UPS SCS Case Study

9,010 views
8,554 views

Published on

Response to Kellogg School of Management Prod. #: KEL177-PDF-ENG

Published in: Education

UPS SCS Case Study

  1. 1. Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  2. 2. Case Summary 1997 – Sold its Truck Leasing Unit Purchase Sonic Air UPS Business 1995 – UPS Logistics Group , Freight Services (WWL + SPL; Service Parts Logistics) 1994 – The Worldwide Logistics (WWL) 1907 – United Messenger Company 1907 - Present Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  3. 3. Case Summary Industrial Engineering Consulting Network Design Integrating Technology Information Network Operation Network Optimization Manufacturer Copyright © 2012 by College of Management, Mahidol University. All rights reserved. Tracking Transaction Distributor
  4. 4. UPS SCS’s Organization A Staff Line Matrix; 1995 Headquarters Each Region is Profit Center (Decentralized organization) UPS SCS Regional Head Americas Regional Director Asia Regional Director Operation Operation Operation Sales * Staff Units provide support for line management, that consist of; - Financial control - Human resources - Marketing / Business development Europe Regional Director Sales Sales Customer Service Customer Service Customer Service Staff Units* Staff Units* Staff Units* Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  5. 5. UPS SCS’s Growth UPS’s Growth Motivation The business trend to “Globalization” Competitive pressure Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  6. 6. UPS SCS’s Growth 1995 – Worldwide Logistics Unit (WWL) and Service Parts Logistics (SPL) integrated and called UPS Supply Chain Solution Unit Worldwide Service (Shipping / trailers) Truck Leasing Consulting Distribution Center Storing WORLDWIDE LOGISTICS UNIT (WWL) Tracking Replacement Parts Shipping SERVICE PARTS LOGISTICS (SPL) UPS SUPPLY CHAIN SOLUTION (UPS SCS) 1997 – Acquires Sonic Air and offer next-day delivery (growth in replacement parts market) UPS SCS Sonic Air Capacity to quickly ship from 40 Parts Warehouses around the World 1999-2001 – 16 key acquisitions to build the capacity and need “people on the ground” Offers completed supply chain solution from UPS’s business network advantage Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  7. 7. UPS SCS’s Growth Strategy Diversify into New Market Acquisition o o o Internal New Venture Joint Venture Acquisition is main instrument to UPS SCS’s growth Understanding local customers and requirements by “People on the ground” Acquires capacity is key strategic planning Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  8. 8. UPS SCS’s Integrate the Acquisitions UPS’s Culture Perfection and rapid response - Customer expect no mistake - Attention to customer’s concern Partnership - Managers helped each other regardless of their profit center Conservative financial practices - Utilized conservative financial planning methods in order to minimize shareholder risk Standard operating procedure - Followed formal procedures precisely Safety - Employee safety practices were integral to the culture Growth - Valued growth Copyright © 2012 by College of Management, Mahidol University. All rights reserved. Employee-centered culture - Valued teamwork - Treated fairly to everyone
  9. 9. UPS SCS’s Integrate the Acquisitions 1st - Culture Putting people first - Management and Leadership program - Treats people fairly, background less Changing the culture - Builds new culture by “Brown way” - Transfer 1,500 employees from acquired companies to be line management - “Building the Business” workshop Facilitating teamwork across - Teamwork approach Top management rotate program Performance standards Compensation model Incentive program 2nd - Operation (sales force) Sales Strategy - One standard and consistent strategy for all (Selling the solution) - Applied BSC for aligning the goals The Sales process - Improve sales process by expertise from acquired companies and small package unit - Reduce variable of service (Setting standard questions and answers) Sales Training and Development - Sales development plan Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  10. 10. Performance Standard & Compensation Model Performance Std. - Profit-and-Loss plan - Station manager is expected to achieve 5% of target P&L Sales performance standard will be changed by geographic and the industries targeted Compensation - Salary-plus-Incentive formula - Stock incentive - Common stock price incentive policy (benefit from a project) - Sales incentive plan - 20-40% of sales expenditure is compensation Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  11. 11. Performance Standard & Compensation Model Performance based compensation Network Expense P&L Plan Stock Incentive Salary-plus-Incentive formula Sales Revenue Bonus Incentive Vary base geographic, industries targeted Copyright © 2012 by College of Management, Mahidol University. All rights reserved. Manager Sales
  12. 12. UPS SCS’s Balanced Scorecard (BSC) People Financial Results of employee relations survey, Safety, Turnover and Diversity Net operating income , revenue , gross revenue and worker’s compensation (managers were expected to minimize safety risks and control this expense) Customer Internal business perspective Inventory accuracy , on-time performance as defined by the customer ,and Visibility along the supply chain Process , internal efficiency measures, order fulfillment accuracy and through-put measures Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  13. 13. UPS SCS’s Balanced Scorecard (BSC) o o Goal Mapping among the acquired companies by Balanced Scorecard Do the business consistency Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  14. 14. UPS SCS’s Business Strategies Business Position Medium Invest heavily for growth Invest selectively and build Logistics Medium Invest selectively and build Develop selectively and build on strengths Low Develop for income Solution Replacement Parts Logistics Low Market Attractiveness High High Develop selectively Freight service for income Harvest or Divest Small package Harvest Copyright © 2012 by College of Management, Mahidol University. All rights reserved. Divest
