It's Friday, 15:00 Bonn time. It must be Digi Friday time again. My name is Martin Ziegenbalg. Head of IR
Konstantin, you're going to sort of lay out the overall background, and then we're gonna have very specific examples, deep diving into it. Before I hand over to Konstantin for your little keynote, just a reminder to you out there's this little text box on your screen for Q&A, so for Q, basically, and please make use of that. It worked pretty well last time around. Without further ado, over to you, Konstantin.
Thank you so much, Martin. Good afternoon, or good morning, or good evening, depending on where you're tuned in. My name is Konstantin Peris. I look forward to take you into how we unlock e-commerce potential via our digitalization efforts. In my day job, I head a team of 50 digital experts in DHL Customer Solutions & Innovation that has been built in 2018. That was when the Group decided to double down on digitalization with regards to customer-facing touchpoints. Ever since, we've been laser-focused on delivering initiatives that achieve happy customers in digital interactions, as well as supporting profitable growth for the Group. As we do this at group level, my team is a key pillar in DHL Customer Solutions & Innovation, which my phenomenal boss, Katja Busch, will introduce more next week.
I trust the four mega trends reflected in our corporate strategy are well known to you. Today, the focus is really on how our digitalization capacity is actually proven instrumental to the success in e-commerce of our customers. This is true both for the B2B arena, where brands take back control of the customer experience, as well as in the B2B arena, where digital sales gain traction quite significantly. The exceptional challenges of the pandemic led to a tremendous surge in e-commerce demand three years ago, and that demand is now obviously normalizing. At the same time, we observed with our customers that there's a whole new level of awareness about bottlenecks and complexities in e-commerce. DHL has long understood that the individual customer needs in e-commerce evolve as they grow, and they have to reflect the local market characteristics.
While every market develops at its own pace, there are three commonalities in place. First, e-commerce typically is not just a one-to-one affair between a provider and a customer, us and one customer, but it's much rather an ecosystem play, with many different parties needing to be coordinated and therefore, jointly successful or not. Second, e-commerce is structurally growing. That growth continues. Third, the logistics excellence has a huge impact on the overall success because it's part of the buying experience. A recent data point from Octane confirms again that four out of five consumers will not likely buy again from a brand after they had to accept a negative delivery experience, and this is why it's so important. As we take a look at where dhl.com touches...
DHL, sorry, touches the e-commerce value chain, that happens all the way from inbound to returns. To give you just one example, I recently had the chance to visit one of our operations in India, where we run omni-channel warehousing for one of the world's leading sports brands. From one warehouse in Bangalore, every e-commerce move to business and shops is conducted, as well as all the fulfillment to the direct-to-consumer activities for the world's largest population. When I was there, what was most impressive is that we already earmarked a huge space for further expansion, because the brand is going to launch their own web shop in India, therefore are confident to see a lot more growth. Let's take a look at how digitalization practically supports that offering. As you can imagine, I can talk about this topic for hours.
Now, I was told to keep it brief today, and this is why I would really like to look at three specific examples. Let's start off with delivery, and let's imagine a situation where it's Monday, you order a product that you really want to have available and at your house next week. Maybe it's some camping equipment for an outing with the family. Maybe it's a soundbar because you look forward to the newest season of a TV show that you look forward to watching. However, you also know that you will be traveling, that the next two days you'll be out of town, and then Thursday and Friday will be filled with other errands. Basically, the likelihood that you will be home when our driver rings at your doorbell is not looking too promising.
If that really happens, that we pass by and can't deliver because you're not at home, it's the perfect nightmare situation. It's actually a lose-lose-lose situation for the merchant on the one hand, because they don't have the happy customer they hoped to get. You might return the product if you don't have it. You definitely need to adjust your plans for the weekend, and we need to take a second delivery attempt, which is adding load to our operation system. In order to prevent this, we introduced On Demand Delivery, which gives the recipient influence to manipulate the shipment flow right up to their doorstep.
You can pick a time window that suits you on that day that you're at home, you can reschedule to one of those days that you're at home, or you can accept that the shipment is delivered to your neighbor, and they can take possession and hand it over at your convenience. On Demand Delivery is supported with digital communication, and it's available via an app, it's available via the web, so it's really convenient. Second example is the duty and tax calculation. I'll take you for a second into the intricacies of cross-border e-commerce.
Let's assume that there's a product that you want to buy from another country, either a very cool gadget that is only available in the U.S., or maybe a high-end sneaker that you found in a shop and really want to have, or a luxury product that you certainly want to buy right from the source because you're concerned about the counterfeit potential. What you then do is you go to a web shop and you easily pay with your credit card, just like you would do with a domestic transaction. As of then, you eagerly await the delivery of that good. Instead, though, you are hit with a message by the delivery company saying that unless you're willing to cough up, let's say, EUR 80 more for import sales tax, delivery won't take place. Well, that's not a very good experience.
