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Response to Kellogg School of Management Prod. #: KEL177-PDF-ENG
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Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
Case Summary
Consulting
Network Design Network Operation Network Optimization
Information
Tracking Transaction
Industrial Engineering Integrating Technology
Manufacturer Distributor
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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.
- 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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
UPS SCS’s Balanced Scorecard (BSC)
o Goal Mapping among the acquired companies by Balanced Scorecardo Do the business consistency
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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)
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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.
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.
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.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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
Copyright © 2012 by College of Management, Mahidol University. All rights reserved.
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.