United Parcel Service’s IPO Essay

United Parcel Service’s IPO Essay.

Please answer the following questions. Limit your responses to four pages total. These should provide a good foundation for our next class discussion of the case. 1. How is UPS performing? Back up your assessment with your financial ratio analysis. What factors in your opinion are driving this performance? UPS has grown from modest beginnings to an organization that ships for that 15 million packages a day with over 6.1 million customer in more than 200 counties as well as an estimated 54 billion dollars in revenue.

UPS has had some ups and down, but for the most part have maintained strong. For example, UPS is a strong brand with a great market setting, cost and logistical advantage. They have built a strong supply chain management, distribution network and work force. One thing that really stuck out about the company, and as noted in the case is that many had joined the firm as part time workers while at college, and then stayed after graduation. It was not uncommon for employees to spend their entire working career at UPS.

This really spoke volumes for the company and showed the faith that employees placed in the company.

Some factors I believed needed improvement would be the customer satisfaction which was not on par with their competitors, and could have possibly looked at how management handled the finances of the company. Overall, I believe that UPS is a high performing organization that has built a brand and a successful organization from the bottom-up. When looking at financial ratio analysis for UPS, we must look at what set them apart from everyone else. If we look at the Profitability rations, we see the following reporting’s. From 1994-1998, we see Total Revenues increasing from $19,576 to 24,788, Total Operating Expenses increasing from $18,020 to $21,696 and Total Profit increasing from $1556 to $3090. These findings can easily justify why UPS is a best-of-breed company. 2. Does it make sense for UPS to carry out an IPO, i.e., what are the cost and benefits to going public for the firm? I do believe it makes sense for UPS to carry out an IPO, as it will give them an advantage over there competitors.

In 1999, the rapid expansion of internet shopping hinted at a boost for the B2C ground business and the increasing demand in faster delivery suggests growth opportunities in the air express segment. We must also look at international growth, and factor in how this will provide opportunities for growth. Per the case, UPS had $25 billion in annual revenues, which accounted for 6% of the United States GDP. It was also mentioned that they delivered close to 13 million packages to over 200 countries, and had contact with every Fortune 1000 company. By 1998, UPS captured an estimated 38% of the market in the express arena, and by 1999, UPS could handle six times as many on-line tracking requests as FedEx by investing in their infrastructure. Since its formation of UPS Logistics Group, UPS’s customers included Sprint PCS, Papa Johns, and Ford. By 1999, the Logistics Group was operating at nearly a $1 Billion in incremental revenue for the company.

On a day to day basis UPS coordinates and picks up about 13 million packages from over 2 million addresses to deliver to over 6 million commercial and residential addresses worldwide, unlike FedEx, UPS made no distinction between the operating facilities for air and ground operations. This allowed the company to optimize all of its assets. Another asset UPS had was its loyal workforce, which added to its overall success. Per the case, UPS spent hundreds of millions annually on educational assistance programs, time-tested policies, and on the job training, which in turn resulted in an industry-low turnover rate. Also an intuitive move on the part of management was to target three emerging trends they felt would define the industry; globalization, e-commerce, and supply chain management.

Like the case provided, UPS would be able to fund much of their growth opportunities through operating cash flows, thus, the benefit from the IPO would be to provide UPS with an attractive tax efficient medium of exchange to fund any subsequent acquisitions. Another plus for the company was that approximately, two-thirds of company’s equity was held by current and retired employees. . Employees that received stock awards use to hold on to them for as long as they remained with the company.

If they sold their stock, the company would buy back the stock at a price set each quarter by the board of directors, with the intent to have shareholders own 90% of the firm’s equity, while controlling 99% of the vote. 3. Calculating the following ratios for UPS and FEDEX in 1997/1998. Which firm scores higher on each of the ratios? Conceptually, how does the choice between operating lease vs capital lease impact the ratios?

a. Sales growth rate
b. NOPAT margin
c. Working capital to sales
d. Net LT assets to sales
e. Leverage

United Parcel Service’s IPO Essay

Zara Case Essay

Zara Case Essay.

Zara’s responsive strategies improve the efficiency of information exchange in every level of supply chain; customers, store managers, designers and market specialists, production stuffs, subcontractors, buyers, warehouse managers, distributors, and so on. As a result of efficient exchange of information, Zara can increase product turnover rate and delivery speed of products, designs, and trends, so each store can get new products just in time. Each shop is also able to reduce inventory risk, which makes Zara to offer products at an affordable price.

Question 2; Zara chooses both in-house and outsourced manufacturing. What are the reasons for choosing both strategies? Using in-house manufacturing, Zara can be more responsive to trend and customer demands. This strategy also provides Zara more quality control and faster exchange of information on each level of supply chain. The main reason using outsourced manufacturing is to reduce overall cost and increase company’s productivity. Question 3; Compare Zara’s possible supply chain disruptions with that of Hewlett-Packard using the assessment matrix of Exhibit 2.


