{"id":25672,"date":"2017-11-15T21:16:13","date_gmt":"2017-11-16T02:16:13","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/disrupt-or-be-disrupted-dhl-invests-in-pharma-supply-chain-to-stay-relevant-in-a-digitally-enabled-industry\/"},"modified":"2017-11-15T21:16:13","modified_gmt":"2017-11-16T02:16:13","slug":"cold-chain-innovation-dhl-fights-to-stay-relevant-in-a-digitized-industry","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/cold-chain-innovation-dhl-fights-to-stay-relevant-in-a-digitized-industry\/","title":{"rendered":"Cold chain innovation: DHL fights to stay relevant in a digitized industry"},"content":{"rendered":"

Digitization threatens traditional logistics industry leaders<\/em><\/strong><\/p>\n

DHL is an express delivery and logistics company that has been operating since 1969. Today, it makes cargo deliveries to 120,000 cities and stands as the second largest logistics company by market share worldwide with 28.4%, behind UPS with 32.9% [1,2]. Despite historical industry growth, recent years have proven challenging as new entrants like Amazon use digital innovation to upend established logistics leaders. Companies like Amazon pose a major threat to DHL and its peers because of their ability to capitalize on capabilities like big data and drone technology to meet evolving customer demands and minimize costs [3].<\/p>\n

Digitization of delivery services has created an arms race for the most effective and efficient supply chains to fight market pressure to reduce costs and serve more customers. In this increasingly competitive environment, DHL must innovate or get left behind.<\/p>\n

Recognizing a $13.4bn market opportunity in cold chain logistics<\/em><\/strong><\/p>\n

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Demand for cold chain logistics is growing rapidly as more products require temperature control [Image A].<\/em><\/strong><\/figcaption><\/figure>As DHL grapples with the rise of digitally-enabled competitors, one area where it has recognized growth opportunity is in life sciences and healthcare logistics, particularly the cold chain. The cold chain can be defined as the “maintenance and storage of goods at the appropriate temperature, as they move from supplier to ultimate delivery destination” [4]. In 2016, more than half of the top 50 best-selling drugs required temperature-sensitive storage through the cold chain [5].<\/p>\n

An effective cold chain is critical for transporting $260bn of temperature-sensitive biopharmaceutical products sold annually. Medicines that require constant storage at 2 to 8 degrees Celsius often experience more than 30 handovers between factory production and patient delivery [6]. It is unsurprising that with so many handovers, one-third of medicine globally is “corrupted by the time it is used”, resulting in significant medical waste and serious consequences to patient health [6].<\/p>\n

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Simplified life sciences supply chain. DHL manages many of the steps [Image B].<\/strong><\/em><\/figcaption><\/figure>Despite recent advances in medical technology, transportation of medical products has remained largely unchanged for 30 years. In fact, a 2015 survey shows that 40% of DHL’s life sciences customers feel that maintaining an effective temperature-controlled chain for their products is a serious issue [7].<\/p>\n

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The cold chain therefore presents a significant opportunity for DHL to invest in digital capabilities to better meet customer needs. Digitization could maximize DHL\u2019s share of the healthcare cold chain logistics market, which is expected to grow from $8.5b to nearly $13.4bn by 2020 [8]. By providing best-in-class service to biopharmaceutical customers, DHL can remain competitive and improve access to safe medication for patients globally.<\/p>\n

DHL management takes steps to address the threat of digitization by investing in cold chain solutions<\/em><\/strong><\/p>\n

When Scott Allison took on leadership of DHL\u2019s Life Sciences and Healthcare vertical in late 2016, he was tasked with supporting the maturation of health supply chains in the 220 countries where DHL operates [9]. One of the first things he assessed was what other supply chain-mature industries, such as technology and automotive, were doing well. He then directed his team to invest in partnering with healthcare customers to pilot new ideas based on cross-industry best practices. A few examples of steps DHL is taking to digitize its cold chain are highlighted below:<\/p>\n