  15. 15. UPS SCS’s Business Strategies o o o o Improve customer’s businesses by adding value to each part of the supply chain Industrial engineering is core competency Acquire resource, skill and competency from others Build UPS to be Trusted Brand Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  16. 16. UPS SCS’s Value Proposition 1. 2. 3. 4. 5. Supply chain improvement Reduce time to market Technology (Sorting, Tracking, Costing “World ship software”) Global Service (make customer’s business from local to worldwide) Network optimization (Customer’s cost saving) Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  17. 17. UPS SCS’s Marketing Segmentation Target Marketing Others Government Small Business Industries Supply chain is critical part of their business model U.S. government is the world‘s largest logistics buyer Purchase Menlo Worldwide Forwarding helps UPS penetrate this segment successfully Retailers/Suppliers Automotive Healthcare High tech UPS’s long-term customers based , face with cost pressure in a fickle marketplace Moving high value, timecritical products and parts Delivery competency is required This segment is large and growing, shipped expensive parts, complex distribution, lagging on SCM Moving high value, timecritical products and parts, replacement parts delivery required many location Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  18. 18. Sales Force Challenges The Problems of Sales Force after Acquisitions 1. Sales force shrink 60% from stress and pressure dealing with new corporate examination and evaluation system 2. Single service always proposed (e.g. transportation) despite UPS strength is Industrial engineering or solution consulting service, that make UPS loss of growth opportunity 3. Sales lack of industrials knowledge, cannot provide the right solutions to customer 4. Multi-channel problem of communication make customers confuse in service providing Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  19. 19. Sales Force Challenges Solutions 1. Improve channel of consulting service to be easier to access by customer, e.g. simplify sale process, provide guideline and best practices 2. Develop sales force to be expertise, initiate completely supply chain services training program. Intentionally develop in… Module 1 : UPS Products available (Intranet or web-based system) Module 2 : Services providing of each Industries Module 3 : Solution selling skill a salesperson should be expert in only 2-3 products/services Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  20. 20. Sales Force Challenges Solutions (Cont.) 3. Develop new Incentive system to consistent with knowledge evaluation result, motivate sales force to develop themselves 4. Not only selling skill but service capability shall be developed, Sales force should be able to provide service for customer in basic cases, it will improve customer satisfaction Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  21. 21. Competitive Challenges UPS SCS dealing with variety of competitors as following …. 1. Small business competitor focuses on niche market and concentrate with single service of transportation, UPS avoid these competitors by propose solution service instead of only transportation service 2. Large business competitor focuses on the same market and has capability to provide logistics solution as well as UPS such as DHL, Exel and FedEx 3. Consulting firm competitor such as IBM, Accenture , McKinsey and Ernst & Young, the mentioned companies provide consulting service of Logistics and Supply chain including financial management as theory of process optimization, UPS SCS propose realistic solution from actual experience dealing with these competitors Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  22. 22. UPS SCS’s Strengths and Weaknesses Strengths o Expert on Industrial Engineering o Owned completely supply chain resource o Premium services (Next-day delivery) o Strong brand with trusted logistics provider o Long history and possess large customers based Weaknesses o Sales force doesn’t has enough knowledge to selling supply chain solution o High turnover rate (Developing program stressor) o Weak brand in supply chain consulting Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  23. 23. Recommendations 1. UPS SCS should to focus on single service customer as well, because of these customer group can be developed to solution service customer if they have more experience and grow up in the future. UPS SCS should position them like a business partner for helping customer to success 2. Develop customer knowledge through various media or advertising 3. Focuses more on sustainable development especially human resources ...... • Improve incentive system and others compensation / benefits • Recruit new generation / talent, into proper development system. Build organization on which diversity of generation, allow people to initiate new ideas for work process improvement 4. UPS brand is just transportation provider in mostly customer perception, UPS should to position brand image to be consultant who provide solution on best practices with experienced team, not only theory. Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
  24. 24. Copyright © 2012 by College of Management, Mahidol University. All rights reserved.

×