MANAGEMENT OF INFORMATION RESOURCES TAKE HOME FINAL EXAM: UNITED PARCEL SERVICE UPS CASE STUDY COMPETITION CHALLENGE Professor: Fernando Jiménez M. Ph.D © EE, MSEE,BSEE Name: Class: MANAGEMENT OF INFORMATION RESOURCES Date: Period: 2015 2 Results: Instructions 1. Open Book –Open Notes Final Case Study Exam. 2. Your team is scheduled to defend your FINAL EXAM case study on Friday November 13th (maximum time assigned 25 minutes). 3. You will have to turn in a formal written report. 4. Evaluation criteria based on strength of your defense: Strong 90 to 100% weighted average Medium 70 to 80% weighted average Weak 0 to 60% weighted average Example: a 10 point question weighted strong ranges from 9 to 10 points a 10 point question weighted medium ranges from 7 to 8 points a 10 point question weighted weak ranges from 0 to 6 points UPS said last year 2014 it plans to invest $2bn over the next five years in its international infrastructure in Europe, Asia and the Americas. The world’s largest package delivery firm held an investors’ conference to discuss its longterm growth plans at which it revealed plans to invest 4.5% to 5% of annual revenue from 2015 to 2019. UPS said going forward it would focus on international growth markets and work to improve the profitability of its e-commerce deliveries. The UPS strategy from 2015 includes targets to grow total revenue by 5-7% per year, and operating profit by 8-11% per year. UPS wants to grow its US domestic revenue by 5-6% each year up to 2019, and operating profit by 8-10% a year. The company also aims to grow international revenue by 6-9% per year and international operating profit by 9-12% per year. “UPS is a strong company that has proven its ability to adapt,” said UPS chief executive David Abney. “The needs of our customers continue to change, and we’re changing with them by offering new and innovative solutions.” “UPS provides superior customer benefit by connecting a broad portfolio of solutions to the UPS global network. When coupled with efficient investment in technology, UPS generates substantial value for customers and shareowners,” Abney said. Improving profitability UPS said it expected online shopping to account for 51% of its US domestic volume by 2019, up from 46% this year. The company said it aimed to make lightweight e-commerce packages more profitable by increasing delivery density through technology improvements like the new ORION route software, and by pricing items by dimension as well as weight. More value added solutions like delivery management service UPS My Choice should also help with profitability, the firm said. Technology optimising routes and boosting planning would mean lowering the cost per package of delivery, UPS said. ORION is already in use by 22,000 UPS drivers with full deployment expected to be completed by 2016. “The company is adapting well to the rapidly changing market conditions,” said chief financial officer Kurt Kuehn. “We are developing the right solutions today, to ensure customers choose UPS for their supply chain needs tomorrow.” “Our innovation, history of service excellence and financial discipline has positioned the company at the forefront of global economic expansion,” added Kuehn. “Our business model and global network are unique, highly efficient, difficult to copy and, above all, extremely profitable.” UPS delivers about 4.3bn packages a year across the world, making a $46.5bn turnover in the process through its global network of more than 96,000 vehicles. The company’s domestic package division represents 61% of turnover, but its international division, generating 23% of revenue this year so far, has been growing more quickly with rising Internet penetration and the growth of the middle class in regions like Asia. UPS has long been concerned about how to keep its IT initiatives aligned with its business direction. One of its earliest governance mechanisms was an executive steering committee made up of four cross-functional, senior-level executives. The steering committee was charged with setting a strategic direction for IT and establishing priorities and funding levels. The steering committee met regularly in the late 1980s and early 1990s when UPS’s IT capability was being built. In 2001, the executive steering committee refocused to an overseer role that provided input on UPS’s long-term IT strategy. It now establishes IT principles, such as UPS’s commitment to standardization and scalability in any system used by its 60,000 drivers. The executive steering committee is a team of three senior executives, including the CIO Because the executive steering committee had became less active in IT governance related to the short-term matters, it was replaced with the Information and Technology Strategy Committee (ITSC). ITSC’s members