This is why leading e-commerce merchants try to prevent that from happening with upfront visibility during the checkout, which is a very sensible step in that journey. Basically, knowing the origin from which it's going to be fulfilled, as well as the destination you want the good shipped to, and the specific item, in real time, they can match the right HS code and anticipate the import sales load that the customer needs to bear. You can pay it right then and there, and with that, we create a win-win-win situation, because if that doesn't happen, and the customer does not expect that charge to appear, quite often shipments are denied and returned, and that is not helping anyone. The third example relates to the sheer number of tracking requests that comes with e-commerce.
On our website, dhl.com, we saw the number of tracking requests skyrocket between 2019 and today. It grew to the tune of 800%. This is why it's really important for us that our customers and users can get meaningful shipment status, no matter what DHL service they look like. We address this via the Universal Tracking API, or short, UTAPI, because that UTAPI is capable of really harvesting that shipment status from any of the operation systems that we apply across the Group, and then play that back to the customer who doesn't care which DHL service and detail was being picked for him or her. I occasionally use the term API, and I probably should explain that a little in more detail. API stands for application programming interfaces, and in a nutshell, APIs are the hidden heroes in e-commerce.
APIs allow the quick and seamless transfer of data in real time, and this is how they connect multiple players whenever needed and in an automated fashion. I will try to illustrate this with three specific use cases. Let's start off with a customer of ours. Let's say they are waiting for an ocean freight shipment to replenish the warehousing stock in their e-commerce warehouse. It's really important because otherwise they run out of stock. They can trigger such a shipment and track such a shipment in our state-of-the-art customer portal for forwarding, myDHLi.
myDHLi was launched in 2019. It serves up all kinds of relevant information, from the pricing of a shipment to the location of a shipment, to the carbon footprint of a shipment, as well as to the progress of timestamps with regards to customs, a very sensitive element of these ocean freight moves. All of that data is found and surfaced via APIs. Let's take a second example with what we call partners. Many brands take advantage of post-purchase specialists to really keep their customers in an on-brand experience as long as possible, as far as we talk about the digital realm. That means these post-purchase players, though invisible, because it's all white labeled, they need to surface and have access to data like tracking for shipments, possibly locations where returns can be handed in, or even return codes, paperless returns, QR codes.
This is why we need to provide them to them, even though they are not our customers themselves. We do that by APIs. The third example then is looking at all those recipients. I don't know whether you're aware, but we have a state-of-the-art mobile app, for instance, in the German market, also in the Dutch market. On these touchpoints, individual consumers, millions of them, can track their shipment status, can follow individualized information, and all of that is made possible via APIs. Let's bring it back to the customer. Every specific customer will have their unique footprint. You can call it a fingerprint in a way. A customer will very likely operate their web shops using a web shop software. You may have heard of Adobe Commerce or Shopify, just to give you two examples.
They might use a post-purchase specialist like Narvar or parcelLab or the other players. Particularly if they are sizable, they will already have a warehouse management system in place, like Manhattan or Blue Yonder, and the list of services continues, including the logistics provider, hopefully DHL. In order to make this overall system more performant than before, we need to use APIs to blend in, and then make sure that basically all these operations run seamlessly. In summary, e-commerce is here to stay and will continue to be an accelerant of logistics growth. Second, our digitalization efforts prove instrumental to driving the success of our customers. My colleagues will show you a couple of more examples how we do this specifically, and I would very much like to thank you for your attention. With this, I hand over to my colleague, Ralf, from eCommerce Solutions.
Thank you, Konstantin. A very warm welcome from my side as well. Good morning, good afternoon, good evening. My name is Ralf Pankotsch. I'm heading IT department within the global head office of eCommerce Solutions. Before I head into the IT part, just give me a quick run through our business, just a very, very basic facts. We operate in the B2B and B2C space. Our sweet spot, probably somewhere between 1 kg and 3 kg . In the, if we compare ourselves to express, we would rather ship the iPad cover and not the iPad as such. We have millions of shipments every day. We operate mainly in the U.S., in Europe, in the Americas, in Europe and in Asia, which is primarily in India.
There we have with Blue Dart, a big, big player in the market, and also some Southeast Asia, with Thailand, Malaysia, and within Australia. You all know the facts. We are operating at a roughly EUR 6 billion revenue, plus, you know, that we are in the ballpark, EUR 350 million of EBIT last year, very, very solid financial figures and platform. We grow. In order to grow, digitalization is one of the key levers. Without digitalization, there is no package, no single shipment that we can operate globally. We integrate multiple partners worldwide. We have a lot of technology as a baseline, and we have a lot of experts in our teams.
