ryder systems, inc. case study: comprehensive business analysis and review

Ryder

Systems,

Inc.

April 3

2014Jeff Shields Chris Jursek Chris Murphy Shane Tompkins Michael Rothstein

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=8hrdelCJL31RlM&tbnid=tm0Lf9sl8jKVBM:&ved=0CAUQjRw&url=http://secure.ryder.com/employees_brandcenter_logo.shtml&ei=gVM6U6zNBIuhsQS6x4B4&bvm=bv.63934634,d.b2I&psig=AFQjCNE7Tz16JqVmxpzVNZcMV2xWSokYOQ&ust=1396417783110192

Ryder Systems, Inc. 1

Table of Contents Company Summary ...................................................................................................................................... 4

History ...................................................................................................................................................... 4

Organizational Structure ........................................................................................................................... 5

Key Strategists and Personnel ................................................................................................................... 6

Leadership ................................................................................................................................................. 8

Vision, Mission, and Values ..................................................................................................................... 9

Organizational Culture .............................................................................................................................. 9

Organizational Goals ................................................................................................................................ 9

Strategy ....................................................................................................................................................... 11

Grand ...................................................................................................................................................... 11

Business .................................................................................................................................................. 12

Functional ............................................................................................................................................... 13

Marketing ............................................................................................................................................ 13

Capital Structure ................................................................................................................................. 14

Operations ........................................................................................................................................... 15

Human Resources ............................................................................................................................... 19

Information Systems ........................................................................................................................... 19

Management ........................................................................................................................................ 19

Marketing Audit .......................................................................................................................................... 21

Product .................................................................................................................................................... 21

Price ........................................................................................................................................................ 21

Place ........................................................................................................................................................ 22

Promotion ................................................................................................................................................ 22

Financial Analysis ....................................................................................................................................... 23

Liquidity .................................................................................................................................................. 23

Solvency .................................................................................................................................................. 24

Activity ................................................................................................................................................... 26

Profitability ............................................................................................................................................. 27

Competitive Environment ........................................................................................................................... 30

Macro ...................................................................................................................................................... 30


Political ............................................................................................................................................... 30

Economic ............................................................................................................................................ 30

Socio-Cultural ..................................................................................................................................... 31

Technological ...................................................................................................................................... 31

Environmental ..................................................................................................................................... 32

Global .................................................................................................................................................. 32

Industry ................................................................................................................................................... 32

Porter’s 5 Forces Model ...................................................................................................................... 33

Direct ...................................................................................................................................................... 35

Hall’s Competitiveness Model ............................................................................................................ 36

Internal .................................................................................................................................................... 36

McKinsey’s Seven S’s ........................................................................................................................ 37

Value Chain ........................................................................................................................................ 41

SWOT Analysis .......................................................................................................................................... 43

Strengths ................................................................................................................................................. 43

General ................................................................................................................................................ 43

Marketing ............................................................................................................................................ 43

Finance ................................................................................................................................................ 43

Operations ........................................................................................................................................... 43

Information ......................................................................................................................................... 44

Management ........................................................................................................................................ 44

Weaknesses ............................................................................................................................................. 44

General ................................................................................................................................................ 44

Marketing ............................................................................................................................................ 45

Operations ........................................................................................................................................... 45

Finance ................................................................................................................................................ 45

Information ......................................................................................................................................... 45

Management ........................................................................................................................................ 46

Opportunities........................................................................................................................................... 46

General ................................................................................................................................................ 46

Economic ............................................................................................................................................ 47


Technological ...................................................................................................................................... 47

Political/Legal ..................................................................................................................................... 48

Threats .................................................................................................................................................... 48

General ................................................................................................................................................ 48

Economic ............................................................................................................................................ 48

Technological ...................................................................................................................................... 49

Political/Legal ..................................................................................................................................... 49

Models for Strategic Analysis ..................................................................................................................... 51

Abell’s Strategy Evolution ...................................................................................................................... 51

Product Life Cycle .................................................................................................................................. 52

Hofer’s Market Life Cycle/Competitive Strength................................................................................... 52

BCG Portfolio Matrix ............................................................................................................................. 53

Ansoff’s Product/Market Mix ................................................................................................................. 53

GE 9-Cell Matrix .................................................................................................................................... 54

Dawar & Frost Strategic Options for Local vs Global Competitors ....................................................... 54

Pearce & Robinson International Strategy Options ................................................................................ 55

Christensen, Berg, and Salter Grand Strategy Matrix ............................................................................. 55

Problems and Strategic Solutions .................................................................. Error! Bookmark not defined.


Company Summary

As a global leader in transportation and supply chain management, Ryder Systems operates in

two major business segments: Fleet Management Solutions (FMS) and Supply Chain Solutions (SCS).

