At some point, virtually every successful company needs to make changes to its infrastructure in order to expand. In 2015 DHL projected significant growth and decided to invest in an updated online platform for customers to track packages. The investment did not have the expected outcome, though. Take a look at what businesses can learn from DHL’s overly ambitious project.
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DHL Updates Its Online Platform
With operations in more than 165 countries, DHL is one of the world’s largest logistics specialists. Because of forecasted growth, the company spent $345 million over the course of two years to update its tracking and customer interface platform. The new system delivered numerous benefits to DHL’s partners that no other logistics specialists offered, such as real-time analytics.
The shipping giant’s online platform allowed users to print shipping labels, track packages, and request courier services. In essence, DHL’s platform worked in real time and made shipping easier for other companies. Its new platform offered integration features that partner websites could use to enhance their customers’ experience with order processing.
As Jose Maria de Orduna, Head of Operations and Value Added Services at DHL, said, “The marrying of the company’s ISC and customs expertise offers customers an end-to-end solution with greater control over their supply chain and guidance on regulatory compliance.”
DHL Doesn’t Achieve Expected Growth
Despite its efforts to make shipping easier, DHL’s profits slumped in 2015 and were down 70 percent in the third quarter of 2015. The company decided to terminate its online platform because projected growth from the previous year wasn’t accurate. As a result, DHL essentially lost 345 million because of its failed IT platform.
As Deutsche Post DHL Chief Executive Frank Appel elaborated, “As we have said previously, 2015 is a year of transition. We are taking all the measures we can to ensure that our business divisions are optimally positioned for success in the coming years.”
Impact of a Costly Online Platform Upgrade
Unfortunately, DHL spent too much money on its online platform and didn’t receive the expected return on its investment. The end result might have been different, however, if the company would have seen strong growth.
Even though DHL scrapped its innovative online platform, the company has plans to move forward with another new system. It’s taking measures to ensure that its software partner can deliver the functionality DHL desires. It’s unclear whether DHL will give its original software provider a second chance, since the original problem was slow business growth rather than the software itself.
Other companies can learn a lot from the mistakes of DHL. Implementing a new IT system with better functionality sounds like a good idea, but companies must carefully assess whether business growth can support the costs. DHL expected growth that it wasn’t able to realize, leading to a large revenue loss.
Unfortunately, this IT project was too ambitious for DHL at the time. Other businesses can learn that taking risks is important, but they have to remember that big risks can sometimes backfire.[/show_to]
