Deutsche Post DHL Group (DP-DHL) will transfer its regional supply chain operations in Macau, Mainland China, and Hong Kong to SF Holding, the parent company of Shenzhen-based SF Express, the two companies announced today.
Once the deal – which includes an upfront payment from SF Holding of €700 million, plus revenue-based royalties for the next decade – is complete, the contract logistics entity will operate as a co-branded unit. All other DP-DHL units in China, including international express, global forwarding, and e-commerce, will continue to operate independently of SF Holding.
By partnering with SF Holding, a co-branded DHL Supply Chain presence in China will enable DHL to keep one foot in China’s supply chain market while reducing exposure to the region’s rapidly growing integrated logistics providers. DHL Supply Chain serves a number of industries in China, such as technology, healthcare, retail, automotive, and e-commerce. DHL’s current supply chain management team in the region will remain at the helm of the combined operation.
The domestic supply chain partnership with DHL complements SF Express’ ambition to become a major player in contract logistics through investments in overseas warehousing facilities. In the realm of international contract logistics, SF’s core focus to-date has been to help Chinese companies go global. Noting the differences between a China-focused approach and a multinational approach to handling logistics, Gong Shunsong, Vice President International Business Unit, SF Express, said at a warehousing services summit, “The end goal for overseas warehouses is to assist with overseas localization efforts and local marketing, operations, customer service, after-sales, etc. In the future, overseas warehouses will evolve from the traditional warehouse model into a multi-functional, personalized overseas operations center that acts a key partner in helping cross-border e-commerce companies acclimate to overseas markets.”
Such partnerships have been the norm in recent years as SF Express continues to outgrow its roots as a last-mile courier, and emerges as an increasingly capable global integrator. The Shenzhen company’s ascent is a result of both significant investments in logistics infrastructure and large-scale partnerships such as the tie-up with DHL Supply Chain. Since its launch less than a decade ago, SF Express’ airline subsidiary, SF Airlines, has built up a fleet of forty-five active freighters. Additional aircraft operate for SF on an ACMI-basis, including an Atlas-operated 747-400F that went into service this month on routes between China and the United States.
Looking ahead, the SF Airlines fleet will continue to grow. The carrier has outstanding conversion orders for multiple aircraft platforms, including the 737-800, 757-200, and 767-300. Last year, SF acquired two 747-400Fs in an online auction and is believed to be looking for additional large widebody freighters to fuel the expansion of its international express services. In order to accommodate its growing freighter operations, SF Express is also developing a greenfield site in the central-Chinese city of Ezhou (near the provincial capital, Wuhan) into what will become SF Airlines’ global air hub.
Even prior to adding its own long-haul international freighter flights, however, SF Express has been increasing its participation in the global express market. The company’s first high-stakes cooperation with a global logistics provider was in the form of a joint venture with UPS. The JV was approved by China’s Ministry of Commerce last year and has since developed a number of services related to international deliveries. Last April, the Cargo Facts team shipped a package from China to the US via SF Express, and the US domestic segment of the transportation was handled by UPS.
Shortly after the UPS JV was approved, SF Express invested US$100 million in digital freight forwarder Flexport in a move aimed at growing its forwarding operations between the US and China. Returning to today’s agreement between SF Holding and DHL Supply Chain, the deal, in essence, rounds out SF’s portfolio of international logistics partnerships.