FMS provides full service leasing, commercial rental, contract maintenance, and contract-related

maintenance of trucks, tractors and trailers. Ryder Systems acquires, manages, maintains, and disposes of

fleet vehicles for commercial customers principally in the U.S., Canada, and the U.K. SCS provides

comprehensive logistics and supply chain consulting solutions from industrial start (raw material supply)

to finish (product distribution), encompassing dedicated, distribution, and transportation services

throughout North America and Asia. Ryder Systems’ customers range from small business to large

international enterprises.

Ryder Systems, Inc. currently employs 28,900 people and maintains a fleet of 209, 500 vehicles.

Its headquarters are located in Miami, Florida. Their largest competitors are Avis Budget Group, Inc.,

Hertz Global Holdings, Inc., and United Rentals, Inc. among many others in that operate in the Rental and

Leasing Services Industry.

History

In 1933, Jim Ryder began his Miami,

FL concrete hauling business with a single 1931

Model “A” Ford. Just six years later, the Ryder

fleet had grown to 50 trucks while changing its

focus from distribution to leasing. In 1955,

shortly after the purchase of the larger Great

Southern Trucking Company, Ryder Systems,

Inc. incorporated as a publicly traded company

and became listed on the New York Stock Chart 1: Recent Acquisition History


exchange in 1960 under the symbol “R.N”. By 1978, total revenue exceeded $1 billion. With steadfast

expansion and innovation through the 80’s and 90’s, Ryder Systems was listed in the Fortune® 500 largest

companies in the United States. In the new millennium, Ryder Systems has continued to provide top tier

services while supplementing organic growth through acquisitions

Organizational Structure

The organizational structure of Ryder Systems is centered around the Chair of the Board,

President and Chief Executive Officer, Robert Sanchez, who has been a member of the company’s

executive leadership team since 2003 and was named Chairman and CEO as of May 2013. Another

notable member within this group includes Vice President and Chief Financial Officer, Art Garcia, who

has held multiple positions within the company dealing with corporate accounting and planning, internal

and external financial reporting, vehicle administration, payroll and shared services. The President of

Chart 2: Organizational Hierarchy


Global Supply Chain Solutions, John Williford is also an important part of Ryder Systems success. Mr.

Williford has focused on accelerating and applying Ryder’s strengths to new areas that create value for

customers, and developing new services that meet customers’ needs in today’s highly complex and

challenging business environment. This group of senior executives comprises an experienced and talented

team that has the capability to effectively lead and manage Ryder Systems.

Key Strategists and Personnel

Robert E. Sanchez - Chair of the Board, President and Chief Executive Officer

Over the course of two decades at Ryder, Mr. Sanchez has served in senior executive leadership

positions in operations, finance, and information technology. He has been a member of the company’s

Executive Leadership Team since 2003. Most recently, Mr. Sanchez held the role of President and Chief

Operating Officer, in which he was responsible for the general management of all business operations.

Prior to that, he served as President of Global Fleet Management Solutions (FMS), Ryder’s largest

business segment. Earlier, he served in a broad range of leadership positions for the corporation and each

of its business segments, including: Executive Vice President and Chief Financial Officer of Ryder

System, Inc.; Executive Vice President of Operations (FMS); Senior Vice President and Chief

Information Officer of Ryder System, Inc.; Senior Vice President of Transportation Management within

Supply Chain Solutions (SCS); and Vice President of Asset Management (FMS).

Art A. Garcia - Executive Vice President and Chief Financial Officer

Mr. Garcia is responsible for Ryder’s financial management functions, including the finance and

audit, strategic sourcing, corporate strategy and investor relations functions. He is a member of Ryder’s

Executive Leadership Team. Prior to this position, Mr. Garcia was Senior Vice President and Controller

for Ryder. In this role, he was responsible for corporate accounting and planning, internal and external

financial reporting, vehicle administration, payroll and shared services and insurance accounting. Before

serving as Senior Vice President and Controller, he was Group Director of Accounting Services, where he


supervised all of Ryder’s internal financial reporting activities, vehicle administration and payroll

services.

Dennis C. Cooke - President, Global Fleet Management Solutions

In this role, Mr. Cooke is responsible for leading all areas of global business operations for the

company's largest business segment, Fleet Management Solutions (FMS). The FMS business provides

truck leasing, rental, and maintenance services throughout the U.S., Canada and the United Kingdom. It

manages a fleet of more than 180,000 vehicles from 800 locations and serves the needs of more than

14,000 customers. Mr. Cooke is also a member of Ryder's Executive Leadership Team. He joined Ryder

in 2011, following a 22-year career with GE and related companies.

John H. Williford - President of Global Supply Chain Solutions

A member of Ryder’s Executive Leadership Team, Mr. Williford is responsible for management,

operations, sales and marketing, and the financial performance of Ryder’s Supply Chain Solutions

business segment. Mr. Williford was responsible for Ryder’s successful acquisition of Transpacific

Container Terminal Ltd. (TCTL) and CRSA Logistics Ltd. (CRSA) in Canada, as well as CRSA Logistics

operations in Hong Kong and Shanghai, China. This acquisition enhances Ryder’s Asia-related

capabilities to strengthen the company’s role as a facilitator of Trans-Pacific commerce and production

between companies and resources in the U.S., Canada, Mexico, and Asia.

