Friday, October 30, 2015

Freight and Logistics Giant Dumps IT Project Costing 345 Million Euros

Company Talks Up a Difficult Situation
Shipping News Feature
GERMANY – In a dramatic overhaul of Deutsche Post DHL’s IT infrastructure, the New Forwarding Environment (NFE) system has now been cast to the wayside, with the freight and logistics group writing off €345 million of costs as a result of the failed project. In taking this financial hit, DHL also announced that it has cut its 2015 profit forecast for the second time this year. Explaining the decision to let go of the system, DHL in a statement, said:

“Given the decreased likelihood that DHL Global Forwarding will be able to realise benefits from the New Forwarding Environment (NFE) system in its current state, the Group will recognise in the result of the first nine months of 2015 one-off effects of a total of €345 million. This comprises a write-down of €308 million of assets capitalised in relation to NFE and €37 million of provisions which cover expenses for an expected roll back of NFE in the countries where it was piloted.”

This project has had quite a rocky 2015 with the Roger Crook, former CEO of DHL Global Forwarding and the person overseeing the progress of the NFE, resigning in April, citing personal reasons. After reporting disappointing results in the Global Forwarding division, the Group decided to suspend the rollout. Now having ended the project in its current form, the company is to now pursue a ‘business-centric IT renewal approach that best supports improvements in operating performance’. DHL are still in discussions with vendors including the NFE implementation partner.

DHL is also taking action to address potential earnings exposure by recognising in its outlook for 2015 further one-off effects of around €200 million, which relates to the current ‘reassessment of legal and regulatory aspects’ in the Post, eCommerce, Parcel (PeP), Express and Global Forwarding, Freight divisions. As a result of the one-off effects the Group expects 2015 EBIT guidance to be a minimum of €2.4 billion. Frank Appel, CEO, Deutsche Post DHL Group, said:

"As we have said previously, 2015 is a year of transition. Accordingly, we are taking all the measures we can to ensure that our business divisions are optimally positioned for success in the coming years. Our objective for a renewal of our forwarding business remains valid. We are now undertaking further measures to make this renewal business-centric.

"As part of our transition from Strategy 2015 to Strategy 2020, we accept these short-term effects on our results in order to deliver long-term targets. We are taking these measures to underpin our earnings guidance for 2016 and 2020."

Photo: On a brighter note DHL has just launched its new airline catering vehicle. Working with airport ground support specialist Mallaghan Engineering, the vehicles are based on a new design which meets all current length, height and width transit restrictions.