Just in eCommerce Solution as such, we have a team of roughly 650 IT specialists, and we run in an average about 100-120 IT projects, specific IT projects every year. For today, I picked four of those just as an example, and it can only be on the surface. I will run through these four, and if there are any detailed question later on, we have a Q&A, and please reach out to myself later on if there are more details needed. With this, let's go to the first, let's say, I think the most important topic that we have to cover. This is our data.
I totally believe that only companies who understand their data and use their data, in order to create products, in order to support our customers, will be or will survive in the future business environment. From a technical perspective, we are, let's say, more common than, as common as everyone else. We built a huge data lake where we have all our data consolidated. Technology-wise, it's a Microsoft Azure database. We use Databricks for the data processing. We have primarily Power BI, the Power BI suite, as our reporting platform, but more on the advanced analytics, you might know, the company DataRobot, where we do some sort of, let's say, detailed analytics and detailed data science. The last topic here, and that is something we currently explore, is everything that has to do with generative AI.
Everything that is ChatGPT or the Microsoft Fabric that will be in very, very short time, being introduced as part of the core Microsoft products. I know that Thorsten will speak later, and he already had last week, touched base on, let's say, the AI hub that we call GAIA in our overall environment, which then opens the door to multiple of these generative AI tools. We will use them in our environment as well. A couple of dashboards and reports or examples to this one, what we do with this platform. Number one, here, customer carbon reporting. That's very important for our customers to know what is their footprint. We also have a global quality reporting, so we always wanna know where we at. What is our current quality?
Are there any issues in operations? Do we see any big customers who are affected by this? There are forecasting, alerting platforms in place. Also, let's say, reporting dashboards in place where we can, in the aftermath, analyze what went good and what went wrong. Of course, volume reporting and volume forecasting is also something that is part of that platform. That all runs globally, and again, data is the foundation for all we do. Let me get to the second one. That is the question: How do we find the right prices for our product? How do we make sure that our customer pay what they are supposed to pay, what's fair in the market, and what's fair, basically, is fair for us as a company? We just recently introduced a advanced pricing tool.
This is a software-as-a-service platform based on the company, Open Pricer. It's a cloud-based, so it's scalable. The more custom or when we have more customers, more, let's say, billing runs that we have to do that can scale easily. It has a very, very intense integration in our core platforms, be it Salesforce, for all the sales activities and customer service activities on one hand side, and of course, on the SAP or, let's say, our finance environments in general on the back end. Konstantin just picked on the API, and this is not different, any different here. There are APIs and microservices in the back end, so it's a very modern and scalable architecture here. Some of the core features, I said already, it. Pricing needs to be fair.
It needs to be fair for one, for the customer, and it needs to be fair for us as a company. This, based on machine learning, based on also artificial intelligence, we make sure that this is in balance. We run profitability analysis, so that's also very important for us as a company to make sure that whatever we do has at least a margin that we are happy with, but also again, on the other hand, not basically compromising our customers here. Customer segment analysis, that's also something that can very well be supported by artificial intelligence, and that's what we do. Sales KPI monitoring, that's the standard features here. The third example that I brought is more on the operation side. We have, as Konstantin also mentioned, we have state-of-the-art customer portals globally.
Our customer can interact with us using a portal. They can integrate with us using APIs. They can also run a number of self-services that we basically provide to the customers, where they can do autonomously get service, get a shipment, get a transportation managed, and all of that. Also on the other side, when it comes to delivery, we have multiple delivery apps globally. In any bigger market, be it, for example, in India or in Europe, in the Netherlands, there are also state-of-the-art delivery apps in place.
Especially the Netherlands, the Dutch guys, they, in the last year, received a lot of, let's say, trophies or recognition in the market by technical and by marketing, let's say, companies, who basically check what's there, they were very often being recognized as the best delivery app or customer-facing app in the market. Some core features, you can read the tech stack here yourself. On the core features, one is outstanding, I think. When you look at the upper picture on the upper right side, it's called The Last Drop Off. That is our what's what3words integration. We have, in the U.K., integrated with what3words.
Whatever, if a customer has the, these, let's say, combination of three words used as his address, we reach out to what3words, get back the geocoding data, then the delivery app can automatically assign the address, and we can deliver the parcel. There is a very, very funny and nice video available on YouTube. If you want to check that out, it's called The Last Drop Off. Some other features that you see here, delivery time prediction, pickup ordering, shipment tracking, all of that runs seamlessly with all the APIs Konstantin was speaking of in the back end. Last, that's my favorite example for today. It is... You know, everything that we, that I said, talked before was more like supporting business with technology, supporting business with digitalization.
Here we have an example that digitalization in itself creates a complete new product. I have a next slide, a detailed run-through how the process looks like. In general, what we do in India with our Blue Dart, we transport the exchange of high-tech mobile devices from today in store to our delivery persons in the field. We can deliver and exchange these mobile devices. We have already multiple brands integrated. I have some more details later. I will walk through how it works in detail. You see the technology stack here. It's a FarEye delivery app, and this FarEye delivery app is integrated or integrates with back ends from some of the big brands in the, let's say, mobile space. It's integrated with iOS diagnostics.
