DHL Bags Landmark Deal

Duetche Post AG’s subsidiary DHL won one of its biggest contracts in its history, it will now manage a part of the UK National Health Service's (NHS) procurement and logistics services.

The deal is worth about $3.1 billion. Its deal with the NHS is one of many contracts it has as part of its DHL Exel logistics division, which was formed in 2005.

DHL which is famous for delivering parcels and packages will now supply everything from stationery to bed linen and MRI. The firm has been awarded a 10-year contract covering the supply and delivery of medical products, laundry, uniforms, laboratory equipment and other items. It will supply up to $7.1 billion a year of goods. The contract will start on Oct 1 and affects orders worth 22 bln sterlings over 10 years.

It said DHL will run a division called NHS Supply Chain on behalf of the NHS Business Services Authority that will be responsible for delivering all procurement and logistics services across an initial 500,000 products to support 600 hospitals and other health providers in the UK.

Deutsche Post said the deal will allow public health authorities to focus on patient care. DHL will try to make savings of over $1.9 over the 10-year period for the NHS. Another 1000 jobs per year would be created, many of the new jobs will be at distribution centers to be opened in 2008 and 2012, Deutsche Post said.

The NHS is Europe's largest employer, providing free health care to U.K. residents. Blair is trying to improve productivity and performance in the NHS. While he has increased health-care spending per person by 63 percent between 1999 and 2005, fewer than half of English hospital workers surveyed last year admitted that they were contented with the facilities available.

``The arrangement means substantial scope for bringing down the prices of the goods that NHS trusts buy, the NHS is not an expert in distribution or warehousing. There is a compelling case to bring in a company which is.'' Health Minister Andy Burnham said in a statement.

However the deal has already hit troubled waters with the NHS union (Unison) clearly not happy with the privatization and the fact that it will see 1,700 NHS employees transferred to the private sector. British labor union said it was holding a vote among some of the 1,650 staff DHL will inherit on strike action to protest the decision to outsource the work. Union members from NHS's logistics division have been holding a strike vote ballot for the past several weeks over the issue and the ballots will be counted Sept. 11, Unison said.

"Why break up an winning team like NHS Logistics and sell it off to a German parcel company like DHL? It makes no sense when there is no doubt that NHS Logistics is an NHS success story," Unison official Karen Jennings said. NHS logistics is an award-winning organization. It doesn't make sense to sell it off,'' said the chief spokesperson for the union Unison.

The government on the other hand remains hopeful that the deal will soon sail through. Currently DHL employs about 70,000 people in the UK and has been working with NHS for over five years. It also plans to run a new service, to be called NHS Supply Chain, which will look after the supplies.