Robert D. Fatovic - Executive Vice President, Chief Legal Officer and Corporate Secretary

In this position, Mr. Fatovic leads the company’s legal functions and serves as Corporate

Secretary for coordinating all functions relating to the company’s board of directors. He is also

responsible for Ryder’s Safety, Health and Security organization, Corporate Compliance Group,

Government Affairs and Environmental Department. Mr. Fatovic is also member of Ryder’s Executive

Leadership Team. Mr. Fatovic joined Ryder in 1994 as Assistant Division Counsel and has held several

positions of increasing responsibility in the Law department. In 1996, he became Associate Division

Counsel and was promoted to Chief Counsel the same year. He later served as General Counsel of


Ryder’s logistics business segment. Subsequently, he became Senior Vice President and Deputy General

Counsel. In this position, he was the lead operations attorney for Ryder and was active in all aspects of

domestic and international supply chain operations as well as legal support for e-commerce and other

Ryder technology initiatives.

Gregory F. Greene - Executive Vice President and Chief Administrative Officer

Mr. Greene is responsible for leading the company’s information technology, human resources,

and corporate communications and public affairs functions. Mr. Greene is a member of Ryder’s Executive

Leadership Team. Prior to this appointment, Mr. Greene served as Executive Vice President and Chief

Human Resources Officer for Ryder, overseeing the company’s human resources functions, including

compensation and benefits, training and development, and strategic initiatives to enhance performance

management, succession planning, and cultivate talent for future growth. Additionally, he led Ryder’s

corporate communications functions, including employee communications and media relations.

Karen Jones - Senior Vice President and Chief Marketing Officer

Ms. Jones is responsible for leading the company’s Fleet Management Solutions (FMS) and

Supply Chain Solutions (SCS) Marketing departments, as well as integrating the management of all

marketing and brand-related activities across Ryder. Ms. Jones is a member of Ryder’s Executive

Leadership Team.

Leadership

Ryder Systems leadership style defines itself by focusing on customer service, sound ethics,

corporate governance and integrity. Ryder believes in having a very diverse and self-motivated group of

employees in order to have a more productive and engaging workplace, and to accelerate business growth

and success. Ryder uses their diverse talent pool of employees to ensure that they respond to the demands

of an increasingly dynamic and global marketplace. The leadership team puts an emphasis on creating a

productive and fun workplace where employees are challenged to meet daily goals.


Vision, Mission, and Values

Vision

Bring compelling value to customers through outsourcing.

Mission

To provide innovative supply chain and fleet solutions that are reliable, safe, and efficient;

enabling customers to deliver on their promises.

Values

Trust, Innovation, Collaboration, Expertise, Safety

Organizational Culture

When Ryder started doing business in the midst of the Great Depression, service was everything:

delivering value through personalized attention, maintaining personal relationships, and fostering trust,

honesty and respect. Service continues to remain as the foundation of Ryder’s relationships with their

customers, communities and colleagues. Ryder’s culture can be summed up in the way they conduct

business, by:

Respecting employees and customers

Thoughtfully approaching how they conduct their business in the communities they serve

Delivering personalized service while empowering customers and employees to reach

their full potential

Ryder believes that by maintaining ties to their roots, they are able to bring their team of more

than 25,000 people together. As a diverse organization with operations ranging from one-man satellite

truck leasing hubs to large corporate offices and logistics centers, keeping everyone connected is

essential. Their shared values bring Ryder together and unite them in team and spirit.

Organizational Goals

In its 2013 annual report, Ryder Systems outlined goals specific to each of their business

segments’ strategies.


Goals for Ryder Systems’ FMS segment strategy:

Drive fleet growth by:

o successfully implementing sales and marketing initiatives designed to

compel private fleet operators and for-hire carriers to outsource all or

some portion of their fleet management needs to Ryder

o offering innovative products, solutions and support services that will

create and strengthen new and existing customer relationships

o completing targeted acquisitions

Deliver a consistent, industry-leading and cost-effective maintenance program to

customers through continued process improvement and re-design, productivity

initiatives, and technology improvements

Optimize asset utilization and management, particularly with respect to their

rental fleet, used vehicle operations and maintenance facility infrastructure

Goals for Ryder Systems’ SCS segment strategy:

Provide customers with a differentiated quality of service and best execution

through reliable and flexible supply chain solutions

Develop capabilities that can be applied and utilized in Ryder’s targeted industry

verticals

Create a culture of innovation that fosters new and high value solutions for

customers’ supply chain needs

Focus on continuous improvement and standardization

Successfully implement targeted sales and marketing strategies


Strategy

Grand

Ryder Systems’ grand strategy is to

grow fleet management and supply chain

outsourcing services by targeting private

markets (utilizing FMS) and key industry

verticals (utilizing SCS) with innovative

solutions, operational excellence, best in class

talent and information technology.