Outsourcing’s logistic failure would be more likely to influence Zara’s supply chain than HP, because its production and delivery spans are much faster. Zara’s outsourcing method may not be influenced by commodity price risks because only labor intensive activities are outsourced. Most of products are produced by Zara’s own factories, so regulatory risk would not be high. The case does not provide any information about Zara’s sole sourcing method. The multi-source approach provides company to have alternative choices when there are some problems with a vender at a certain point (ex.

failure of delivery goods, increasing price). As Zara is a world successful cloth retailing company has presence in more than 45 countries in the world. The identifiable competitive priorities on which Zara has built up its successful business model are as follows: (i) Speed of Production – Zara has the ability to transform a fashion concept and place finish products in the stores within a period of 2 weeks successfully. Zara has dedicated teams at stores which allow the retailer to get designer influenced products at a very rapid pace within the stores.

(ii) Variation of Production – Zara’s value chain comprises of members who dedicated work closely with customers in spotting new trends of demand in fashion. They have the ability to launch new trends, designs and variation of products in short span of time. (iii) Cost Leadership – Zara produces fashionable range of products at an affordable pricing. When compared to other competitors in the same strategic group, Zara’s products are priced lower than GAP, Benetton and H&M.

The most important reasons to achieve consistent cost leadership in the modern market due to they keep a very low level of inventory in stores. Their efficient distribution system allows them to get products in the store just in time. As a result of which Zara has a high annual inventory turnover compare to their competitor in the market. Read more: http://www. ukessays. com/essays/business/operation-management-of-zara-and-benetton-business-essay. php#ixzz2gGzijXSa

Zara Case Essay

Supply Chain of Honda Essay

Supply Chain of Honda Essay.

The supply chain encompasses all activities associated with the flow and transformation of goods from raw material stage (extraction), through to the end user, as well the associated information flow.

Material and information flow both up and down the supply chain.

Supply chain management emphasizes the logistics interaction that take place among the functions of marketing, logistics, and production within a firm and those interaction that take place between the legally separate firms within the product-flow channel.

It is important to note that supply chain management is about the coordination of product flow across functions and across companies to achieve competitive advantage and profitability for the individual companies in the supply chain and supply chain members collectively .

It is difficult, in practical way, to separate business logistics management from supply chain management. In so many respects, they promote the same mission:To get the right goods or services to the right place, at the right time, and in the desired condition, while making the greatest contribution to the firm.


RESOURCESSupply chain/ logistics is a collection of functional activities ( transportation, inventory control etc), which are repeated many times throughout the channel through which raw material are converted into finished products and consumer value is added.

Because raw material sources, plants, and selling points are not typically located at the same place and the channel represents a sequence of manufacturing steps, logistics activities recur many times before a product arrives in the marketplace .even then, logistics activities are represented once again as used product are recycled upstream in the logistics channel.

Logistics is the part of supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from, the point of origin to the point of consumption in order to meet customer’s requirement.


Although it is easy to think of supply chain as managing the flow of product from the point of raw material acquisition to end customer, for many firms there is a reverse logistic channel that must be managed as well. The life of the product, from a logistic viewpoint, does not end with the delivery to the customer. Products become obsolete, damaged, or non-functioning and are returned to their source points for repair or disposition. The reverse logistic channel may utilize all or a portion of the forward logistic channel or it may require a separate design.

IMPORTANCE OF SUPPLY CHAINIt is about creating value- value for the customer and suppliers of the firm, and value for the firm’s stakeholder. Value in logistics is primary expressed in terms of time and place. Products and services have no value unless they are in the possession of the customers when (time) and where (place) they wish to consume them. For example- concession at a sport event have no value to customers if they are not available at the right time and place that the event is occurring. Good logistics management views each activity in the supply chain as contributing to the process of adding value.

Cost are significant- cost of logistics is second to the cost of productLogistics customer services expectation are increasingSupply and distribution lines are lengthening with greater complexitySupply chain / logistics is important strategy to increase salesSupply chain / logistics adds significant customer valueCustomers increasingly want quick, customised responseSupply chain / logistics in nonmanufacturing areas•Service industry•Military•EnvironmentPRINCIPAL ACTIVITIES OF SUPPLY CHAIN MANAGEMENTSource-R.BALLOU, 2004,”BUSINESS LOGISTICS/SUPPLYCHAIN MANAGEMENT”5th edition, pg-29.

PRODUCT AND ITS KEY CHARACTERISTICSHonda CIVIC is a car manufactured by Honda .It was introduced in July 1972 as a two door couple, followed by three door version. With transverse Engine mounting of its 1169 cc engine and front drive. The car provides good interior space despite overall small dimensions.

Early models of the civic were typically outfitted with the basic AM Radio, a rudimentary heater, foam -cushioned plastic trim, two speed wipers and painted steel rims with a chromed wheel nut cap.

The current CIVIC has become much more luxurious with satellite-linked navigation, a six speed manual transmission , air conditioning , power locks and power windows.

