ups scs case study


Case Summary

1907 – United Messenger Company

1994 – The Worldwide Logistics (WWL)

1995 – UPS Logistics Group , Freight Services (WWL + SPL; Service Parts Logistics)

1997 – Sold its Truck Leasing UnitPurchase Sonic Air

1907 - Present

UPS Business


Case Summary

Consulting

Network Design Network Operation Network Optimization

Information

Tracking Transaction

Industrial Engineering Integrating Technology

Manufacturer Distributor


UPS SCS’s Organization

Each Region is Profit Center(Decentralized organization)

A Staff Line Matrix; 1995

UPS SCS Regional Head

Americas Regional Director

Europe Regional Director Asia Regional Director

Operation

Sales

Customer Service

Staff Units*

Operation

Sales

Customer Service

Staff Units*

Operation

Sales

Customer Service

Staff Units*

Headquarters

* Staff Units provide support for line management, that consist of;- Financial control- Human resources- Marketing / Business

development


UPS SCS’s Growth

UPS’s Growth Motivation

The business trend to “Globalization”

Competitive pressure


UPS SCS’s Growth

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

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 Tracking Replacement Parts Shipping

WORLDWIDE LOGISTICS UNIT (WWL) 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 SCSCapacity to quickly ship from

40 Parts Warehouses around the World

Sonic Air


o Acquisition is main instrument to UPS SCS’s growtho Understanding local customers and requirements by “People on the

ground”o Acquires capacity is key strategic planning

UPS SCS’s Growth Strategy

Diversify into New Market

Acquisition Internal New Venture Joint Venture


UPS SCS’s Integrate the Acquisitions

Perfection and rapid response- Customer expect no mistake- Attention to customer’s concern

Employee-centered culture- Valued teamwork- Treated fairly to everyone

Partnership- Managers helped each other

regardless of their profit center Standard operating procedure- Followed formal procedures precisely

Safety- Employee safety practices

were integral to the culture

Conservative financial practices- Utilized conservative financial planning

methods in order to minimize shareholder risk

Growth- Valued growth

UPS’s Culture


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


- 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

- 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

Performance Standard & Compensation Model

Performance Std. Compensation


Performance Standard & Compensation Model

Sales Revenue

Network ExpenseStock Incentive

Salary-plus-Incentive formula

Manager

Sales

P&L Plan

Bonus Incentive

Vary base geographic, industries targeted

Performance based compensation


UPS SCS’s Balanced Scorecard (BSC)

PeopleResults of employee relations survey, Safety, Turnover and

Diversity

FinancialNet operating income , revenue ,

gross revenue and worker’s compensation (managers were

expected to minimize safety risks and control this expense)

CustomerInventory accuracy , on-time

performance as defined by the customer ,and Visibility along

the supply chain

Internal business perspective

Process , internal efficiency measures, order fulfillment accuracy and through-put

measures


UPS SCS’s Balanced Scorecard (BSC)

o Goal Mapping among the acquired companies by Balanced Scorecardo Do the business consistency


UPS SCS’s Business Strategies

Invest heavily for growth

Invest selectively and build Develop for income

Invest selectively and build

Develop selectively for income Harvest or Divest

Develop selectively and build on strengths Harvest Divest

Marke

t Attr

activ

enes

s

Business PositionHigh Medium Low

Mediu

mLo

wHi

gh

Logistics Solution

Freight service

Replacement Parts Logistics

Small package


UPS SCS’s Business Strategies

o Improve customer’s businesses by adding value to each part of the supply chain

o Industrial engineering is core competencyo Acquire resource, skill and competency from otherso Build UPS to be Trusted Brand


UPS SCS’s Value Proposition

1. Supply chain improvement2. Reduce time to market3. Technology (Sorting, Tracking, Costing “World ship software”) 4. Global Service (make customer’s business from local to worldwide)5. Network optimization (Customer’s cost saving)


UPS SCS’s Marketing

Target Marketing

Small Business

Others

Industries

Segmentation

Supply chain is critical part of their business model

Government

U.S. government is the world‘s largest logistics buyer

Purchase Menlo Worldwide Forwarding helps UPS

penetrate this segment successfully

Retailers/Suppliers

UPS’s long-term customers based , face with cost

pressure in a fickle marketplace

Automotive

Moving high value, time-critical products and parts

Delivery competency is required

Healthcare

This segment is large and growing, shipped expensive parts, complex distribution,

lagging on SCM

High tech

Moving high value, time-critical products and parts, replacement parts delivery

required many location


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



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



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


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, Exeland 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


UPS SCS’s Strengths and Weaknesses

Strengthso Expert on Industrial Engineeringo Owned completely supply chain resourceo Premium services (Next-day delivery)o Strong brand with trusted logistics providero Long history and possess large customers basedWeaknesseso Sales force doesn’t has enough knowledge to selling

supply chain solutiono High turnover rate (Developing program stressor)o Weak brand in supply chain consulting


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.

ups scs case study

Education