It's integrated with Android. When it comes to companies, you know, it's Apple, Samsung, it's Huawei and some other companies that we are integrated with. We have the payment is being done with Razorpay gateway, also integrated, all run seamlessly in the back. How does this process works? What's basically so, I think, so great in this product? If you imagine a customer who has an old phone, whatever it is, an Apple, an Samsung, whatnot, and he wants to trade that into a new one. Many of these companies offer the trade-in service. What you typically do, you walk into a store, put your phone on the deck, desk, and ask for a quote. They check that.
Technically, they look at the phone and so on, they give a quote. You buy the new phone, the quote that you get will be deducted from the payment. That's about it, you leave the store with a new phone. Here we have pretty much the very same service. The customer buys the device, now he buys it online, he asks for the trade-in option. The company provides a preliminary quote and says, "Your phone is worth this or that," let's say $200. The company ships the new device. It shows up in the Blue Dart delivery center, customer service, at that point in time, calls the customer and say, "Hey, your phone is here." It comes in tomorrow in the morning.
Be ready, have your old phone at hand, in order to hand it over to the delivery person. At the doorstep, our guy, our Blue Dart delivery guy, does two things. First, he does a visuals check, then he runs a diagnostic software on that device. This is automatically integrated with the backends of these big companies, then it's either, the company either validates or gives a new quote, an update to the quote that has been given before. Then at the doorstep, the customer can accept this offer or leave it. If, let's say, he accepts it, then our delivery person hands over the new phone, he takes back the old one, he handles the payment, and we in the back handle the return of the old device.
With this was my last slide. I'm more than happy to answer detailed question, but I'm also more than happy to hand over to Nabil. He cannot be on site with us here today, but will join us from sunny Florida. Nabil, over to you.
Thank you very much, Ralf. It's a pleasure to be here. My name is Nabil Malouli, and I lead our e-commerce and return solutions at DHL Supply Chain, globally. DHL Supply Chain is our unit, business unit, that look after the contract logistics business. I'm very happy to share with you a couple of updates on this topic, because I think the topic of returns and recommerce is such an exciting topic. It's such an exciting topic because of the fact that you can really combine a great product development and new solution that is good for the planet, as well as also helping our customers in difficult times, towards making their business more profitable and more sustainable.
If we go into the market situation, what we see in the following slide is that the recommerce market has been booming, and consequently, the logistic activities that are behind that are also increasing. It's projected that the recommerce market will be reaching EUR 150 billion by 2027. We see many companies that are joining that trend. We see companies, not only the large ones, like such announcement that you see there around Walmart or Nike or Carhartt, lululemon, as an example, but you also see some of the medium-sized companies joining that trend.
We start to see that becoming critical for co- organization and also creating a huge logistic opportunity behind, which we estimate approximately to be EUR 24 billion of solutions that are gonna be required on the logistic to be powering that need. If you go into what it means for the different clients in the following slides, in term of opportunities for companies, it's quite interesting because as I mentioned, we have direct impact in term of creating solutions that are more sustainable, to basically creating circularity across the value chain by receiving products, processing them, when a consumer has not been satisfied with the product or that the product has any type of defect, and being able to re-insert that product maybe towards a different channel.
We basically recreate a second life to that product, which is obviously much better for the environment, but it's also much better for the companies when we talk about sustainability. We've seen more than 80, approximately 88 companies that have launched resale program just in the last 12 months. This is not only increasing, but it's really taking pace where everybody is joining this trend. One also element that is critical is that we put always the consumer of our customers at the center, because we know that's critical for all the companies in order to retain customers and also to grow the business.
Returns have a direct link in term of satisfaction, because obviously we all, as consumers, when we send back something, we are expecting our refund, and that is something that's also triggered directly through that process. Another element is based on the current economic situation and the slowdown of e-commerce growth, where we see that many companies are trying to also optimize their business. Basically through this process, we can really help them to increase margin and also avoid destroying products through better solution and digital solutions. Another element that is critical is that this is an area of business that has not been prioritized historically for different reasons, but we see now that companies are still trying to solve this problem of: How do you process returns? How do you reinsert these products in the market?
The supply chain behind is actually a critical enabler to make this viable. Last but not least, there is obviously a high cost, a tie to that, to the entire process. I mean, we can all, I would say, see that when we send back a product, there is obviously shipping, there is processing and so on. That is something that also will be key for companies in order to reduce this cost and make that more valuable.