IN United States of America, the civic is the second longest continuously-running nameplate from the Japanese manufacturer, only TOYOTA COROLLA, introduced in 1968, and has been longer production. (Toyota Corolla History, 2008, Corolla key features)AWARDS-In 1972 to 1974 – “CAR OF THE YEAR JAPAN”In 1974- “1974 CAR OF THE YEAR “(US Road Test Magazine, 1974)”TOP SAFTY PIDE- GOLD” award by The Insurance Institute for Highway Solution. (Torrance calif,USA,dec 5 2005,IIHS)Civic wins International Design Award “RED DOT : BEST OF THE BEST”(Honda, 27 March 2006, Honda Corporate Section)Japan Car Of The Year “Most Advanced Technology Award”CHANGES OVER LAST 35 YEARSHonda civic has got eight generation changes. These are made as per the demand of the customers within the country and worldwide. Civic is one of the most popular models of Honda automotive industry.

DEMAND FORCES FOR HONDA CIVIC:1)Domestic market demand -Japanese domestic market2)International market demand-North AmericaEuropeAsiaOthersCHANGES IN MARKET FROM DOMESTIC TO WORDWIDE.

Customised figure from dataSource-Takeo Fukui, 31 March 2006, Honda motor co. Ltd, CSR report, 31 march 2006CIVICS’ FIRST BREAKTHROUGH IN US MARKET: The Civics’ features allowed it to outperform American competitors such as the Chevrolet Vega and Ford Pinto. When the 1973 oil crisis struck, many Americans turned to economy cars. Reviews of American economy car quality were poor and getting worse due to spiralling costs for manufacturers. Japanese culture had a long-standing tradition of demanding high-quality economy cars, and the growing American desire in the 1970s for well-made cars that had good fuel mileage benefited the standing of Honda, Toyota, and Datsun in the lucrative U.S. market.

MAIN PROBLEMS FOR CIVIC IN INTERNATIONAL MARKET:•Need for strong supply chain interference with marketing and production•Need for strong supply chain management system•Information systems•Inventory management strategy•Strong logistics and Warehousing•Need of production facilities and distribution centres•Need for R&D centres to meet customers demand


Supply chain organization and controlLocation strategyTransportation strategyFocused customer service goalInventory strategyPlanning and CollaborationTo achieve Honda’s goal to provide genuine satisfaction to customers around the world, Honda has developed worldwide operations based on the policy of manufacturing close to the customer.

It focus on what people all over the world truly need has taken us beyond simply providing the products and services required, and led us to establish production facilities and R&D centres in local communities. Honda manufactures at 134 Production facilities in 28 countries, has established 31 research and development centres in 15 countries, and draws strength from over 140,000 associates worldwide. Sales of motorcycles, automobiles and
power products now bring Honda into contact with, Over 20 million customers every year. They empower their global operations by hiring many associates locally, procuring parts locally and collaborating with members of local communities in a wide range of philanthropic activities.

Honda’s global operations: expansion through localizationSALES AND PRODUCT FACILITIESRESEARCH AND DEVELOPMENT FACILITIESSALES OFFICES PRODUCTION FACILITIESSource-Takeo Fukui, 31 March 2006, Honda motor co. Ltd, CSR report, 31 march 2006.

THE PROGRESS:But as time progresses ,Honda has introduced civic models from first generation to the latest eight generation model , which is advanced and very popular throughout the world. The company started his global distribution of civic Honda and made changes as per the demandSALES FACT AND FIGUREDuring fiscal year 2002 to 2006, Strong sales of the redesigned Civic occurred. In particular, the Company anticipates an increase in unit sales, based on full-year sales of the Civic, the introduction of the redesigned Step WGN, a brand-new 1.3-liter small car with the new i-DSI (Dual & Sequential Ignition) gasoline engine, as well as the all-new CR-V and Integra.

Source-Takeo Fukui, 31 March 2006, Honda motor co. Ltd, CSR report, 31 march 2006How product is used:Honda civic has a mixed users depending upon location, purpose, comfort need and a symbol of dignity and status.

In developing and underdeveloped countries, it is use as a luxurious car. People only use the civic for special outings and on special trips. In these countries it’s a symbol of dignity and status. They don’t use it frequently.

While on the other hand, in the developed countries it is a daily use car for offices, markets, visits to places etc. Here it is not a symbol of dignity or status, but a car which is purposefully used for comfort, quality of engine, features and for its good safety features. It is frequently used in the developed countries.

Product used for:It is an on road car specially used for travelling between cities and within cities.

Honda civic is an executive deluxe car and largely used for travelling to offices, family outings, long drives etc. As it’s a deluxe car, it provides better comfort and ease of driving to the customers. Safety features allows Honda civic to be most popular among the customer.

As Honda civic is implementing changes in it from last 35 years, this strategy attracts customer over a long period of time.

CONCLUSION:Supply chain management strategy is typically formed around three goals- cost reduction, capital reduction, and service improvement .depending upon problem type, strategy may range from long to short time periods. Planning usually takes place around four key areas: customer, location, inventories and transportation .the network of links and nodes serves as an abstract representation of the planning problem.






Supply Chain of Honda Essay