In order to deliver these valuable

solutions that will compel future customers to

outsource their fleet management and supply

chain needs to Ryder Systems, the grand

strategy is supported by a number of key

priorities:

Operational Excellence: Continuous productivity and process improvement to solve customer

problems, increase cost effectiveness and drive safety.

Innovation: Develop innovative products, solutions, and support services connected to the core

business that deliver value to targeted customer segment and strengthen customer relationships.

Growth Focus: Accelerate growth rate through increased sales & marketing effectiveness and

new product innovation.

Talent & Culture: Attract, develop and retain the best talent while fostering a culture where

leaders engage their people to innovate, pursue the vision and build on core values.

Information Technology: Deploy technology to enable growth while improving operational

efficiencies.

Chart 3: Grand Strategy


Business

Fleet Management Solutions

Ryder Systems provides customers with a variety of fleet solutions that are designed to improve

their competitive position. By outsourcing these services to Ryder, customers can focus on their core

business and improve their efficiency and productivity, while also lowering their costs. The FMS product

offering is comprised of longer-term full service leasing and contract maintenance services; shorter-term

commercial truck rental; flexible maintenance services; and value-added fleet support services such as

insurance, vehicle administration and fuel services. In addition, Ryder provides customers with

purchasing access to a large selection of used trucks, tractors and trailers through a used vehicle sales

program. Ryder Systems’ FMS business strategy is to be the leading provider of fleet management

outsourcing services for light, medium and heavy duty vehicles. They hope to achieve this by achieving

previously stated FMS goals.

Supply Chain Solutions

Ryder Systems offer a broad range of innovative logistics management services that are designed

to optimize a customer’s supply chain and address key customer business requirements. The organization

is aligned by industry verticals (Automotive, Industrial, Consumer Packaged Goods, Hi-Tech and Retail)

to enable teams to focus on the specific needs of their customers. The SCS product offerings are

organized into four categories: dedicated services, distribution management, transportation management

and professional services. These offerings are supported by a variety of information technology and

engineering solutions that are an integral part of other SCS services. These product offerings can be

offered independently or as an integrated solution to optimize supply chain effectiveness. A key aspect of

value proposition for Ryder Systems is operational execution, which is an important differentiator in the

marketplace. The SCS business strategy is to offer customers continued differentiated functional

execution and proactive solutions from deep expertise in key industry verticals. This strategy revolves

around previously stated SCS goals.


The general operational strategy for Ryder Systems is to implement a Fleet Management

Solutions for their new customer, simply managing the private fleets. As time goes on, it becomes more

so efficient and feasible for the customer to fully outsource their logistics and transportation (move to

Supply Chain Solutions). Ryder Systems then acquires the customer’s fleet and exclusively provides

logistics and supply chain services from the industrial start (raw materials) to finish (product distribution).

By providing effective and efficient service to private fleets, Ryder Systems can build and strengthen their

relationship to the customer and gain further, more established business while continuing growth through

acquisitions.

Functional

Marketing

Ryder implements sales and marketing initiatives designed to compel private fleet

operators and for- hire carriers to outsource all or some portion of their fleet management needs. These

fleet operators can range from small businesses to large organizations. Utilizing the FMS and SCS

segments, Ryder Systems can offer fully customized services to customers that will ensure improved

Chart 4: Business Strategy


effectiveness and efficiency. Ryder Systems marketing and sales operations are heavily dependent on

building a value added brand through customer service and relationship selling.

Capital Structure

Debt Financing (total debt: $4,189,425,000)

There are two primary funding sources for Ryder System, Inc.:

$900 million Committed Global Revolving Credit Facility (matures 10/18/18) that

supports access to US and Canadian commercial paper markets and provides funding

to subsidiaries in the UK, Canada and Puerto Rico

Issuance of Medium Term Notes within the U.S. public bond market

Additional funding sources include:

Accounts Receivable-Backed Securitization Facility

Single Investor and Leveraged Lease Financing

Lease Securitizations (Asset-Backed Securities)

Bank Term Loans – U.S. and international subsidiaries

Revolving Lines of Credit to support international subsidiaries

Letters of Credit

Ryder continues to have broad access to the debt capital markets with substantial debt capacity to

support growth. The ability to consistently and reliably pay interest while having flexibility through use

of different sources of funding plays a key role in the continued financing of Ryder operations.