When you look at the entire reverse logistics, I mentioned a couple of the elements, and you look at the entire value chain in the following slide, what you're gonna see is that there is really, like, four pillars, and that they are each one of them critical in order to make this process of reselling items that have been returned viable, not only from an operational perspective, but also from a financial perspective. That is starting from the return management side, which is really the experience that we will all live whenever we return a product through the return of that item, the shipping of the product back to a warehouse, to a store.
As an example, the process of receiving that item into a fulfillment center, where we will receive items, we will grade them, we'll evaluate what is the best channel based on the different policies, the different product categories, the different margin levels, and then reinsert that product through our recommerce experience and through a recommerce channel that could be the website of the company, it could be an alternative website for secondhand products, it could be on marketplaces. The channels are quite diverse, and that is really depending on the type of companies we serve, retailers, brands, and also some organizations' preference around what is best for that product to basically be resold. When we look at the type of solutions that we are offering and how DHL is helping customers, we really want to focus today on two dimensions.
One is, on the software side, what are we doing to digitalize our processes and also to optimize them? One of the elements that we have started to deploy at scale and is already operating, is what we call purpose-built return management systems. Which are basically software that have been customized and that have been really enhanced to take into consideration all the elements of a return product. For example, traceability and visibility is one concrete example of, well, when you return an item to a brand or a retailer, having that visibility of how many items, what are the reasons why the products are being returned, where are they in their journey back to the warehouse or to the store, is helping you to plan better the labor you're gonna need to process.
If there has been a defect on the product then you might have to do a recall. That traceability and visibility of the entire experience is key. The second element is a state-of-the-art return functionalities. Here we are really talking about the functions and features that you have in a return experience. Every clients, and even for our clients that are multi-brand clients, have different rules on how they will process a return. A company could receive, you know, a T-shirt, and because it doesn't have the label, consider that as a product that needs to be sent into another process.
Another one might tell you, "Well, you can just put back a label, and that's okay, and then we can resell it into our premium channel, if that's the only thing that is happening with that product on the time when we inspect the item." All these rules and all these decision trees are quite complex. They are product dependent, they are brand dependent. Having the right type of technologies to do that, really allow you to do this much faster, much precise. There's more precise in terms of process and accuracy, and also give, like, data and right, we're just talking about data, and give also data back to the clients to be able to help them to improve their business holistically.
Last but not least, the data ecosystem that we are building also around integration with the different marketplaces, websites, platform, in order to help clients to resell this product, is key. Here we see proven benefit around the ability to manage large scale volume, increase of 30% of productivity through this type of software, a deployment, and also the ability to help our customers sell more through better channel and reduce the amount of destroyed product. If we go into the second example of how we help customers, here we are more looking at the execution within the warehouse and how do we deploy robotic and automation to also digitalize the whole process.
I was talking a bit about the feature and functionalities on software, but here we're talking also about all the type of autonomous vehicles that we are using in order to transfer the goods from an inbound process into a packing station, where we're gonna be looking at the products receiving. The conveyor system that we are using in order to make that process for B2B experience, as an example, of a B2B return channel versus a B2C. Here again, we see that this type of automation and robotic solutions are helping us to significantly improve efficiencies, reduce costs by 25%, but also shorten the time that it takes us to process these items.
Which is critical when we start to look at the overall benefit that we can provide, which is: how do I make the product available to sell again, and in a shelf, in a warehouse or in a store, the fastest possible? That is reducing inventory carrying costs, and that is one of the major area that customers are looking to improve when they look at the entire return process.
To summarize, the benefit that we see here across how do we leverage technologies to help our customers and unlock their e-commerce channel, it's really about speed and efficiencies to shorten the time between the moment a product is sent back to warehouse, and then we can process that, you know, within 24 hours from what we call dock to stock, in order to shorten that carrying inventory cost. The second element is really this ability to operate at scale. We are uniquely positioned because we can actually really provide that entire value chain to this organization in one end-to-end a supply chain solution.
Last but not least, the ability to manage B2C returns and process that through the entire value chain to the resale channels and B2B within an omni-channel environment, within an existing in facility infrastructure, really help to create synergies and improve the overall digital experience for the customers and consequently for their final consumers. That is on my part. I'd be happy to answer questions as well as we go into the Q&A session, and then I'm happy to hand it over now to my colleague, Thorsten, which will speak to about data science. Thorsten?
Yeah, thank you for the hand over. I'm happy to be here. My name is Thorsten Kranz. I'm Head of Data Science Implementation, I'm looking after large-scale AI solutions, which we are developing and deploying to support our business. If you have tuned in last week already, you might have seen me already there talking about automation. Actually, you might also have seen me twice already due to my short cameo a couple of minutes ago. Sorry for that. Last week, I was officially here talking about automation and how AI already supports us in that area already now. I already teased that one of our solutions which we are running, which is called Product Classification Tool or short PCT. Today we have a deep dive on exactly that topic.