includes 15 senior managers from all functional areas within UPS and is headed by the CIO. Its charter was repositioned to study the impacts and application of new technology and to provide a short-term technology direction Consider governance for one type of decision—a standards decision. The chief IT architect, a CIO direct report and member of the ITSC, heads the standards committee that handles most of the daily negotiations related to standards. However, the standards committee escalates decisions up to the ITSC when its members think that a standards decision has implications beyond the immediate application in question. Similarly, the CIO escalates a standards decision up to the executive steering committee if the ITSC thinks that a standards decision has long-term strategic implications for UPS. UPS S general network infrastructure, includes two data centers: the Ramap Ridge data center in Mahwah, New Jersey and the Windward data center in Atlanta, Georgia. The company uses 14 mainframes, 2,820 Mid-range computers, 120,000 PCs, 6,100 servers, and 80,000 wireless handheld Data Information Acquisition Device (DIADs); while its global telecommunications network has 2,445 network sites. UPS website helps the company achieve many of its goals, both as a communication medium to individual customers and business clients and as a business portal to support e-commerce information exchange. The website receives an average of 115 million hits per business day and online tracking requests average 9.1 million inquiries per business day (www.ups.com). The Internet allows UPS to serve its customers in a more effective and efficient manner. Discussion Questions: 1. How is UPS mission statement related to its business strategy? (10 points) 2. How does UPS information systems strategy support its business strategy? (10 points) 3. How does UPS organizational strategy support its business strategy? (10 points) 4. Describe Porters generic strategies that UPS uses to compite globally. Provide a rationale for your response. (10 points) 5. Using a Hypercompetitive Framework, analyze UPS strategy and the type of market disruption is facing. (10 points) 6. Discuss UPS s approach to providing an IT infrastructure to support its global customer strategy. (10 points) 7. What are the key components of the infrastructure UPS used for his worldwide expansion. Comments/list hardware, software, Data and networks ? (10 points) 8. Analyze and comment UPS transformation process undergone by UPS to adapt to market changes. See video and analyze Process Manager comments. (10 points) 9. Comments about UPS Q3 2015 financial results. (pick three key performance indicators from the company results indicated in the appendix and also comment about the enterprise market share in relation to UPS worldwide expansion). (10 points) 10. Describe the IT governance mechanisms used at UPS. What does the representation of UPS’s executive steering committee suggest to you? Do you think that IT plays a strategic role at UPS? Why or why not? (10 point) UPS Releases 3Q15 Results ATLANTA, Oct. 27, 2015 (GLOBE NEWSWIRE) -- UPS (NYSE:UPS) today announced third quarter 2015 diluted earnings per share of $1.39, a 5.3% increase over the same period last year. International operating profits were up more than 10% to $507 million, driving company-wide results higher. Currency exchange rates and lower fuel surcharges reduced total revenue slightly to $14.2 billion. On a currency-neutral basis revenue grew 1.8%. Revenue management initiatives across the business resulted in base rate improvements. The company completed the acquisition of Coyote Logistics during the quarter. The addition of this asset-light, truckload brokerage firm provides expanded capabilities for UPS. Coyote is expected to create more than $100 million of synergies. “Third quarter results reflect strong progress on our long-term initiatives despite uneven economic conditions,” said David Abney, UPS chief executive officer. “We remain committed to these strategies to support customers and improved shareowner value.” Total company shipments increased 1.9% over the third quarter last year to 1.1 billion packages, led by U.S. air products and European transborder shipments. Positive Momentum Continues with 3Q EPS up 5.3% International Operating Profit Increased 10% Strong Air Shipment Growth in U.S. Domestic Revenue Gains Tempered by Currency and Lower Fuel Surcharges Completed Acquisition of Asset-Light Coyote Logistics Reaffirms Full-Year 2015 EPS Guidance at Higher End of Range Cash Flow For the nine months ended Sept. 30, UPS generated $4.6 billion in free cash flow. The company paid dividends of $1.9 billion, an increase of 9.0% per share over the prior year. UPS also repurchased 20 million shares for approximately $2.0 billion.
