US Trade Tariffs on India to Kick-In; DHL CIO on Using AI to Keep Supply Chains Moving

How does DHL perceive the US tariffs on India? How do you plan to navigate the evolving challenges across markets and supply chains? 

In the last 12 to 18 months, we have seen geopolitical changes affecting the trade patterns of our customers. Their supply chains and distribution models are changing. Being a logistics company, it is extremely important for us to evolve with those changes. We had Strategy 2020, then Strategy 2025, and now we are on to Strategy 2030. 

Our Strategy 2030 talks about accelerating sustainable growth by focusing on the core changes happening in global trade and how we can proactively improve our processes, make our systems better, and skill our people to handle these changes, which will impact not only the world but the logistics industry as a whole.

At times, when Air Express, which we are a part of, becomes expensive, the supply chain shifts to sea or ground. During COVID, for instance, we saw this shift. Similarly, during geopolitical tensions last year, when airspaces between a couple of European countries were closed, we had to look at alternate distribution routes to fulfil our customer promises.

With the latest tariff situations, there are a lot of restrictions on the US receiving supplies from the rest of the world. As a result, customers are finding alternate markets, and as their logistics provider, we have to quickly reshape our distribution networks to fulfil those customer demands.

As an organiszation, we are quite aligned with our customers’ needs and the way geopolitical changes are taking shape. We have put a lot of focus on skilling our people. For example, we have a global programme called CIS—Certified International Specialist—and throughout the year, our people undergo this programme to make sure they are aligned to customer needs and can respond effectively.

Whether it's uncertainty on the front of tariff changes, COVID, climate challenge, ash cloud issues in Europe, our people are trained to handle them. As an organiszation, we always proactively try to foresee market trends and align our strategies with them—by building core components like digitaliszation and an evolving workforce into the heart of our plans.

In the aftermath of the tariffs, you might have prepared the ground for those changes to take effect, and your business might be ready to roll out initiatives for your customers. So, as far as digital is concerned, what have you visualised, and how will you face the changes that take effect on the ground?

Based on the tariff situation with different countries, the US is possibly one of the biggest markets for a lot of countries. So their exports to the US will definitely be impacted in the short term. Those countries, or the customers based in those countries, will likely try to evaluate alternate markets. We, as a logistics company, are ready to support their logistics needs, whether it is to deliver to the US or to some other countries where those customers may find new markets.

As far as digitalizsation is concerned, our systems have been quickly aligned to set up the tariffs for shipments to be delivered in those countries, especially when it comes to customs clearance. We have been proactively engaged with our customers and have communicated to them what kind of paperwork and additional information they need to provide for us to deliver their shipments in the US post the tariff changes.

We have been closely working with our operational colleagues who handle the shipments and the commercial colleagues who interact with customers. There is a well-networked cross-functional group between IT, operations, and commercial teams, which has been working on this since January this year — from the time we sensed that tariff-related changes were going to take place.

We have worked with our customers to update our systems with the new requirements under the tariff changes. Our systems are now fully ready. We are capable of carrying shipments to the US with the revised tariffs. And, if customers want to temporarily divert their shipments from the US to other countries, we have the capability to advise them through our tool called Global Trade Service. This allows customers to understand what kind of paperwork or entry requirements are needed in those other countries.

This service is available to customers free of cost. It is a tool available on our global websites through which customers can check: “Okay, if instead of sending the material to the US, I want to send it to the UK or to Germany, what kind of documentation do I need to prepare?”

This way, they can diversify their logistics from one particular market into different markets. We foresee that the tariff situation will possibly have a short-term impact on a lot of markets where heavy tariffs are imposed. But in the medium to long term, global trade will likely stabilise itself.

What kind of scenarios had you visualised in the January 2025 exercise? What preparation did you start then?

Preparations were kicked off on two fronts. One was around handling the volumes on the ground, which was primarily led by our operational team. The second was preparation in terms of making tariff-related changes in our booking systems, billing systems, and other places where it was necessary—for example, customs clearance systems.

The exact tariff percentage was not known; it only kept unfolding at specific points in time. But what we had done was, based on certain announcements made at the beginning of the year—for instance, “X country will face Y amount of tariff” or “these products will attract this much tariff”—our business team started forecasting. We already knew which countries were heavy lanes in terms of shipping those products and services. So, we estimated that we would possibly see a decline in volumes in certain sectors, whereas in others we might see an increase. Accordingly, we had to ramp up our linehaul—whether in terms of air capacity or ground handling capacity. We had to possibly increase the number of flights to certain destinations from certain origins or add more vehicles on the ground to handle the increased capacity.

At the same time, wherever we anticipated a decline in volumes—like in the US—we started preparing our network in those locations to accommodate the reduced volumes. Ours is a fixed-cost network, so we need to be flexible enough to change according to the volumes coming in, in order to keep delivery and pickup costs minimal and offer customers an optimal choice.

From an operational point of view, this meant a lot of redistribution of processes as well as redistribution of assets on the ground and in the air through linehaul revamps. We looked at destinations where we expected higher volumes, destinations where volumes would be lower, and adjusted our routes accordingly. In parallel, we enabled changes in our systems depending on the tariffs for those countries and the requirements of the US. That way, our systems were ready so that, as and when the tariffs kicked in, we could just “switch on the button,” ensuring no disruption for customers in their supply chains.

As far as the trade uncertainty is concerned, are there any use cases of Artificial Intelligence (AI) that you have applied?

When we realised certain countries that could benefit from tariffs, and certain countries that could face disadvantages in the US, through AI our commercial and operational teams generated models to understand how we see volumes changing from these particular lanes to the US.

For example, some South Asian countries possibly have a tariff advantage over India, countries like Vietnam or Thailand. So, using AI and their existing volumes, our commercial team worked out models anticipating that business could go up from these countries into the US. Accordingly, they designed certain promotional schemes and enhanced services in those markets.

On the other hand, wherever we saw disadvantages — like in the case of India and China, where heavy tariffs were imposed and exports to the US could be impacted — we used AI to build models for both our operational and commercial colleagues.

For operations, the focus was on optimising costs. If volumes are expected to be low, how can those routes be operated efficiently, whether through ground, air, or ocean networks. For the commercial team, it was about advising customers: “While your US volumes may be impacted, what are the alternate markets for you, and in those markets, what kind of products and services can DHL offer?”

That way, we help customers reduce the impact of these tariffs on their business.

As far as the digital public infrastructure is concerned, was it helpful to you in overcoming the trade related challenges? 

The progress India as a country has made in the last few years in terms of digital infrastructure, be it the GSTN network or the custom clearance network, which used to be manual earlier. 

As soon as there are any changes in tariffs or in custom clearance for imports or exports, they are immediately available in the custom systems in a few hours or days. Subsequently, we align to these systems. We take a download into our internal IT platforms to make our systems ready. We have APIs from the government and we quickly align them into our system.