Ryder Systems Inc
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Researched Ryder Systems Inc. using online database and telephone interviews with personnel • Assessed corporation’s current state of operations and their position within their competitive environment •Proposed specific management, operational, and financial strategies in the form of a comprehensive paper and power point presentation
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Ryder Systems Inc
- 1. Ryder Systems, Inc. Chris Jursek Chris Murphy Mike Rothstein Jeff Shields Shane Tompkins
- 2. Company Summary • As a global leader in transportation and supply chain management, Ryder Systems operates in two major business segments: – Fleet Management Solutions (FMS) – Supply Chain Solutions (SCS) • Employs 28,900 people • Maintains a fleet of 209,500 vehicles
- 3. Company History • 1933: Jim Ryder begins Miami, FL concrete hauling business with a single 1931 Model “A” Ford • 1939: Ryder fleet grown to 50 trucks while changing its focus from distribution to leasing • 1960: Ryder Systems, Inc. incorporates as a publicly traded company and is listed on the New York Stock exchange in 1960 under the symbol “R.N”. • 1978: total revenue exceeds $1 billion. • 80’s & 90s: Steadfast expansion and innovation, Ryder Systems listed in the Fortune® 500 largest companies in the United States. • In the new millennium, Ryder Systems has continued to provide top tier services while supplementing organic growth though acquisitions.
- 4. Vision, Mission, and Values • Bring compelling value to customers through outsourcing. • To provide innovative supply chain and fleet solutions that are reliable, safe, and efficient; enabling customers to deliver on their promises. • Trust, Innovation, Collaboration, Expertise, Safety
- 5. Key Personnel • Robert E. Sanchez -Chair of the Board, President, CEO • Art A. Garcia -Executive Vice President, CFO • Dennis C. Cooke -President of Global Fleet Management Solutions • John H. Williford -President of Global Supply Chain Solutions
- 7. Goals • Fleet Management Solutions – Drive fleet growth through marketing, innovation, and acquisitions – Deliver industry-leading maintenance program – Optimize asset utilization and management • Supply Chain Solutions – Provide differentiated quality of service and best execution – Develop capabilities that can be applied and utilized in Ryder’s targeted industry verticals – Create a culture of innovation, fostering new and high value solutions for customers – Focus on continues improvement and standardization – Successfully implement targeted sales and marketing strategies
- 9. Grand Strategy • Grow fleet management and supply chain outsourcing services by targeting private markets and key industry verticals • Supported by key organizational priorities – Operational Excellence – Innovation – Growth Focus – Talent & Culture – Information Technology
- 10. Business Strategy • Fleet Management Solutions – By outsourcing fleet management to Ryder, customers can focus on core business and improve efficiency and productivity, while also lowering costs • Supply Chain Solutions – Organizes customer supply chain, aligned by industry verticals (Automotive, Industrial, Consumer Packaged Goods, Hi-Tech, and Retail)
- 11. Functional Strategies • Marketing – Implements initiatives designed to compel private fleet operators and for-hire carriers to outsource all or some portion of their fleet management needs – Marketing and sales operations are heavily dependent on building a value added brand through customer service and relationship selling • Capital Structure – Debt financing ($4,189,425,000) – Equity financing ($1,896, 714,000)
- 12. Functional Strategies FMS (63% of revenue) – Full Service Lease (64%) – Commercial Rental – Contract Maintenance – Related Maintenance – Fleet Support System SCS (37% of revenue) – Dedicated Carriage (57%) – Professional Services – Distribution Management – Transportation Management • Operations • Operates in many industries such as R&CPG, Automotive, Hi-Tech, Industrial, Food and Beverage, while also providing business & personal service.