Equity Financing (total shareholders’ equity: $1,896,714,000)

Preferred stock of no par value per share – 3,800,917

o none outstanding

Common stock of $0.50 par value per share – 400,000,000

o 53,335,386 outstanding at year end 2013


Operations

Fleet Management Solutions (for year-end 2013, global business accounted for 63% of

consolidated revenue)

Commercial Rental (23% of FMS revenue)

Commercial vehicles for short-term customer needs

Used by both lease and non-lease customers

Full Service Lease (64% of FMS revenue)

Long-term contractual agreement

Includes vehicle procurement, maintenance services and used vehicle disposition

Comprehensive package of fleet support services available

Contract Maintenance (5% of FMS revenue)

Comprehensive, preventive maintenance services

Vehicles are owned by our clients or under third-party finance lease contracts

Contract-Related Maintenance (6% of FMS revenue)

Ancillary maintenance work on Ryder or customer owned vehicles not included

in base contract

On-demand maintenance for large customer owned fleets

Fleet Support Systems (2% of FMS revenue)

Fuel

Insurance

Safety

Regulatory reporting

Technology


Diversified portfolio of customers represents many industries including food & beverage,

transportation & warehousing, housing, business & personal service, and industrial. Ryder has been

successful serving both large and small private fleets.

Current FMS customer data is as follows:

13,500 full service lease/contract maintenance customers

37,700 commercial rental customers

800 operating locations (operating in U.S., Canada, U.K., and Germany)

122,900 full service lease and 37,400 contract maintenance vehicles in service

38,200 commercial rental vehicles in service

At December 31, 2013, Ryder had 532 operating locations, excluding ancillary storage locations,

in 49 states and Puerto Rico. A location typically consists of a maintenance facility or “shop”, offices for

sales and other personnel, and in many cases, a commercial rental vehicle counter. Maintenance facilities

typically include a service island for fueling, safety inspections and preliminary maintenance checks as

well as a shop for preventive maintenance and repairs. Ryder also operates 161 locations on-site at

customer properties, which primarily provide vehicle maintenance.

Ryder has been operating in Canada for over 50 years. At December 31, 2013, Ryder had 34

operating locations throughout 8 Canadian provinces. There are also 13 Ryder-operated maintenance

facilities on-site at customer properties in Canada.

Ryder began operations in the U.K. in 1971. At December 31, 2013, they had 57 operating

locations primarily throughout the U.K. Ryder also managed a network of 491 independent maintenance

facilities in the U.K. to serve customers when it is more effective than providing the service in a Ryder

location. In addition to our typical operations, Ryder supplies and manages vehicles, equipment and

personnel for military organizations in the U.K. and Germany.


Supply Chain Solutions (for year- end 2013, global business accounted for 37% of consolidated

revenue)

Professional Services (5% of SCS revenue)

Strategic consulting & decision support

Solutions engineering

Network modeling & optimization

Total landed cost

Lean Six Sigma

Distribution Management (31% of SCS revenue)

Order fulfillment

Warehouse and distribution center operations

Inbound materials management

Outbound product support

Reverse logistics

Vendor managed inventory

Kitting, packaging & assembly

Dedicated Carriage (57% of SCS revenue)

Turnkey transportation service

Drivers

Vehicles

Routing & scheduling

Management & administrative support

Transportation Management (7% of SCS revenue)

Freight procurement & contract management as agent


Shipment planning and execution

Freight brokerage

Freight bill audit and payment

Origin/destination services

SCS services currently operate in major industries including Retail & Consumer Packaged Goods

(36% of 2013 operating income), Automotive (28%), Hi-Tech (16%), and Industrial among others (20%).

Ryder Systems supplies comprehensive solutions for over 670 customers with a focus on customers with

sophisticated service requirements who require specialized equipment, specialized handling, or integrated

service. Ryder Systems currently lease and operate over 35 million square feet of warehouse space in

North America and Asia.

At December 31, 2013, Ryder has 473 SCS customer accounts in the U.S., most of which are

large enterprises that maintain large, complex supply chains. Most of the core SCS business operations

are geographically located to maximize efficiencies and reduce costs. Managed warehouse space totaled

approximately 28 million square feet for the U.S. and Puerto Rico.

In Mexico, Ryder has 99 SCS customer accounts and managed warehouse space totaling

approximately 6 million square feet. The Mexico operations offer a full range of SCS services and

manage approximately 9,700 border crossings each month between Mexico and the U.S. and Canada,

often highly integrated with Ryder’s distribution and transportation operations.

In Canada, Ryder has 59 SCS customer accounts and managed warehouse space totaling

approximately 1 million square feet. Given the proximity of this market to U.S. and Mexico operations,

the Canadian operations are highly coordinated with their U.S. and Mexico counterparts, managing cross-

border transportation and freight movements.

Asia is a key component of Ryder’s retail strategy, where they have a network of owned and

agent offices, with headquarters in Shanghai. Ryder has 40 SCS customer accounts and managed

warehouse space totaling approximately 280,000 square feet, primarily in Singapore.


Human Resources

Ryder Systems has approximately 28,900 full-time employees worldwide which makes

the human resource department a vital piece of the company. The head of the human resource department

for Ryder Systems is Vice President and Chief Administrative Officer Gregory Greene. Mr. Greene

joined Ryder in August 1993 and has since held various positions within Human Resources. The Human

Resource department focuses on hiring a very wide range of individuals in order to create a diverse

workplace which enables Ryder to attract and retain the best talent to meet and exceed customer

expectations. Ryder implemented a Diversity & Inclusion Council, made up of 11 cross-functional

leaders, in order to guide the company in achieving three key goals: becoming an employer that attracts

diverse talent, developing the diverse talent they already have and driving innovation and growth through

diversity of thought.

