Supply chain radar: JB Hunt – great problems to have in the glory days
It is decision time now for JB Hunt, which opens the earnings season.
DHL has admitted it “over-invested” in India’s Blue Dart airline – but the “right sizing” has led India’s only dedicated freighter operator to a loss.
“We always look at the right size for the business,” Ken Allen, former ceo of DHL Express and now chief of its e-commerce solutions, told the Economic Times of India.
“I think we over-invested in India, and specifically in Blue Dart, for a while and tried to do things too quickly, and didn’t do it with the right level of quality that we normally do.
“So, we’ve had to pull back a little bit. We have to make it the right size and then we can build incrementally. We will just make sure that the workforce is the right size. We are just working on that now. There’s been some cutback already.”
According to Blue Dart, that “cutback” triggered a net loss of RS31.92 crore ($4.48m) in the third quarter, against the profit of Rs32.02 crore ($4.5m) a year earlier.
“The company had undertaken a restructuring/right-sizing exercise during the current quarter with an intention to improve efficiency and create long-term value for stakeholders,” it said. “This has impacted the profitability for the quarter ended December 2019.”
Blue Dart also adopted a new accounting standard in April which also affected profit.
Balfour Manuel, Blue Dart’s managing director, said: “While GDP growth has been revised from 6.1% to 5% for 2019-20, with our clear focus on service quality and cost efficiencies, we are mitigating the challenging situation reasonably well.
“Our customers will always be at the centre of our business, and we will continue to invest to enhance our infrastructure and technological capabilities to stay relevant to their needs.”
While there has been no specific information on job cuts at the company, Blue Dart’s culture has always focused on its people and the carrier has won many awards for being a “best workplace”. Co-founder Tushar Jani, who sold a 51% stake in the company to DHL in 2004, and remains chairman of the board, told The Loadstar at the end of 2018 people were the life blood of any company.
“There needs to be a human face of technology,” he said. “You need a human interface, a human to understand the tech; the technology is not the driver. If you think technology will take labour out of transport, you’re very much mistaken. Transport needs people.”
And he said of the increasingly large e-commerce sector: “It can’t survive without people – someone has to bring the parcels.”
However, DHL wants to “refocus” the business. Mr Allen said: “In India, we have a great model. If you look at DPDHL in India, we have got the express company, we have DHL Global Forwarding, DHL Supply Chain, we’ve got Blue Dart. Each specialises in a particular area.
“Blue Dart is a great example of a company that just needs to refocus on exactly what it is really good at. Part of the problem with the e-commerce revolution, as it were, is that the growth is so massive that, at different price levels, you can get as much business as you want.”
And he said DHL remained very focused on India, where it has made big investments.
“I can tell you India is right up there, almost number one in terms of investment and capability. India is a big growth opportunity. We’ve been here a long time. And we’ve got great businesses: every single one of them is a quality leader.”
You can see Blue Dart’s full third-quarter results here.