- 14. Liquidity 2013 2012 2011 Ind. Avg. Current Ratio 0.86 0.82 0.93 1.85 Quick Ratio 0.81 0.71 0.87 - Working Capital -$168,646 -$232,428 -$85,650 -
- 15. Solvency 2013 2012 2011 Debt Ratio 82% 82% 79% Debt-Equity 3.80 4.67 4.78 LT Debt-Equity 2.07 2.35 2.36 Times Interest 2.69 2.16 2.10 Earned
- 16. Activity 2013 2012 2011 Ind. Avg. Asset Turnover 0.71 0.75 0.79 0.50 Inventory Turnover 79.27 78.00 72.91 144.01 Acc Rec Turnover 8.26 8.07 8.02 8.06 Working Capital Turnover 0.03 0.04 0.01 0.03
- 17. Profitability 2013 2012 2011 Ind. Avg Gross Profit 20.6% 20.03% 20.57% 35.7% Net Profit 3.70% 3.36% 2.81% 6.20% Return on Assets 2.73% 2.65% 2.38% 2.3% Return on Equity 14.14% 15.08% 12.47% 12.7% EBIT (Operating 7.64% 4.84% 4.62% 8.12% Income) Earnings per Share $4.57 $4.11 $3.31 -
- 19. Macro • Political – High degree of regulation at the federal, state, and local levels • Economic – Stabilized, future conditions unknown • Environment – Introduction and development of natural gas and other alternative fuels • Global – Organizational globalization
- 20. Industry
- 21. Direct
- 22. Internal
- 23. Internal
- 24. SWOT Analysis
- 25. Organizational Strengths • Operations – Ryder is known for having effective and efficient operations within both (FMS and SCS) business segments along with excellent customer service • Financials – Ryder has been able to consistently and reliably pay interest, effectively managing their financial obligations
- 26. Organizational Weaknesses • Operations – High costs are apparent in gross profit margin • Finances – Carrying significant amount of debt – Sensitive to fluctuations in economic conditions – Approximately $1.4 billion maturing in 2016
- 30. Models for Strategic Analysis
- 33. Hofer’s Market Life Cycle/Competitive Strength
- 36. GE 9-Cell Matrix
- 37. Dawar & Frost Strategy Options for Local vs Global Competitors
- 38. Pearce & Robinson International Strategy Options
- 39. Christensen, Berg, & Salter Grand Strategy Matrix
- 40. Problems
- 41. Debt
- 42. Operating Costs
- 43. END
Editor's Notes
- FMS: Ryder strives to be the leading provider of fleet management outsourcing services for light, medium, and heavy duty vehicles SCS: Ryder strives to offer continued differentiated functional execution and proactive solutions from deep expertise in key industry verticals
- (Revenue) Market share: 5% Top 5 competitors: 44% Average market share in industry: 2.4% Ryder continues to have broad access to debt capital markets with substantial debt capacity to support growth. Has shown consistency with paying interest
- FMS Already outsourced full service lease and rental market estimated to be 1.1 million vehicles in U.S., Canada and U.K. Total commercial market is estimated to be 7.9 million vehicles in U.S. and Canada (additional market opportunity in the U.K.) Domestic market share for FMS solutions:13.9% SMS Outsourced supply chain logistics market in North America and Asia is estimated to be $275 billion Dedicated outsourced market is estimated to be $15 billion (U.S.) Market share in targeted areas: 5.4%
- Current Ratio: A strong current ratio suggests that a firm does not have a sufficient amount of current assets to cover its current liabilities Quick Ratio: By eliminating inventory from the formula, the calculation does not overstate a firm’s ability to meet its short-term demands. Ryder has relatively very little inventory (less than 1.0% of total assets), therefore the quick ratio values are very similar to the quick ratio.
- Debt Ratio: represents the portion of assets that are financed through issuance of debt and other financial arrangements. Det-Equity: measures the degree to which the assets of the business are financed by liabilities and shareholder’s equity. Higher values = more risk. LT Debt-Equity: measurement of assets financed through long-term obligations against shareholders’ equity. Higher values mean there is credit risk associated with the firm, and that the firm is issuing more debt than equity to obtain assets. Times Interest Earned: reflects the ability of a company to cover its interest expense for a given period, the amount of income available to cover interest expense.
- Total Asset Turnover: measurement of how effectively a firm is using its assets to generate revenue. A high ratio indicates a firm is using its assets effectively. Decline due to recent acquisitions. Inventory Turnover: numerical measure of how quickly inventory is turned over or sold. Ryder inventory turnover only represents the sale of trucks and equipment from the entirety of their fleet, which is relatively small compared to their true revenues. Acc Rec Turnover: indicates a firm’s receivables’ quality and the success of the firm in collecting outstanding receivables. Greater turnover gives credibility to the current and quick ratios. Ryder has effective extension of credit as well as collection of receivables with their customers Work Cap Turn: indicates if a company is effectively using working capital to generate sales. Ryder does not utilize working capital to fund operations resulting in sales.
- Gross profit: percentage of sales retained after accounting for the COGS
- New Entrants At the local level, there are little to no barriers to entry into the transportation industry. Access to distribution channels is readily available and there is little degree of product differentiation as smaller organizations fight in low-cost strategies. However, at the regional, national, and global scales (that Ryder Systems operates in) the immensities of entering the logistics and transportation industry become apparent. At such a macro level, economies of scale are very large and result in an extremely capital intensive structure. Substitutes Planes, Trains, Ships Buyer Power Complexity and customization of specific services needed by the buyer. In order to be competitive in a highly competitive environment, Ryder must meet those needs. Supplier Power The supply and maintenance of the automotive industry is an expansive and competitive environment. There are little threats as Ryder Systems acquires the majority of their trucks by purchasing them from their customers, rather than direct from the truck manufacturers. This process increases the diversity of the trucking fleet, allowing Ryder to be less dependent on a fewer number of automotive suppliers. Trends in the advancement of the automotive industry: introduction of alternative fuels and the improvement of fuel efficiency in engines. Intensity of Rivalry Ryder is in an extremely competitive industry and subsector, with several major competitors and a large number of smaller, localized competitors. Many of the sales and revenues that logistics and transportation suppliers receive are from long-term contracts. In order to win over customers, both differentiation and cost effectiveness are major factors within the industry.
