UPS SCS Case Study

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

Case Summary

Industrial Engineering

Consulting

Network Design

Integrating Technology

Information

Network Operation

Network Optimization

Manufacturer


Tracking

Transaction
Distributor

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*


UPS SCS’s Growth
UPS’s Growth Motivation
The business trend to
“Globalization”

Competitive pressure


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

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


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


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

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


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


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


Manager

Sales

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


UPS SCS’s Balanced Scorecard (BSC)

o
o

Goal Mapping among the acquired companies by Balanced Scorecard
Do the business consistency


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


Divest

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


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)


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


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, 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

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

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

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