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DHL abandons IT modernisation plan and recognises ‘off-the-shelf’ solutions might be the answer

Posted on 4th November 2015 by YmeriHart

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When a company with the resources of DHL announces it is abandoning its very expensive IT modernisation plan, the risks of using an in-house team to develop the software are highlighted.

The Deutsche Post DHL Group announced a write-off of €345 million in its third quarter results, related to €308 million spent on developing the New Forwarding Environment system and the rest covering the cost of the roll-back in those countries where it was piloted.

Although not explicitly outlining what went wrong, the group talks about its objective of having “the necessary flexibility to meet evolving industry needs” – so presumably that brief was not met. Frank Appel, CEO, Deutsche Post DHL Group says: “We are now undertaking further measures to make this renewal [of our forwarding business] business-centric.”

So how does DHL Global Forwarding define a business-centric model? Apparently by finding an IT renewal approach that “best supports improvements in operating performance, such as enhancing shipment visibility through better capture, management and display of operational milestones, and reduction of paper work through greater use of a document management system which has already been proven in our US business.”

That doesn’t sound like rocket science, does it? Greater real-time visibility and streamlined document management systems have been a mantra for years. Many people no doubt think this was all achieved years ago.

But it is not as easy as it sounds and even the most sophisticated transport management software systems need to constantly evolve to meet the changing requirements from retailers and manufacturers and the ever-rising customer expectations.

So what will DHL do now to upgrade its IT systems and deliver the service its customers want?

In a statement, the group said it “recognized the need to weigh potential alternatives and will implement a step-by-step replacement and upgrade of its IT set-up. This could rely on a flexible IT architecture, potentially enhancing and converging existing systems and also incorporating advanced ‘off-the-shelf’ solutions that have been commercially proven within the freight forwarding sector.”

Maybe part of its problem was attempting to move too quickly – especially when it was expecting an in-house team (admittedly with an implementation partner) to do most of the work.

Many organisations recognise that using off-the-shelf solutions developed by software companies with a real expertise and understanding of their market sector, can be highly beneficial. The software company has already been through most of the learning curves and pains of development while working with other customers and has built up an expertise and experience that an in-house team can never match.

But DHL could do even better than that. Rather than making a single off-the-shelf purchase, it should keep using that software company’s expertise through building a long-term relationship. It is that partnership that will provide the flexibility and business centric IT solution that DHL needs.

Whatever happens, DHL recognises that its IT renewal plan is an essential part of its transition from Strategy 2015 to Strategy 2020, so it is prepared to write-off the last 16 months and seek a better way to develop and integrate the transport management software it needs.

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