- Relative delivered costs was based off of profit margin Profit Margin Hertz United Ashtead Aggreko Ryder
- Operations: Add value/differentiating power to Ryder brand Finance:
- Since the industry is favorable, there are opportunities available to Ryder to continue their successful operations. Ryder strengths slightly outweighs their weaknesses. Their operations are efficient and effective and add value to the Ryder brand. However, high operating costs and debt financing are glaring weaknesses. Should operating costs continue to rise, profit margins would shrink and Ryder would not be able make interest; thereby defaulting on their debt. Should interest rates rise due to unstable/fluctuating economic conditions, Ryder’s net profit margins would shrink significantly.
- Divided into two divisions, based on future conditions: Global and Domestic Domestically, future conditions are slowly changing. On the home front, Ryder is generally reactive within the market, resulting in the low risk strategy of revision and following the industry leaders. Since 80% of their revenue is from domestic operations, it is an appropriate strategy. Globally, Ryder is somewhat proactive. They are entering the Asia markets through acquiring Asian transportation logistics companies. This is the first step to cultivating the market as to generate increased global sales.
- Divided by the two divisions, based on percentage of sales revenue: Global and Domestic As previously stated, Ryder generates 80% of their sales from domestic operations. However, those sales have stayed relatively constant, with a 5-year compound annual growth rate of 1.4%. Since Ryder has only just recently begun to develop the Asian market, the Global growth rate is also slow. However, there is great potential should Ryder properly manage their expansion while also staying financially healthy and able to support that expansion.
- Divided by the two divisions, based on life cycle stage of the market: Global and Domestic Business Strengths/Competitive Position: Above Average Competitive strength is determined through a number of key factors: Market Share: Ryder 5%, Average 2.5%, top 5 competitors 44% (✔) Operating Margin: Ryder 4.6%, Average 17.02%, top 5 competitors 10.9% (−) Knowledge of Customer & Markets (+) Technological Capability & Leadership (+) Financial & Physical Resources [Large Debt vs Significant Assets] (✓) Caliber of Management & Staff (+) Competencies Match Key Success Factors (✔+) Strategies reflects Abell’s model: Domestically, revise and follow the leader while investing in selective growth Globally, should grow aggressively. In order to do so, must aggressively innovate in key geographic areas and create the market for their services.
- When it comes to the Asian market for logistics and transportation services, Ryder’s acquisition of local service providers gives them opportunity to gain introductory market share. The question remains, how to achieve market share before the market begins to slow down and the industry loses its attractiveness? Ryder’s answer is acquisitions and market development in the Southeast Asian area.
- Backward: focuses on the acquisition of elements in the organization’s supply chain typically with the goal of reducing input costs and increasing its competitive advantage (differentiation/revenue) Horizontal acquisition of direct competitors at the same level in the distribution channel. (Asia)
- Based on Porter’s 5 Forces, the industry is attractive to Ryder. Business Strengths/Competitive Position: Slightly Above Average Competitive strength is determined through a number of key factors: Market Share: Ryder 5%, Average 2.5%, top 5 competitors 44% (✔) Operating Margin: Ryder 4.6%, Average 17.02%, top 5 competitors 10.9% (−) Knowledge of Customer & Markets (+) Technological Capability & Leadership (+) Financial & Physical Resources [Large Debt vs Significant Assets] (✓) Caliber of Management & Staff (+) Competencies Match Key Success Factors (✔+) The GE 9-cell matrix coincides with Hofer’s Market Life Cycle/Competitive Position model. Ryder should pursue selective growth, investing and developing key initiatives to decrease operation costs and/or increase revenues.
- Due to the increasing globalization throughout the logistics and transportation industry, the pressure to globalize is high. Ryder’s resource base, although locked domestically, can be built in other countries that are compatible to the industry. Ryder’s business model and competitive capabilities are also transferrable, as they are Ryder’s strength and are necessary to general trucking and logistics services.
- $4,189,425,000 ~$1.4 billion matures in 2016 Interest coverage is acceptable, but prone to possible fluctuations in the economy. Having too much debt decreases Ryder’s intrinsic value by limiting flexibility to make value-creating investments including capital expenditures, acquisitions, and investments in intangibles such as business building, R&D, and sales and marketing. Mix of loans and bond issuances, depending on the interest rates. Creditors will see mostly debt, and thereby high risk, and may charge high interest rates
- Although Ryder is well known for their operations and customer service, adding value to their brand, providing efficient and cost effective customized services to customers is expensive. Based on the declining gross margin, Ryder must either find ways to increase revenue or decrease costs. Increase revenue: More aggressive marketing and sales Target customers with potential for SCS conversions from FMS and Private Fleets Gain larger market share Catch 22: grow through acquisitions, procurement is expensive and contributing to operational costs Decrease costs: Re-evaluate value chain Slow or stop domestic acquisition Catch 22: impedes growth May result in decline in quality of service