Copyright 2001, Traffic World Magazine
Saving gone through a year or so of intensive cost cutting and reorganization, Ryder System's New Year's resolution is to make "process and model improvement changes," said President and Chief Executive Officer Gregory T. Swienton. The overarching goal is to strengthen Ryder as a major lead logistics provider, and in this cause it will launch a Web-enabled reporting and analysis tool and is developing what it sees as a revolutionary solution for managing customers' supply chains.
In 2001 the Miami-based logistics organization achieved $113 million in annualized run rate savings, with about $90 million of the savings included in its results for calendar 2001, Swienton said. A restructuring program aimed at removing organizational silos and giving Ryder a new focus was completed, and this involved some downsizing with the loss of 1,000 to 1,100 job positions.
Although cost-cutting efforts continue, Swienton has shifted much of his attention to the lead logistics market and how Ryder will compete in it. An important element of his strategy is to "develop deeper, closer and more collaborative relationships with key clients." Gone are the days when the organization tried to capture every piece of potential new business that came its way. The idea that "everyone rushes around and responds" when an RFP comes in is no longer accepted practice, noted Swienton.
The new approach is to concentrate on leading customers with solutions that are repeatable and hence more likely to yield the kind of margins that Wall Street has come to expect.
IT, one of the organizational pillars that support the approach, is receiving special attention. The IT budget "is fairly substantial and we may move it up a few percent in 2002 even while we are cutting back in other areas," Swienton said.
Gene Tyndall, senior vice president for global supply-chain solutions, said that Ryder is "centralizing IT and beefing it up." It has named a CIO and "most of our IT management will be put into that organization." That includes a section responsible for supply-chain solutions, which will now report to the CIO. Another important change is meant to reinforce the company's ability to evaluate applications "because our strategy is to buy, not build, so we buy the best, make sure it works and then put it out into the market," Tyndall said. Up until December much of this work was outsourced to the consulting firm Accenture, but Ryder has taken this back in-house. "We are insourcing basically the people who worked at Accenture," he said. Ryder will still use Accenture "for difficult situations," he emphasized.
Tyndall supports the view that deeper collaboration with customers is the way of the future. Collaboration had become fashionable before the Sept. 11 terrorist attacks on the United States, but the tragedy has catalyzed the process, he believes. According to Tyndall, if companies want to minimize safety stocks and make supply chains more efficient "all parties in the supply chain had better be talking together even more tightly and in more real time."
Ryder is testing a Web-enabled reporting and analysis tool it plans to launch by mid-2002. More ambitious is a solution for managing supply chains that Tyndall said is "very different from anything so far." Being developed in cooperation with "a few close partners" the basis of the technology "will be visibility, what's called event management now, that will go to decision support and even optimization," he explained. Tyndall said that the level of innovation he aims to achieve has been largely absent from the 3PL scene for some 20 years. As a result "companies continue to be generally satisfied with but not excited about outsourcing." The new solution will enable Ryder to take over the management of a customer's supply chain and not just operate it. The company is evaluating systems vendors as potential partners - six of the majors including names such as Descartes and Optum are under scrutiny - and Tyndall believes that if successful, the product will take outsourcing to a new level. "We have delivered cost reductions, et cetera, but there is a lot more value there," he said.
A growth engine that sits alongside IT is globalization, but Ryder has hardly touched the throttle over the past year. Swienton pointed out that the organization has followed its customers into most major overseas markets, but economic conditions and the need to focus on other strategic issues have made this option less urgent recently. This will change as the economic outlook brightens, and when it does, a favored approach is to acquire relatively small 3PLs with a strong regional base. The problem with large-scale acquisitions, said Swienton, is that it is often difficult to meld two corporate cultures.
When the economic outlook will improve is, of course, the question that preoccupies most pundits right now. Swienton is optimistic that even if the much-vaunted turnaround is a long time coming, the cost-cutting fire Ryder has already been through has put it in good shape to face the future. "If we get any extra uptick in the economy we will get some disproportionate bottom-line value because of this belt-tightening and strengthening," he said.