DHL eCommerce, the e-commerce logistics specialist division of DHL Group, has opened a new £150m parcel hub on Segro Park next to Coventry Airport. The 270,000sq ft facility will support the growth of domestic and international e-commerce for UK businesses and enable the company to significantly expand its market share.
At the official opening, business minister Justin Madders MP said: “The West Midlands is a powerhouse for investment, and this state-of-the-art hub in Coventry will not only create hundreds of local jobs but give a major boost to our logistics sector and speed up delivery times for consumers.”
The site is rated BREEAM ‘Excellent’ status, thanks to 75,000sq ft of solar panels, LED lighting and landscaping to protect the area’s natural biodiversity. DHL has also equipped the site with 120 EV charging points for cars and LCVs.
The new facility, known as Hub 2, forms part of DHL eCommerce’s £482m investment in the UK announced in 2022, aimed at increasing capacity and setting a new benchmark in parcel automation. The site features three sorters supplied by Fives Group, a 44-door cross-dock facility and secure bonded storage as well as customs capabilities to support the expansion of international trade.
DHL eCommerce, formerly known as DHL Parcel UK, has its own dedicated network separate from DHL Express. eCommerce generally offers slower transit times at lower cost than DHL Express which specialises in premium same-day and next-day deliveries.
The main cross-belt sorter (COY) is 1.5km long while a second sorter (FLY) has a belt length of 0.3km. Together they can sort up to 56,000 parcels an hour. The COY sorter can handle parcels up to 1.2m and 25kg while the FLY sorter is for smaller items which could now include C2C parcels.
An out of gauge (OOG) sorting system manually handles items which are too large or otherwise unsuitable for the automated belt sorters. An AI-camera driven morphologic switch scans items as they arrive at the sorters and decides which sorter they should be sent to.
“The cameras look at the item’s characteristics such as its length and does it move,” said Richard Wenham, head of operational support at DHL eCommerce UK. “A bowling ball in a box or a car tyre for example might move and the AI understands that it needs to be sorted manually.”
The new facility is designed to sort “the multitude of traffic we carry” and is unusual in that the full range of consignments can be handled under one - albeit enormous – roof, Wenham added.
Caljan booms which extend up to 18.5m are used to unload the mainly loose loaded inbound trailers onto the sorter from 35 loading bays. Some inbound freight is full trailer loads of the same product sent direct from customers’ DCs while the balance is mixed loads from the shared user depot network.
After sortation, parcels are sent to the 70 outbound bays for delivery to the 40 depots where 3,000 mainly self-employed couriers handle the deliveries and collections from a wide range of SME customers. In all, there are around 400 vehicle movements in and out of the site every day.
The cross docks are in the middle of the hub and the mezzanine is suspended from the roof to leave the floor clear of pillars.
Hub 2 is a mile from Hub 1, which finishes its sort earlier than Hub 2 so trailers can be routed via Hub 2 to top up with parcels to maximise load fill. It also provides redundancy in the event of an incident such as the power cut at Hub 2 just before midnight the night before the official opening when thieves stole copper cabling from the local substation. Trucks were immediately diverted to Hub 1 and customers saw no interruption to their deliveries.
The hub is maintained 24/7 by a team of 18 engineers and a typical shift will see 350 staff working in the hub, rising to 550 at peak periods. Peak for ecommerce traffic is traditionally around the August bank holiday but more recently Black Friday at the end of November running into Christmas has become “very challenging” according to Wenham.
Unusually site traffic is split almost equally between B2B and B2C volumes which helps to smooth peaks and avoids the 300% spike in volumes seen by other B2C carriers. Currently it counts the growing click and collect and parcel locker deliveries as B2B.
Stuart Hill, CEO of DHL eCommerce UK, acknowledged that handling B2B and B2C volumes in the same network was a difficult balancing act.
“The B2B element tends to have a higher number of parcels per consignment,” he said. “Remunerating our drivers based on a drop is really important and if we get our payments wrong we can discourage a driver from doing one or the other.”
As a result DHL eCommerce pays drivers more for a larger parcel than for a smaller one so payment is based on the activity the driver does and so they can earn more for doing more work.
“Shops tend to be open from 9 til 5 whereas B2C is a longer window,” said Hill. “Route optimisation and local knowledge are key.”
The next challenge will be finding ways to encourage drivers to make the switch to electric vehicles.
“That will be really difficult,” admitted Hill. “The payload of an electric vehicle is lower so we can’t get as many parcels on it. The infrastructure for that driver to stop and charge during the day is not there yet.”
Most drivers take their vehicles home in the evening and charging there for many is also still not an option.
DHL has looked at automating more of the operation at Hub 2 – the bonded area for example is a prime candidate - but the cost of robotics has so far proved prohibitive.
“We looked at robots for unloading the trailers but the profile of our traffic makes that very difficult,” said Wenham. “We never know what will be on each truck.”
The hub has been designed to handle high value products and the control room monitors 500 cameras which cover the hub and vehicle routes that regularly transport full loads of high products such as smart phones and game consoles.
Pablo Ciano, global CEO of DHL eCommerce, said: “More than any other European market, e-commerce in the UK is booming and is expected to reach a £176bn turnover by 2029. With our latest addition to our network, we are significantly expanding our processing and sorting capacity, ensuring we are perfectly equipped to address our customers’ needs and support their business growth. This is another important step in optimising our UK network to provide our customers with reliable, affordable, and more sustainable parcel services.”
Ciano has been with DHL for 20 years and is currently based in Germany but arrived in Coventry from Saudi Arabia where eCommerce is about to launch.
“This hub is a very important part of the expansion that we are executing in the UK for DHL eCommerce,” he said. “We recently acquired Brandpath from Peter Jones which is supplementing and strengthening our fulfilment for small to mid-sized enterprises in the area of ecommerce which is very complimentary to what we do here.
“The UK is a very important market for DHL Group which has 50,000 employees here and it is the third largest country for DHL. It is a market we are very committed to grow in.”
The latest tranche of investment, which also includes adding more double-deck line-haul trailers and switching trucks to renewable HVO fuel, should enable eCommerce to cope with forecast growth until 2030.
Ciano said eCommerce was complimentary to DHL Express.
“DHL Express is a premium end-to-end service provider and they have been working with some of the big players since the very beginning, selectively providing a service where we think we can continue to differentiate our service,” he said. “The typical cycle is not new and we have seen the story many times before with Wish and eBay. They all grow with next-day premium delivery with Express because they are growing exponentially so they prioritise service over cost.
“When they get more scale they move towards localised inventories or to deferred service and we help them on that journey. DHL eCommerce does have a cross-border deferred service so where Express has seen a decline in the super-premium volumes, eCommerce offers a deferred service which is more in line with what the customers need.
“But it is not black or white – they are not a premium player and we are not a cheap player which is not capable of participating in that market.”