Information Systems

Ryder offers a broad range of innovative logistics management services that are designed

to optimize a customer’s fleet management and supply chain and address key customer business

requirements. For example, with their fleet management solutions business segment, Ryder offers two

complimentary information systems that add intrinsic value to their services. RydeSmart Telematics is

full-featured, cloud-based software which integrates GPS technology with on-vehicle computers to lower

operating costs and improve customer service. Ryder also offers their customer web portal, a web based

fleet management tool that provides customers with 24/7 access to key operational and maintenance

management information about their fleet.

Management

Ryder Systems’ management starts at the top with their Board of Directors and Chief

Executive Officer, Robert Sanchez, who is in charge with overseeing the management of the company

and its business to enhance long-term value for shareholders and ensure the continuity and vitality of the

company. Ryder employees throughout the world are expected to conduct business in accordance with the


highest ethical standards. These expectations are reinforced in the companies Principles of Business

Conduct. The principles apply in every location in which Ryder does business around the world, as well

as to every employee, officer, director and member of the Board of Directors. Ryder’s employees know

that Ryder's ability to remain an ethical leader in the business community rests on the actions of every

single employee in the organization.


Marketing Audit

Product

Ryder operates in two business segments, both offering differing logistics solutions for their

customers.

Fleet Management Solutions (63% of revenue)

FMS provides full service leasing, commercial rental, contract maintenance, and contract-related

maintenance of trucks, tractors and trailers. Ryder Systems acquires, manages, maintains, and disposes of

fleet vehicles for commercial customers principally in the U.S., Canada, and the U.K.

Supply Chain Solutions (37% of revenue)

SCS provides comprehensive logistics and supply chain consulting solutions from industrial start

(raw material supply) to finish (product distribution), encompassing dedicated, distribution, and

transportation services throughout North America and Asia. Ryder Systems’ customers range from small

business to large international enterprises.

The logistics solutions offered by Ryder are designed to support the differentiation of their brand

against their competitors. In order to appeal to businesses and business models that are active in product

distribution and fleet management, Ryder strives to create logistics services that improve efficiency and

productivity for the customized needs of their customers

Price

Based on number of customers reported in the annual investor report, the fleet management

solutions business segment has approximately 51,600 customers while the SCS business segment has 670

customers. Based on percentage of revenue distribution by segment, it can be calculated that the average

revenue per customer within the fleet management solutions segment is approximately $80,000. For the

supply chain solutions business segment, average revenue per customer is calculated at $3.5 million.

These numbers makes sense, as they are the cost differences between simply outsourcing the management


of your company’s fleet to Ryder compared to the full dedicated fleet carriage that Ryder offers in their

supply chain solutions.

Place

For fleet management solutions, Ryder has 532 operating locations in 49 states and Puerto Rico,

34 operating locations throughout 8 Canadian provinces, and 57 operating locations primarily throughout

the U.K.

For supply chain solutions, Ryder has 473 SCS customer accounts in the U.S., 99 SCS customer

accounts in Mexico, 59 SCS customer accounts in Canada, and 40 SCS customer accounts in Asia.

Ryder’s global dispersal allows them to service and operate based on customer needs, while also

being able to have effective and efficient control of local, regional, domestic, and international operations.

Promotion

Since customization and efficient and cost effective services are the differentiating factor in the

industry, Ryder strives to offer specialized capabilities and proactive solutions based on deep expertise

from teams in key industries that can build profitable and long lasting relationships with current and

future customers.


Financial Analysis

In order to perform the analysis, financial information was taken from Ryder’s 2011, 2012, and

2013, annual financial reports. Various types of financial ratios were used to evaluate the company’s

financial performance over these three fiscal year ends. The types of ratios used in the analysis were:

liquidity, profitability, activity/efficiency, and solvency.

Liquidity

The following ratios are measures of Ryder’s short-term ability to pay maturing obligations. Four

different liquidity ratios were used in the analysis: current, quick, cash ratio, and working capital. Overall,

Ryder is not liquid.

Current Ratio: the primary users of this financial ratio are short-term creditors. In general, a

higher current ratio means there is less credit risk associated with a firm. It is calculated by dividing

current assets by current liabilities. A strong current ratio suggests that a firm has a sufficient amount of

current assets to cover its current liabilities. Ryder has had poor current ratio, currently 0.86 and below

1.0 for the past three fiscal years. Compared to the industry average, 1.85, Ryder has a poor working

capital relationship as it holds a low level of current assets compared to current liabilities.

