Freight Profitability

[Imagegear]

I have just received a parcel order online which originated in Finland.

Reviewing the delivery tracking information the route was as follows:

Finland to Malmo, Malmo to Copenhagen, Copenhagen to Leipzig, Leipzig to Marseilles, Marseilles to Nice.

Almost all flown as freight.

How can this be profitable when the delivery charge was €5.99????

IG

[marsipulami]

Just measure the volume of your parcel and then find the cargo volume of let's say a Boeing 767, do the math and you'll have the answer. It's also worth to watch the amount of traffic and sorting process of a major integrator on the net...

[EAM]

The cost of a shipment fron Finland to Nice is more than 5.99€, this is probably just the amount the seller charges you.
Some do even free shipping, put it still cost to ship the item.

Anyway, your shipment will be delivered when it arrives, maybe in 2 days, maybe in 4 days.
Some shippers pay for a guarantee delivery the next day and then the same shipment costs about 60-80€, that is were you make profit. ;-)

[Imagegear]

Well the parcel was actually delivered in two working days

I can only be impressed

IG

[RevMan2]

It’s not profitable. It’s a mix calculation, with cross subsidisation between product and fulfillment.

[FougaMagister]

Forwarded via Leipzig? Well done DHL! Nothing new there... :ok:

Cheers :cool:

[dixi188]

I worked in the night freight industry for over 20 years.
Typically on an A300, the first 5 tonnes of "High value, must be there by 9am, next day", stuff paid for the operation, the other 30 to 40 tonnes was less important stuff, but was all profit.

[Council Van]

DHL might not have made a lot of money on that individual parcel but I seem to recall from Copenhagen to Leipzig we would some times have explosive items on the Cargo Manifest. I believe these were for use in the air bags in motor industry. Normally trucked across Europe to arrive at the factory's 'just in time'. The car manufacturers can not afford to have a line not producing cars for a shift, near Leipzig they have a Porsche factory with each line quite easily producing 500 vehicles per shift. If the line does not run then they have lost millions in turn over.

The solution is to pay DHL a lot of money to fly the components they need in if a lorry is delayed. If DHL fail to deliver then they will face big penalty charges. They also carry lots of other just in time or urgent items, medical supplies, some nasty sounding chemicals etc etc which will cost a lot to have air freighted.

The other way DHL make money is on volume, as mentioned above you can fit a lot of small parcels in a B757 or Airbus. When I left DHL in 2014 Leipzig had around 60 aircraft arriving each evening. A good mix of high volume and high value items sees all the big overnight freight companies make big profits.

DHL Hub in Leipzig - YouTube

https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.youtube.com/watch%3Fv%3DMdUy__9dGF0&ved=2ahUKEwiSmpGFjNLfAhVWRhUIHZsmAysQjjgwAHoECAcQAQ&usg=AOvVaw144mMMeUFpjfvX3zc-hPmh&cshid=1546537642728

Since this video was made they have doubled the size of the sorting hub and substantially increased the size of the Apron.

You wonder how DHL make any money. I once brought about 4 pallets of Mellon's from Casablanca to Paris. As they were being off loaded I was wondering how much the poor Moroccan farmer would have been paid per Mellon if they were going to be sold for perhaps €2 in a French supermarket after every one else in the supply chain had made a profit? Probably a few Moroccan centimes per mellon for months of work which could easily have been destroyed by something such as an untimely thunderstorm with large hail damaging the fruit and making it unsaleable.

[EAM]

A package within the EU is about 14.00€, 5,99€ is only what the seller charged, not the price for the shipment.

[rationalfunctions]

Certainly a low-margin high volume game, with much of the profit being on the end-to-end side of the business. Taking the DHL 2017 annual report (https://www.dpdhl.com/content/dam/dpdhl/en/media-center/investors/documents/annual-reports/DPDHL_2017_Annual_Report.pdf) as an example:

As overall business, DHL had €3.7 bn profit on €60.4 bn revenue - around a 6% margin.
On freight alone, profit was €0.28 bn on €14.5 bn revenue - margin of just 2%

[Asturias56]

As a comparison if you ship a container load of T-shirts from China to Europe on a vessel like the "Emma Maersk" the transportation cost end-to end is US 1 cent per T-shirt.......

[FougaMagister]

Maybe, but remember that while air freight makes up just 10% of global freight by volume, it represents no less than 50% by value. Working on behalf of one of the main players in the express freight industry (the one with purple tails :ok: ), what we carry includes mostly electronics, pharmaceutical equipment, medicine and medical samples, urgent business documents, aviation spare parts and sometimes automotive parts. All things that need to be delivered... yesterday!

Cheers :cool: