Strategy Implementation
PROJECTED BALANCE SHEET
2015 2016 2017 2018 2019
Assets
Current Assets
Cash And Cash Equivalents 2,730,000 3,276,000 3,931,200 4,717,440 5,660,928 Short Term Investments 1,996,000 2,395,200 2,874,240 3,449,088 4,138,906 Net Receivables 7,134,000 8,560,800 10,272,960 12,327,552 14,793,062
Inventory -
Other Current Assets 1,348,000 1,617,600 1,941,120 2,329,344 2,795,213 Total Current Assets 13,208,000 15,849,600 19,019,520 22,823,424 27,388,109 Long Term Investments 473,000 567,600 681,120 817,344 980,813 Property Plant and Equipment 18,352,000 22,022,400 26,426,880 31,712,256 38,054,707 Goodwill 3,419,000 4,102,800 4,923,360 5,908,032 7,089,638 Intangible Assets 1,549,000 1,858,800 2,230,560 2,676,672 3,212,006 Accumulated Amortization -
Deferred Long Term Asset Charges 255,000 306,000 367,200 440,640 528,768 Total Assets 38,311,000 45,973,200 55,167,840 66,201,408 79,441,690
Liabilities
Current Liabilities
Accounts Payable 5,497,000 6,596,400 7,915,680 9,498,816 11,398,579 Short/Current Long Term Debt 3,735,000 4,482,000 5,378,400 6,454,080 7,744,896 Other Current Liabilities 1,464,000 1,756,800 2,108,160 2,529,792 3,035,750 Total Current Liabilities 10,696,000 12,835,200 15,402,240 18,482,688 22,179,226 Long Term Debt 11,316,000 13,579,200 16,295,040 19,554,048 23,464,858 Other Liabilities 13,693,000 16,431,600 19,717,920 23,661,504 28,393,805 Deferred Long Term Liability Charges 115,000 138,000 165,600 198,720 238,464
Minority Interest 21,000 25,200 30,240 36,288 43,546
Negative Goodwill -
Total Liabilities 35,841,000 43,009,200 51,611,040 61,933,248 74,319,898
Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock
Common Stock 9,000 10,800 12,960 15,552 18,662
Retained Earnings 6,001,000 7,201,200 8,641,440 10,369,728 12,443,674
Treasury Stock -51,000 -61,200 -73,440 -88,128 -105,754
Capital Surplus
Other Stockholder Equity -3,489,000 -4,186,800 -5,024,160 -6,028,992 -7,234,790 Total Stockholder Equity 2,470,000 2,964,000 3,556,800 4,268,160 5,121,792 Net Tangible Assets -2,498,000 -2,997,600 -3,597,120 -4,316,544 -5,179,853
Factors Considered in Projections and Analysis:
1. An average increase of 6% in revenue each year for the past 10 years, plus an inflation rate of 4% until 2016.
2. Starting in 2017 the growth rate on revenue will be 7% with an inflation rate of 5%.
3. Other expenses will be reduced by increasing investment income by $2 million each year.
4. The tax rate of 34% remains unchanged.
5. Due to UPS’s growth and expansion, other companies in the industry will most likely exit the market or reduce operations; thus, increasing UPS’s market share.
Recommended Specific Annual Objectives and Policies
Specific Annual Objectives (3 years)
Year 1
Our team of strategist have developed two key business goals for UPS to achieve in the following year:
1. To achieve a unified organization which is working productively and efficiently together and which clearly understands the overall business plan.
2. To effectively introduce the treaties of international trade to facilitate acquisitions and mergers.
To support these business goals, the recommended objectives are:
By the end of the year, all employees and organizations understand and support our strategic goals and programs for the next three years. All plans and strategies will be disseminated in print and audio visual formats.
Build awareness and understanding about the new changes to the rules within international trade and logistic services compliance. This will be done in quarterly workshops.
Year Two
United Parcel Service continues to do well however it is important for them to have clear objectives in order to guide their efforts and resources. Our audit suggests that it will serve UPS well to create objectives in relation to:
Efficiency we recommend that they target a 30% increase in efficiency by focusing on a reduction of their operational costs.
- The company can have commercial clients retaining full responsibility for packaging and labelling their shipments this will reduce packaging errors.
We recommend that they improve customer service by providing a by establishing an online customer care interaction platform or application.
Increase the number of daily transactions by deliberately infiltrating and overtaking competitor’s market shares. Establish branches in areas where DHL was doing domestic shipping as UPS greatest revenue stream I domestic deliveries.
Strengthen relationships with traders whose shipments can facilitate premium delivery pricing.
Year Three
Creating fully functioning outputs
Receiving Turnaround,
Six Sigma Quality Checks,
Put-Away Time,
Input-Output Warehouse Rack Time,
Cycle Counting,
Shipping Time,
Re-Slotting Times,
Labor Times,
Human Resource Performance.
Following The Latest Transportation Legislation,
Treating Customers Well When Delivering Goods,
Route And Lane Optimization,
Proper Tracking Mechanisms,
GPS Coordinates,
Driver Management,
Driver Kpis,
Transportation Maintenance,
And Safety Management.
Specific Policies
Quality policy
Quality is customer satisfaction. UPS should aim at reaching the level of superior quality at low cost by achieving flawless service generation. UPS should adopt the Excellence Approach that equally and fairly meets the expectations of its customers, employees, suppliers, society and shareholders, which in essence is a continuous process of improvement, learning and innovation.
Occupational health & safety (OHS) and environmental policies
UPS should guarantee to:
- Minimise environmental pollution by investing in environmentally friendly and OHS standards compliant technologies in all operations,
- Reduce potential of occupational accidents and vocational illnesses by creating a healthier and safer working environment,
- Make occupational health & safety and environmental sensitivity a way of life,
- Comply with current legal and various other responsibilities regarding the environment and OHS activities, by means of regularly reviewing environmental and OHS hazards involving the logistics services sector.
Customer Feedback Policy
UPS should establish effective communication channels in order to understand and quickly respond to its customers’ requirements. It should undertake to respond and conclude all positive or negative notifications received by it in accordance with the laws, international transportation rules and the corporate procedures and to implement and continuously improve the customers’ complaints handling process together with its personnel aware of customer oriented approach.
Information Security Management System Policy
UPS should guarantee to ;
- provide a secure access to it’s and stakeholders’ information assets, - Protect the usage, integrity and confidentiality of the information,
- Assess and manage the risks which may comprise it’s and stakeholders’ information assets,
- Protect the integrity and brand image of the company,
- Perform necessary sanctions in case of violation of information security,
- Provide the requirements arise from national, international or sector regulations, laws and related legislations, agreement obligations, corporate responsibilities for internal and external stakeholders,
- Decrease the effects of threats on business/service continuity, providing the continuity and sustainability of the business,
- Provide and improve the level of information security by control infrastructure.
Cooperation Policy
Foster sustainable partnerships based on mutually beneficial relations
Human Resources Policy
Ensure in employing the right people for the right job regardless of religion, language, race, gender or disability; increase employee satisfaction; strengthen corporate loyalty and develop efficiency; ensure participation in the decision making process by providing an environment for self-development.
Guarantee vertical, horizontal and traverse information sharing amongst all parties with the right tools and at the right time.
Financial Affairs Policy
Effective debt follow-up and collection from income generated from primary business activity, securing acquired liquidity, financial equity provision at minimum cost wherever possible and fulfil responsibilities on a timely basis. Keeping record of company activities in accordance with laws, general practice codes, international accounting standards and in compliance with unified accounting system, producing real and reliable financial statement correctly
representing operation results.
Purchase Policy
Acquiring the right product and service at the right time, at the right amount from the right place at the right price.
Information Policy
-Rendering electronic documentation infrastructure wherever and whenever possible, -Simplifying information access process and ensuring information safety.
Technology Policy
Keeping operational efficiency at highest level by using latest technology.
Active Management Policy
Ensuring that buildings, equipment and material provide top quality service at low costs within product optimum lifespan.
Sustainability Policy
UPS should aim to perform its economic, social and environmental responsibilities within the frame of Customer Oriented Approach, Employee Satisfaction, Reliability, Develop
Cooperation, Learning and Development, Taking Responsibility and Team Spirit values, in order to provide a sustainable future by considering the needs and expectations of
stakeholders.
Corporate Social Responsibility Policy
Including all its employees, recognizing CSR as a vital part of corporate activity and being therefore committed to a course of social responsibility in accordance with this CSR policy for the sustainable development of society and business.
Contribution to the building of a prosperous and vibrant society by providing high-quality logistics services through business activities based on its excellent know-how and technology.
Disclosing information openly and transparently in order to maintain and develop a
relationship of trust with its various stakeholders, and acting responsibly towards them through various means of communication. Undertaking its business based on the principles of fairness and sincerity, acting with the utmost respect for human rights and pursuing a high sense of corporate ethics in the global business market which encompasses diverse cultures, morals, ethics, and legal systems.
Striving to minimize environmental effects and utilizing resources towards the development of a sustainable society that is in harmony with the environment.
Promoting social contribution activities as a good corporate citizen in order to realize a better society.
Making every effort to create a pleasant and motivating working environment for all its employees and to fully support those employees who desire self-fulfillment and self- development through their work.
Making every effort to promote fair and sound business practices among its business partners by fostering a common awareness of social responsibility and common awareness of social responsibility.
Recommendation of Specific Strategies and Long-term Objectives
Recommendations
1. UPS has been experiencing increasing fuel costs lately, as a result of energy prices that are escalating around the world. As a logistics provider, fuel costs account for a significant part of operating costs at UPS. Thus, an increase in fuel costs jeopardizes directly the
organization’s profitability. The company needs to invest in alternatives to gasoline. One way to achieve this goal is to acquire more vehicles powered by alternative fuels or hybrid technology. The UPS alternative fuel fleet currently includes 2700 trucks powered by compressed natural gas, liquefied natural gas, propane and electricity (Paul Lukas. 2012). 2. The company should increase the level of training its loaders on the
company’s methods of operations. The training of the loaders is an effective way of improving the production levels. Since, the loaders are able to meet their daily-expected production levels after gaining
adequate knowledge on the company’s preloading and packaging services. ($2M)
3. UPS needs to incorporate technology-enabled operations in preloading and packaging operations. Technology enabled services are usually user friendly and improves the efficiency of the company operations. Thus, the supporting UPS services will improve the operational
efficiencies in the company. UPS is also able to leverage on the leading edge technology to improve logistics management and visibility for the customers. The company should implement the action of incorporating technology-enabled operations within the next 3months. The integration of the technology-enabled services would be a key strategy for the success for increasing production levels in the company.
4. Develop new labeling system for all packages carried by UPS. Reduce amount of missing or lost packages by implementing a standardized labeling system for all packages. Implement laser printing to ensure all labels are legible and clearly visible. Use RFID technology to accurately track packages from their point of origin to their final destination. Provide customers with up-to-date information about their items.
5. Automate the sorting processes. Implement automated sorting process to reduce manual labour and in turn prevent broken or damaged packages and reduce delivery time. This will eliminate human error in the sorting process and ensure that all packages are sorted into the proper
warehouses or shipping vehicles and are shipped as quickly as possible. 6. Improve forecasting time-in-transit to prevent delays in aircraft
departure. Implement GPS system in all UPS vehicles to record transit time data. Analyze data to find most efficient and consistent routes in
order to ensure accurate measurement of time-in-transit and thus prevent delays in aircraft departure. Improved time-in-transit measurements will result in quicker delivery and more affordable shipping costs for
consumers.
Long-term Strategies
1. Strategically locate UPS distribution centers in major cities throughout the globe. Adding additional distribution hubs in highly populated regions will result in reduced transit time and reduced transportation costs. The decrease in transit time and transportation costs will lead to higher profit margins and customer satisfaction
2. Due to the continual growth of e-commerce and online purchasing habits of customers, UPS should focus on implementing strategic measures to account for future demand and a rise in online shopping over the past five years. This approach will aid them in keeping up with the growing e-commerce industry, in which shipping companies will need to account for a greater number of deliveries between retailers, manufacturers, and consumers occurring online. Since web-based, business-to-home deliveries are UPS’ specialty in the current market, they must respond to rising costs by starting to price deliveries based on the size of ground shipments rather than solely on weight alone,
customers adapt to the online world of e-commerce, UPS’ primary goal should be to bypass the low costs of their competitors and implement next day delivery into their business model for this growing industry 3. Due to the emerging popularity of “green” initiatives, United Parcel
Service should focus on increasing the sustainability of their business model through new packaging options and ground transportation methods. This approach will greatly improve the company’s image and reputation while decreasing long-run operating costs. UPS has already made indirect efforts towards sustainability via their Forestry Initiative, but a more direct approach with greater visibility will likely prove much more effective.
Comparison of Recommendations to the Actual Strategy
This recommendation focuses on improving the overall experience of the customer. UPS will improve their reliability and delivery time, ensure that shipping costs are affordable, and provide industry-leading customer service. The company will allocate funds to accelerate the research and strategic placement of distribution centers. In addition, UPS will invest in
technological research regarding GPS, automated sorting, and labelling systems. The resultant findings will then need to be analyzed in order to determine the most cost efficient way to purchase and implement new systems. These recommendations are similar in nature to UPS’ growth strategy which includes:
Deploying technology-enabled operations
Expanding their global network
Serving the needs of end consumers around the world
Advantage of Alternative Strategies
Improving efficiency and technological innovation to minimize delays and unnecessary costs
Lower operating expenses Increased efficiency
Focusing on sustainability will increase job satisfaction and create a positive company culture
Disadvantages of Alternative Strategies
Huge investment into technological research and spending
The introduction of a new e-commerce division may cause traditional employees to feel threatened
Implementation
This recommendation requires UPS to increase spending on research and analysis in the field of new technologies. At the completion of said research and analysis, UPS will need to allocate funds for the purchase of technologies as well as land and building expenses for new locations. In addition to these expenditures, employees will need to be trained to work the new technologies that UPS implements. Because of the large investment, Research and
Development, Engineering, and Finance teams will be heavily involved in the decision making process.
Value of Implementation
Through implementing these changes in their business model, UPS can expect to increase global market share and customer satisfaction while capitalizing on their core competencies of reliable and timely delivery, affordable shipping costs, and customer service. Since UPS reported total annual net income of $3.032 billion in 2014. We can expect their profit margins to continually increase as we implement these changes into their operations strategy.
ROI: Value/Cost, where $3,032,000,000/19,305,000 = 157.06 Return on Investment
Enacting these changes to UPS’s operations department results in an ROI of 157.06 times the investment, which leads us to believe that the implementation of these changes is well worth the investment. We can assume that these measures of operations efficiency will satisfy the current and future customer base that UPS currently caters to.
Deployment Framework for the Recommended Alternative
Action
Time Frame
Person Cost
Beg End Responsible
(Q/Yr) (Q/Yr)
Strategically Locate Distribution Centers
1 Research distribution Q1/2016 Q2/2016 Research $50,000
of demand in U.S. Department
2 Determine top 3 Q2/2016 Q2/2016 Research $50,000
optimal locations and Department
operational needs for each
3 Research real estate Q3/2016 Q4/2016 Research $100,000
in those 3 locations Department
4 Purchase buildings Q4/2016 Q4/2016 Purchases $1,750,000
that fulfill operational Department
needs
5 Hire contractor to Q1/2017 Q4/2017 Human $100,000
make additional Resources
changes to structure Department
6 Interviews and hiring Q4/2017 Q4/2017 HR $175,000
of managers (one for Department
each location)
7 Interviews, hiring, and Q4/2017 Q1/2018 HR $1,000,000
training of new Department
employees
8 Interior design and Q1/2018 Q2/2018 Marketing $75,000
decoration Department
9 Update transportation Q2/2018 Q3/2018 Operations $80,000
locations
10 Analyze and monitor Q2/2018 Ongoing Operations ----
changes in transit Department time and delays
Improve forecasting of time-in-transit
1 Research GPS Q1/2016 Q2/2016 Research $90,000 technologies and Department determine the optimal
device for UPS
vehicles
2 Purchase devices for Q2/2016 Q3/2016 Purchases $250,000 one distribution center Department
3 Install devices in Q3/2016 Q3/2016 Operations $100,000 vehicles Department
4 Train employees to use Q3/2016 Q4/2016 Operations $150,000 the devices accurately Department
5 Appoint a team to Q4/2016 Q2/2017 Human $300,000 monitor the route data Resources collected and instruct Department drivers based on the
most efficient routes
6 Analyze and monitor Q2/2017 Q3/2017 Analysis $300,000 the effect of the GPS Team devices and resultant
route data on delays
and time-in-transit
7 If results are positive, Q4/2017 Q1/2018 Operations $4,000,000 implement the devices Department at all other locations
Automate Sorting Processes
1 Research automated Q1/2016 Q2/2016 Research $100,000
sorting technologies Department
to determine the
most suited system
2 Purchase automation Q2/2016 Q3/2016 Purchases $500,000
system for one Department
location
3 Install the system Q3/2016 Q4/2016 Operations $15,000
Department
4 Monitor the new Q1/2017 Q3/2017 Operations $125,000
system to determine Department
efficiency and
effectiveness
5 If the system is Q4/2017 Q4/2017 Human $50,000
effective, relocate or Resources
let go newly non- Department
essential employees
6 Purchase systems Q1/2018 Q3/2018 Purchases and $5,000,000
and install them at Operations
other locations departments
7 Continue to monitor Q3/2018 Ongoing Operations ---
the systems to Department
maintain optimal
efficiency
1 Research innovative Q1/2016 Q2/2016 Research $80,000
labeling systems Department
2 Purchase new labeling Q2/2016 Q3/2016 Purchases $700,000
system for one location Department
3 Implement the system Q3/2016 Q4/2016 Operations $15,000
Department
4 Monitor the new Q1/2017 Q3/2017 Operations $150,000
system and analyze Department
any changes in the amount of lost or missing packages
5 If the system is Q4/2017 Q4/2017 Human $4,000,000
effective, purchase Resources
more systems to be Department
used at other locations
6 Continue to monitor Q3/2017 Ongoing Operations ---
the systems to Department
References
Bronfenbrenner, K., (2000). Worker Turnover and Part-Time Employment at UPS.
David, Fred. Strategic Management:Concepts and Cases, Global Edition, 15th Edition. Pearson
(Intl), 02/2015.
Hair, J., Bush, R., B., Ortinau, D., (2014). Retrieved from United Parcel Service: Will Big Brown Remain The Dominant Package Delivery Service?. Retrieved from:
http://highered.mheducation.com/sites/0072467576/student_view0/chapter2/case_studies Morlok, E K., Nitzberg, B F., Balasubramaniam, K., Sand, M L. (2000). The Parcel Service
Industry In The U.S.: Its Size And Role In Commerce. Retrieved from: https://trid.trb.org/view.aspx?id=673517
Paul Lukas (April 1, 2012). "UPS United Parcel Service James Casey transformed a tiny
messenger service into the world's largest shipper by getting all wrapped up in the details of package delivery".
Schmidt , A., (2015). How Has E-Commerce Changed The Courier Services Industry?.
Retrieved from:
http://marketrealist.com/2015/07/e-commerce-changed-courier-services-industry/
Appendices
Figure 5: UPS Senior Operations Management