellent customer service, has informed the categorization of DHL as one of the most reliable logistic firms. On the whole, DHL has grown from a little-known American transport company to a global conglomerate with operations worldwide.
Effects of Covid 19 On DHL And Other Logistic Firms
The Covid 19 pandemic has caused significant disruptions in the business landscape, especially the global supply chain. Indeed, the need to control the spread of the disease has informed partial and complete lockdowns in some countries, thus causing enormous disruptions in economic activity (Dragan & Mulej, 2020). Such measures have caused a reduction in manufacturing and other commercial activities, ultimately undermining the profitability of global logistics companies (Dragan & Mulej, 2020). Some of the negative consequences associated with the diseases that have significant repercussions on logistics companies include reduced customer spending, reduction in the movement of goods primarily in the disease-prone areas, and shortage of labor.
Reduced Customer Spending
The impacts of Covid 19 and the uncertainties surrounding the diseases have caused customers to reduce spending on non-essential items in the wake of reduced incomes. In particular, the disruption of economic activities occasioned by the disease has left many people jobless, therefore necessitating the need for prudent spending (Lin, Lee, & Lye, 2020). As a result, the majority of people, particularly those under partial and complete lockdowns, have resulted in tightening their spending in order to save resources that can help them survive in case the disease persists (Lin, Lee, & Lye, 2020). Unfortunately, the reduction in expenditures and purchases of goods has caused a decline in the activities of global logistics companies, making them economically disadvantaged. Overall, Covid 19 has caused a reduction in spending, thus undermining the activities of global logistics companies such as DHL.
Disruptions in The Movement of Raw Materials and Finished Products
One of the significant impacts of Covid 19 is the disruption of manufacturing activities. In particular, the need to observe social distancing rules as outlined by governments and those who have caused capacity challenges in many manufacturing companies leads to low productivity (Dragan & Mulej, 2020). Such disruptions, coupled with the restriction of movement to prevent the disease from spreading, have resulted in significant disruptions in the global supply chain. The fear of exposing their staff to the disease has caused many logistics companies to suspend operations in the affected areas, which is likely to undermine their financial performance (Dragan & Mulej, 2020). Overall, Covid 19 has caused a reduction in the movement of raw materials and finished products; therefore, dealing a significant blow to the financial performance of logistics companies.
Shortage of Labor
The emergence of the Covid 19 pandemic has caused massive labor shortages in virtually all economic sectors. In particular, the need to observe social distancing rules, and the subsequent quarantining has occasioned significant labor shortages in the global supply chain sector (Dragan & Mulej, 2020). For example, in order to comply with the health guidelines issued by different governments and the who, many workers in the global supply chain sector have resulted in quarantining, therefore denying the companies the much-needed human resource (Dragan & Mulej, 2020). Additionally, illnesses among staff in some regions have also reduced the number of competent workers available for work (Dragan & Mulej, 2020). In sum, the health challenges associated with Covid 19 have caused a labor shortage in the global logistics sector, denying companies such as DHL the human resource needed for optimal performance.
Impact of Past Pandemics On DHL
Ordinarily, pandemics cause massive disruptions in the world’s economy. However, the impact of such epidemics is more pronounced in specific sectors of the economy that are viewed as sensitive. In particular, the transport and logistics sector usually suffer the brunt of infectious diseases as mostly, the control of the diseases requires the suspension of operations in order to prevent the possibility of the disease spreading (IFC, n.d.). As one of the world’s logistics industry’s major players, DHL has dealt with a fair share of challenges occasioned by pandemics. For example, the outbreak of severe acute respiratory syndrome (SARS) in 2002 caused DHL to suspend operations in the affected regions temporarily (IFC, n.d.). Equally, the outbreak of the H1N1 Flu Virus, commonly known as the Swine Flu, caused DHL to suspend services in the areas worst hit by the disease (IFC, n.d.). Overall, past pandemics caused DHL to suspend operations in the affected areas in order to prevent the disease from spreading.
Mitigating the effects of Covid 19
Undoubtedly, Covid 19 has caused extensive disruptions in the global supply chain and ultimately informed massive losses for companies such as DHL. Going forward, logistics companies need to enact measures to help mitigate the effects of the disease as part of the preparations for the resumption of full operations. One of the methods DHL and other companies can use in this regard is ensuring the observation of social distancing rules in their activities (Dragan & Mulej, 2020). In this respect, companies should ensure that their logistics processes allow all the involved parties to maintain a reasonable distance in compliance with WHO’s guidelines. The companies should also leverage technology in order to reduce the chances of the disease spreading (Dragan & Mulej, 2020). For example, DHL should adopt digital platforms and abolish the paper receipts and other documentation that are likely to facilitate the spread of the disease from one person to another. In general, DHL and other players in the global supply chain can mitigate the effects of Covid 19 by emphasizing social distancing and adopting digital platforms.
How FedEx, UPS and Other Competitors Are Handling the Situation
The corona epidemic has caused extensive disruptions in the entire global logistics industry, thus causing varied reactions from different sectors. For instance, FedEx, one of the main stakeholders and a significant competitor to DHL, has responded by suspending operations in countries and regions with a high infection rate (IFC, n.d.). Additionally, the company has partnered with governments in order to ensure the faster and safe transportation of specimens and testing equipment. For example, FedEx is using SenseAware technology and monitoring to transport samples to different laboratories in the US safely (IFC, n.d.). On the other hand, UPS is addressing the pandemic by emphasizing compliance with government and health regulations concerning the disease (IFC, n.d.). Overall, DHL’s competitors are handling covid 19 by upholding safety regulations aimed at safeguarding their staff and customers.
Conclusion
The corona epidemic has caused significant disruptions in the global economy. The transport and logistics sector has borne the brunt of the consequences of the disease mainly due to the need to restrict movement as a precautionary measure. Reduced mobility and quarantining, in particular, have caused a decrease in consumer spending, thus denying DHL a significant portion of revenue. The need to observe social distancing rules has led to massive labor shortages in logistics firms, therefore, undermining their operational capacity. In many respects, the impacts of the corona pandemic are similar to those of past epidemics such as swine flu and the SARS. DHL is not the only company contending with the effects of Covid 19. Other players such as FedEx and UPS are equally affected, and in response, they emphasize social distancing and other guidelines outlined by the WHO.
References
Barker, J. R. (2020). Logistic function and complementary Fermi function for simple modelling of the COVID-19 pandemic: tutorial notes.
Dragan, D., & Mulej, M. (2020). Research on Pandemics and COVID-19 virus: A systemic review of methodologies focusing on holistic solutions in logistics and supply chain management.
International Finance Corporation (IFC) (n.d.) The Impact of Covid 19 On Logistics. IFC n.d. Retrieved from www.ifc.org/wps/wcm/connect/industry_ext_content/ifc_external_corporate_site/infrastructure/resources/the+impact+of+covid-19+on+logistics
Lin, R. J., Lee, T. H., & Lye, D. C. B. (2020). From SARS to COVID-19: the Singapore journey. The Medical Journal of Australia, 6.
Our Story (n.d.) DHL n.d. Retrieved from www.dhlexpress.be/en/our-story/
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