Quick Ratio: the main users of this ratio are short-term creditors. It is similar to the current ratio

in the sense that it reflects the amount of current assets available to cover current liabilities. However, in

comparison, the quick ratio is more effective because it provides the actual amount of current assets

available to cover current liabilities since it does not include inventory in the calculation. The quick ratio

is obtained by dividing accounts receivables, short-term investments, and cash and cash equivalents, by

current liabilities. By eliminating inventory from the formula, the calculation does not overstate a firm’s

ability to meet its short-term demands. Ryder has relatively very little inventory (less than 1.0% of total

assets), therefore the quick ratio values are very similar to the quick ratio. In 2011, 2012, and 2013, Ryder

had quick ratios of 0.87, 0.77, and, 0.81 respectively. As previously mentioned, these results are not

healthy and show that Ryder is not liquid.


Cash Ratio: The cash ratio expresses how much cash and cash equivalents a firm have available

to meet its current liabilities. The ratio is found by dividing “cash and cash equivalents” by current

liabilities. Ryder had cash ratios of: 0.05, 0.05, and, 0.09 for its past three fiscal year ends. As these

figures suggest, cash and cash equivalents represent a very small portion of Ryder’s current assets;

thereby Ryder cannot cover short-term debt.

Working Capital: this ratio is a measure of the difference between a firm’s current assets and

current liabilities. It is computed by subtracting current liabilities from current assets. In accordance with

the previous liquidity ratios, Ryder’s working capital ratios support the notion that the firm does not have

enough short-term assets to cover its short-term debt. In 2011, 2012, and 2013, Ryder’s working capital

has been a net negative and decreasing at -$85,650, -$232,428, and -$168,646 respectively.

Overall liquidity grade: D

Solvency

This section provides ratios that are primarily used by long-term investors and creditors because

they provide a measurement of a company’s ability to meet its long-term obligations. Solvency is relevant

in terms of deciding whether or not a company has the ability to stay in business in the long run. The four

main solvency ratios are the debt ratio, debt-to-equity, long-term debt-to-equity, and times interest earned.

Debt Ratio: the overall measurement of how many assets a firm has in proportion to its liabilities.

Moreover, it represents the portion of assets that are financed through issuance of debt and other financial

arrangements. This measurement is computed by dividing total liabilities by total assets. Most long-term

creditors and investors consider the optimal result for this measure to be 50 percent. From 2011-2013,

Ryder had debt ratios of: 79 percent, 82 percent, and 82 percent, respectively. These values show that

Ryder finances many of their assets through issuance of debt, and point out the significant risk associated

with that strategy.

Debt-to-Equity: the relative ratio of total debt to common shareholder’s equity. It measures the

degree to which the assets of the business are financed by liabilities and shareholder’s equity; lower


values for this ratio are preferred indicating less risk. Thus, this ratio indicates the degree of protection to

creditors in case of insolvency. The higher this ratio is the more a firm is relying on debt as opposed to

equity, which in the long run, could lead to solvency issues. A value of 1.00 means that half the firm’s

assets are financed by debts and the remaining half by equity. When the value is higher than 1.00, more

assets are financed with debt compared to equity. The value is calculated by dividing total liabilities by

common shareholders’ equity. As supported by the debt ratio, Ryder’s debt-to-equity ratios were: 3.80,

4.67, and 4.78 over the past three fiscal years, suggesting that debt is used in the company structure much

more so than equity. However, the decline suggests that either debt is decreasing or more equity is being

distributed. In addition to their poor liquidity, solvency issues compound Ryder’s financial situation.

Long-Term Debt-to-Equity: the measurement of assets financed through long-term obligations

against shareholders’ equity. Similar to the debt-to-equity ratio, lower values for this ratio are preferred.

Lower values mean there is less credit risk associated with the firm, and that the firm is issuing more

equity than debt to obtain assets. To determine the value for this ratio, divide a firm’s total amount of

long-term liabilities by its common shareholders’ equity. In 2013, Ryder had a ratio of 2.07. 2011 and

2012 had ratios of 2.35 and 2.36, respectively. These values continue to indicate that the majority of

Ryder’s assets are financed through long-term debt. If the debt is not managed properly, this could prove

to be financially detrimental.

Times Interest Earned: this ratio reflects the ability of a company to cover its interest expense for

a given period. In order to obtain a value for the ratio, one must determine the firm’s operating income

before interest and taxes (EBIT) to reflect the amount of income available to cover interest expense. It is

preferred to have a value greater than 1.0 for this ratio. The higher the value, the more EBIT a firm has to

cover its interest expense, meaning it has a sufficient amount of funds to pay for using debt as a means of

financing. The formula for this ratio is EBIT divided by interest expense. Over the past three fiscal years

Ryder has shown ratios above 2.0, signaling that their debt financing is generating earnings twice that of


interest. Although carrying a lot of risk though debt financing (rather than through equity) is very risky,

Ryder has consistently shown that they are able to properly manage that debt.

