Bricks and Clicks: The New Road Warriors

The slow economy, bulging inventories and heightened customer expectations all demand shippers' transportation and logistics operations exemplify perfection. Is the transportation and logistics industry on par with the rest of the e-commerce world? Here's...


[From iSource Business, August 2001] It's not a sight we will soon forget. Television news helicopters followed the yellow Ryder truck en route to Tallahassee loaded with disputed election ballots requested by Judge Sanders Sauls, just in case he might want to count them again. Americans are quick to seize symbols, and this was obvious when an anonymous donor bid more than $67,000 for the yellow truck in a charitable auction hosted by Yahoo!


Now anyone could be forgiven for thinking that the infamous Ford F350 belonged to Ryder, although the reality is that Budget Group Inc. owns the yellow trucks that Miami-based Ryder System originally made famous. Symbolically, that notorious Ryder truck may represent the election crisis of 2000, but it also represents the Internet economy, which is compelling Ryder, like so many other companies, to reinvent its business. That process included selling its consumer truck leasing unit to Budget five years ago and licensing its good name.


Ryder and other transportation and logistics companies have lately been in the process of identifying core competencies and managing change to remain competitive in a New Economy that continually redraws the roadmap a process that's been far from a leisurely, Sunday drive. By the end of the 1990s, Ryder System Inc. had sold off all but its Integrated Logistics and commercial truck leasing units, including Public Transportation Services (school busses) and Aviali (aircraft maintenance). On the heels of a buying spree launched less than 10 years earlier, the sell-off amounted to half of Ryder's revenues. Unable to figure out how Ryder planned to refuel, Wall Street groused about the company's stock price dropping by half and remaining stagnant for more than a decade. Investors were advised to hold their shares or sell them.


Then came the turnaround. Pared down to commercial truck leasing and logistics, by 1999 Ryder had transformed itself into a brick-and-click. Revenues had grown by more than $1 billion in five years, driven in large part by Integrated Logistics. A member of Standard & Poor's transportation index, it out-performed the S&P 500 and is still ranked squarely in the middle of the Fortune 500. Still, no one cared about the old fogies, which was a clear case of being at the right place at the wrong time for Ryder.


But less than two years later, things have changed drastically for the company. To be a brick-and-click nowadays is to be revered as smart and steadfast. And with $5.4 billion in revenues, a $1.5 billion market cap, 30,000 employees, 100,000 trucks, 40,000 trailers, three distribution centers (DCs) and a new e-mission, Ryder seems to be poised for greatness.


The bad news, however, is that Ryder has been hit hard by the slump in sales of used trucks due to over-production on the part of original equipment manufacturers (OEMs), which often makes buying new equipment the better deal. Worse, an over-abundance of goods has piled up throughout the economy. The U.S. Department of Commerce reported a fourth quarter inventory-to-shipment ratio of 1.36, only a smidge higher than the 50-year low of 1.31 reported last March. Failing two consecutive quarters of less than 1 percent growth in GDP is officially defined as a recession. However, at this point, Federal Reserve Chairman Alan Greenspan is sticking to calling the current downturn a major inventory correction.


Semantics aside, the state of the economy has necessitated a serious review by all the major transportation and logistics players. Besides the slowdown in the economy and accumulated inventories, heightened customer expectation demands that shippers' logistics operations be world-class. The result is a business environment that requires the use of Internet-based technology and services. In light of this shift, industry analysts strongly believe that the Internet will truly change the way in which the transportation and logistics industry does business.


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