Konstantin, in the beginning, mentioned the mega trends, which are determining our business. He mentioned two, which I cover today, e-commerce and digitalization. I can extend it even to a third of those mega trends with PCT, which is the globalization, and this sets the frame for what we are trying to tackle with PCT and doing it quite successfully, actually. Our main purpose, connecting people, improving lives, holds totally true for us, and we want to do this across border. In our global network, we are just constantly crossing borders with our services. You have to be aware that we are really living in a connected world, but there are barriers, and in the recent years, actually, some of them have appeared anew.
For example, just think of the Brexit, think of the VAT, de minimis removal in the European Union or ICS2, just to mention a few of examples where new regulations came up, which make it more difficult to do global trade. Whenever we go across borders, we have to take care of customs processes, and these processes are expensive. They employ a lot of manual efforts in order to make things happen and to facilitate our shipments to cross these borders and arrive on time at our, at the recipients. In order to support this, we have developed a best-in-class internal solution to solve a very specific problem, which is, based on a product description, predict the so-called customs code or commodity code or HS code.
You might have heard this before, which is a kind of standardized representation of each product that is intended to be shipped across borders. How we are doing this, I will share more details with you now. We have implemented PCT already some years ago, and it supports us really on a variety of different use cases. Most important, probably, it helps us in the acceleration of processes. Steps in the process, which had to be done manually by experts in the field of customs, can now be fully automatically done by a AI model based on historical data. In addition, we can support customs audit processes to improve the efficiency of our customs processes, and also master data quality can be improved for enriching product catalogs, for example, to enable fully landed cost calculators and full visibility, transparency for recipients of e-commerce shipments.
With this extremely detailed architecture slide, I want to briefly explain to you what PCT does, how it works. You can imagine, due to our history, due to our network, we have a whole bunch, billions of examples of historical shipments, which have been successfully cleared at customs, which have crossed the border, and they contain, beyond many other aspects, a product description and the correlating customs code, which is crucial for making customs processes efficient. We are leveraging all those data sources that we have across the company. We are combining them into a machine learning model, leveraging latest state-of-the-art deep learning technologies, which then can be used to automate the process of predicting a customs code.
This tool, PCT, is then integrated via APIs into the operational systems of our business units, enabling them to fully automating this crucial step of the customs clearance process and having major benefits for all our business units, basically. We have deployed PCT across the Group in many of our operations, and we do not only support the global standard, which is, yeah, six-digit customs code. No need to go into details here, we have even extended it to regional, European Union, for example, or even local country-specific standards. All of them are supported here. We have the ability to automate really at scale. Due to the design of the systems in an extensible API approach, we are able to process millions of shipments every week, and the average response time of this model is around 50 milliseconds.
This is just a enormous speed, enormous potential for scalable automation. We, of course, want to make sure that we are delivering best-in-class solution. There are external providers you might be aware of this, who offer a similar service, and we are constantly benchmarking against those external providers. We have a regular process of reviewing if we are still better than the external providers, and, yes, we are. We are clearly by far better, and, maybe not because we are so super smart, but we have a data asset. We have our core network producing a continuously new data for the asset that is then being fed into the model, and this is the core why our solution is best-in-class and can provide the best accuracy at the highest automation rate. I already mentioned, we have deployed it across our business.
For example, for express, we are supporting in automated classification of import shipments, or also, exports. For ICS2, this is needed, global or local standards. This arrives together, we have implemented it for eCommerce Solutions, also automation, post and parcel Germany, especially for the import into Germany, it is being applied. For DHL Global Forwarding, this is one of the cases where we apply it for customs audit processes, and really create major benefits in that area. It's not just for our core business where we are supporting with PCT. There's another area which I would like to quickly mention. Maybe you have heard about GoTrade, the youngest member of our family of Go initiatives. You might have heard of GoHelp or GoTeach, for example.
GoTrade has the purpose to enable, to support SMEs in emerging economies to do international trade, to engage in the exciting opportunities of e-commerce. There are a whole lot of activities where GoTrade is supporting in that area, help grow those SMEs, those economies. In the end, of course, this is a win-win situation for the companies, but of course, also for us, when they, yeah, find us as a valuable partner in the actual delivery process of their e-commerce. We have provided PCT, which is an API, I explained it before, but we added a easily usable front end, a graphical user interface to PCT, which can be used by those SMEs who are part of GoTrade very easily, just by going into the browser and going to the specific website, which has been provided to them.
They just enter the product details in a sleek user interface. The AI provides the recommendations for the most likely HS codes that will fulfill the criteria of the product that is being put there. They are guided through the step, the multiple level of hierarchy that are there for customs codes, and in the end, they can select the final code without having to involve any brokers, any expert knowledge or whatever, which is a massive simplification of a, yeah, rather specialized task that usually an SME would not be able to cover themselves. To summarize briefly, PCT implies enormous benefits for our company and beyond, as shown on the last slide. Just to mention a few, we see significant reduction in costs. We are talking about millions and millions of EUR every year.
