DHL Global Forwarding (DGF) is an air and ocean freight forwarder that has established its name in this industry in India. In 2015, its regional director noticed some variance on the payment to airlines on specific days of the week in three different cities. The regional director must come up with a new plan to be presented in a team meeting in Bengaluru, India.
Kedar Joshi and Debmallya Chatterjee
Harvard Business Review (W17196-PDF-ENG)
March 29, 2017
Case questions answered:
- What are the challenges facing DHL Global Forwarding? What are the various options available to Datta?
- What is DGF’s current consolidated freight forwarding approach?
- Create a freight forwarding program on a weekly basis using the Integer Programming Model
a. Clearly state decision variables
b. Formulate objective function
c. Formulate constraints
- Solve the model using Microsoft Excel Solver and comment on the solution.
- Identify the risks and challenges associated with the proposed shipment schedule.
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DHL Global Forwarding: Consolidation Program Case Answers
This case solution includes an Excel file with calculations.
Q1: What are the challenges facing DHL Global Forwarding? What are the various options available to Datta?
DHL Global Forwarding, being the market leader in the Indian forwarding sector, has enjoyed tremendous growth, but with growth comes challenges, which are as follows:
- Volatility in fuel prices. This creates a changing shipment cost, which is a concern for Datta.
- Accumulation of shipments in one city or due to a holiday affects the operating costs, resulting in the inability to reach economies of scale and poses a threat to achieving the industry standard of 5 days lead time.
- The competition, both locally and internationally, is increasing in the freight forwarding industry, which adds more pressure on cost-saving and reaching economies of scale.
- As depicted by the data for the years 2012 to 2015, the revenues for DGF are constant, and operating profit is plunging dramatically, which is another challenge for Datta.
To address these challenges, Datta could make use of road routes to the cities that have the cheapest flights available on the shipment days. Making another freight forward approach, making use of both road and airline, would help reduce the costs.
Furthermore, demand forecasting could be helpful as well in bargaining with airlines to decide on fixed freight charges. Opening warehouses in other cities where cheaper airlines were available could also be an option.
Q2: What is DGF’s current consolidated freight forwarding approach?
Currently, DHL Global Forwarding sends out the shipments every Tuesday, Thursday, and Saturday via four different airlines. The cumulated shipment size, airline availability, and cost per kg are shown in the following table:
These shipments are sent through the cheapest airline options available on the designated days. The table below shows the cheapest per kg shipment by air costs and total weekly shipment expenditure for the current…
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