We see increased customer satisfaction, because if the clearance process is efficient, if it is fast, we don't have any delay in the delivery process due to customs. We have additional benefits around CO2 footprints. Yeah, even sustainability is represented here. The way that we implement it in a very modern way, AI model, machine learning model, encapsulated in an API, makes it so easy, and is one of the reasons why we were able to scale it across the company, implement it in multiple, yeah, ecosystems across different business units, and provide a reliable service and better service in the end to our customers. I'm very happy to accept any questions on this, and this is now the transition to the Q&A session. I will move a bit over and hand over to Martin again.
Pass on. Exactly. Thank you, Thorsten. Thank you all three for these very interesting insights in how... These are only a few examples we could share, but very, very interesting ones. We come to the Q&A, and I think we've got the first question that came in via Slido, and it's Andy Chu from Deutsche Bank asking, and probably something for you, Konstantin, to address. Do you have any quantification? How do you measure whether whatever you're doing there has an impact versus you doing nothing?
I think if I read it correctly, Martin, the question is specific to On Demand Delivery?
Yeah.
It's very important to say that there is no standard answer available by market. It will look different. What we learned in On Demand Delivery is that, let's say, the preferred options to be used, these differ by. In the U.S., for instance, safe place delivery plays a key role. It's very attractive. In other countries, no signature is preferred. Overall, we can say that 10%-15% receive instructions, and that is a very good indication that there's a significant impact on the number of successful deliveries.
I think that's a very important point. I mean, doing business in 220 countries means that you are acting in 220 different market environments with different consumer behavior, experience, and therefore, demand. Being flexible is key. Get that. All right. There is another question here that came in anonymous with regards to cybersecurity. Now, obviously, I could ask either one of you, but feel free, how you deal with it?
That's a very broad question, just some general notes. Number one is by policies. We have very strict IT security policies, data privacy policies in place, following all the rules and regulations that are out there. That's number one, and any IT system, any IT platform, and any IT team has to follow those, let's say, guidelines, rules, and regulations. It's part of the build process already when it comes to providing new IT platforms. It's also part of the testing, and we are very often audited, and if any auditor comes in, that's the number one question we see.
All right. Good. Makes an awful lot of sense.
Maybe just to add to that's again, one of the benefits of an API.
Mm-hmm.
With an API, you stay in control of your data rather than handing it over. If there's a reason to block access to the data flow, you can actually manipulate that. You have influence.
Okay, very good. Another question coming in, and, probably something for, again, starting off with you, but generally touching all. We had this in the earlier sessions already. What's your approach towards finding partners? You prefer a long-standing partnership with providers, technology providers, as valuable, or you wanna rather stay on your toes and see who's got the cutting-edge stuff?
I think this is a combination of both, Martin, because the entire arena is evolving so dynamically that you have to stay on your toes.
Mm.
You have to stay in touch. At the same time, on some of the more complex endeavors, it actually proves helpful to work in a long-term relationship. The key thing is always in how can we possibly join forces to solve customer problems better than on our own?
All right. Well, there's one question over to Nabil, maybe. Interesting example on the delivery option and the example that you've described there. To what extent do you think that is scalable?
I think the delivery options that we want to be providing are infinite. If we look at, you know, just like seven, eight years ago, the delivery process or the return process was a straightforward process. It was basically, you know, from the warehouse to a consumer door. Now you see, for example, what Konstantin was mentioning around on-demand delivery options, the ability to hold products, to reroute, to drop at neighbors, to bring to your office, to hold for a certain period of time. We see the same thing happening in returns, right? Return being picked up at your home, pick up and drop off location. I think we will continue to evolve these models, and I think it's absolutely scalable.
We see it's just not scalable in the same way every market, in the same manner, because at the end of the day, the consumers are the ones driving the preferences, and then you have to build the right technologies to serve that. I think it's absolutely scalable in terms of whatever the best solution is in each market to deploy that. We're doing this, and we continue to do that.
Martin, let me add a few words to that, because the question is particular towards the Blue Dart solution.
Right.
which is on the integration with the big tech. Yes, absolutely. That's a fantastic question. I hear that very often. It's scalable in what I mentioned, I would say. Number one is adding more, let's say, companies who's selling phones. We have the big ones. We are testing a few others. That's number one. Second is moving up the product, so not only phones, but also tablets, for example. Next in line, laptops. The team in India is currently investigating whether there can be exchange programs with laptops. That would open a complete new space in terms of-
Mm
... companies that we work with, also in terms of volume, that we work with. Last but not least, scalabilities in the geographies. That could be any other country within DHL eCommerce Solutions, so one of our entities, and it also very well could be any other division. Yes, scalable, absolutely. Technically implemented, changes needed, of course, but possible.
All right. Until we get maybe another question from the external side, let me raise one issue, which I think is particularly valid here for the field of digitalization supporting e-commerce, because at the end of the day, this is something that also touches the operational life of the employees out there. One thing we know about digitalization, it's for each organization that's confronted with it, a change process. Yeah? What's your proven approach to make sure that whatever you guys are developing and thinking of is being transferred into the operations, into the organization, meeting as little resistance as possible? Are there specific training programs, or how is your experience?
Maybe I can give it a start, especially for the field of AI and data science. This is a super complex topic and very hard to grasp for somebody who is not involved in this so far. Especially here, we have invested massively in the awareness and education of our overall workforce in this topic. We have established under our certified umbrella for trainings, an e-learning, where everybody basically with access to our learning infrastructure, tens of thousands of colleagues, can do a short e-learning to understand the basic buzzwords, what it's about, why it's important. Why does data matter to our company? This is one building block. We also have a training program, two days' training for our management team, where we are really going many levels deeper than in this short e-learning.
Mm.
Understanding also with them what their role is in our transformation around data and all those aspects that they have to bring to the table to make it successful. Also for this, we have, for example, trained 100 trainers across the whole group and have already trained close to 2,000 managers across the whole world, basically. We see really impact from this. It's not just about training, but about the impact it creates afterwards, because our projects are more successful, and we are faster in the adoption process, which is core at the end.
Well, maybe to add, I mean, in my experience, quite often, data beats opinion.
The beautiful thing about digitalization is that you can track and you can pilot, and if it works, then you can scale. We have a huge reservoir of good ideas. If I listen to my employees, they quite often have better ideas or new ideas that didn't even cross my mind. If you can then put them to the test, and if then they work, it's actually fairly easy to scale. All right?
Yeah, I mean, when it comes to digitalization, nearly every single employee is somehow exposed to technology. If you look at delivery drivers, everyone has a handheld today. The route that they drive is very often predefined. The good thing is what we just recently introduced is combining a, let's say, mathematical model, how to optimize a tour of a driver together with the driver's preference. We put both into one model. At the end of the day, we come to a kind of an optimized routing that the driver accepts. That also allows us or allows the driver to accept technology as part of their daily life. That's what we see very often.
Yes, training is a big factor here. We invest a lot everywhere into that one. You know, all the next generation is anyway tech-savvy.
Mm.
That's not a big problem, I would say.
Okay. Well, that's an important link, how you get it into the organization and bringing benefits together, and that sort of leads to another question that we got in here from Alexia at Barclays. Alexia, thanks for that. It's basically about, yeah, I mean, we are doing what we're doing along the famous three bottom lines: is a customer benefit, is an employee benefit. What do you think, where do we stand within the industry, and where does the industry overall stand with regard to penetration? Let me call it penetration of digital solutions into the operating reality. Are we scratching the surface, or are we always halfway through? What's your thinking?
You want to get started?
Yeah, I can say some words to eCommerce Solutions, of course. I think, you know, we are not just scratching the surface. We are in that business already for, like, whatever, 20 years. I think we are well advanced. When we look at the market and our competitors, we are, in some areas, well advanced. In others, yes, there is some room for improvement. I would say we just recently saw that with the introduction of generative AI. There is, out of a sudden, a disruptive factor, and we have to basically get back to the drawing boards and see what we can do with it, and how can we introduce these models into all of our, let's say, businesses, into our delivery chain, into our products.
I don't think that this technology, let's say, driven into companies, will stop anytime soon.
Maybe to add there-
Mm-hmm.
I think that if you take a look at how you can purchase music or movies, that has totally changed. When it comes to delivering e-commerce, that physical part will not go away. For me, the key question is: How can we infuse and connect these worlds to the success of our customers?
All right.
In that regard, I do not think that we will fully digitalize, and we actually also observe that some of the players who basically drew a lot of attention, fully digital, then develop some investment into the not so digital elements as well, because without them, it doesn't work.
Right. Yeah, I agree. I mean, the goods we are shipping will also in future need attention. Yeah? We often get this example of, you know, something like a digital freight solutions and say, "Well, if your driver drops you off at the wrong corner, you are smart enough yourself to move across the street." Boxes don't do that, right? Well, okay. Well, keeping time in mind and sticking to our promise not to engage you for more than 1 hour with our session today, I think we can conclude.
We arrive, Thorsten and Konstantin, thank you very much for the insights that you have provided to us, and I think the debate that we had just had at the very end leads over very well to the concluding and fourth session in our Digi Friday series, which is next week's Friday, same time, and it's on how digitalization supports and changes the customer experience. We're gonna have Katja Busch. Very good. With that, thank you for your attention, your interest, your questions, and looking forward to see you next week. Before that, make sure you have a good weekend. Bye-bye!