Overall solvency grade: C

Activity

The following section contains ratios that are measures of how effectively a firm is using its

assets. The activity ratios used in this analysis are: asset turnover, inventory turnover, accounts receivable

turnover, and working capital per sales.

Total Asset Turnover: provides a measurement of how effectively a firm is using its assets to

generate revenue. A high ratio indicates a firm is using its assets effectively. This ratio is calculated by

dividing net sales over the average total assets. Based on the fairly consistent industry average of 0.50,

Ryder has been effectively used its assets to generate sales. Its asset turnover ratio has been good: 0.79,

0.75, and 0.71, for the 2011, 2012, and 2013, respectively. The reason for the decreasing ratios can be

attributed to large acquisitions that Ryder has made in the past few years, significantly enlarging their

total assets.

Inventory Turnover: numerical measure of how quickly inventory is turned over or sold. In

general, the higher this ratio is the better. Higher turnover means that more sales are being generated.

Inventory turnover is obtained by dividing cost of goods sold by the average inventory. However, as

Ryder is primarily a logistics services provider, their inventory turnover only represents the sale of trucks

and equipment from the entirety of their fleet, which is relatively small compared to their true revenues.

The past three fiscal years have seen an increase in inventory turnover, with 2011, 2012, and 2013 values

being 72.91, 78.00, and 79.27 respectively.

Accounts Receivable Turnover: indicates a firm’s receivables’ quality and the success of the firm

in collecting outstanding receivables. It should be noted that greater turnover gives credibility to the

current and quick or acid test ratios. It is found by dividing net credit sales by average net receivables.

Ryder’s accounts receivables turnover were 8.02, 8.07, and 8.26 for 2011, 2012, and 2013, respectively.


This shows that Ryder has effective extension of credit as well as collection of receivables with their

customers.

Working Capital per Sales: indicates if a company is effectively using working capital to generate

sales. It can be found by dividing working capital by sales. Working capital turnover was 0.03, 0.04, 0.01

and for 2011, 2012, and 2013, respectively. It should be noted that Ryder working capital is a net

negative. This shows that Ryder does not utilize working capital to fund operations resulting in sales.

Rather, it liquidity and solvency ratios have shown that debt is the primary financial driver of sales.

Overall activity grade: B

Profitability

This section will examine Ryder’s profitability ratios. Profitability ratios are measures of the

success of an enterprise for a given time period. Several different ratios were used to determine Ryder’s

profitability. These included: gross profit margin, net profit margin, return on total assets, return on

equity, earnings before interest & taxes (EBIT), and earnings per share (EPS).

Gross Profit Margin: obtained by dividing a firm’s gross profit by its net sales revenue. It reflects

the percentage of sales dollars retained after accounting for the costs of goods sold. Ryder’s gross profit

margins were below average from 2011-2013. The gross margin has remained at a steady 20% over the

past fiscal years, suddenly dropping from a healthier 47% between year-end 2010 and 2011. Compared to

the industry average of 35.7%, these are low percentages and bring to light large operational costs that

Ryder is facing.

Net Profit Margin: indicates profit rate. It is calculated by dividing net income by net sales.

Ironically to the gross profit margin, the net profit margin has been growing steadily over the last three

years from 2.81 in 2011, 3.36 in 2012, to 3.70 in 2013. The results of this ratio suggest that Ryder has had

difficulty quelling their costs. It can be ascertained from the low gross profit margin that operational costs

such as cost of lease and rental of equipment, cost of services, and fuel expenses are much more


expensive that selling, general, and administrative costs. It is worth noting that, along with these costs

difficulties, Ryder’s net profit is significantly below the industry average 6.20%.

Return on Total Assets: indicates the rate of return on total assets. It is computed by dividing net

income by average total assets. Ryder has also shown growth in this area as well. Although this number

often suggests a firm is not effectively using its assets to generate sales, further analysis must be

performed when using this ratio to properly evaluate a company’s financial performance. Compared to

the industry average 0.88%, Ryder has shown consistent performance from 2011-2013, with asset return

at 2.38%, 2.65%, and 2.73%, respectively. Generating sales does not appear to be the issue for Ryder.

Managing and lowering costs is the more challenging and pressing matter.

Return on Equity: is the percentage a company earns on its total equity in a given year. It is

calculated by dividing net income by total shareholder’s equity. Return on equity shows how much profit

a company generates on the money shareholders have invested in the firm. The mission of any company

is to earn a high return on equity. Ryder has had a solid yearly return on equity of 12.47%, 15.08%, and

14.14% (during the 2011-2013 fiscal years, respectively) that is consistently above the industry average.

EBIT (Operating Income): represents a measurement of the amount of income available after

allocating for costs of goods sold, selling expense, general and administrative expenses, depreciation

expense, amortization expense, and asset impairments. It is calculated by dividing EBIT by net income. In

2011, 2012, and 2013, the Ryder’s EBIT ratios were 4.62%, 4.84%, and 7.64%, respectively. Fortunately,

their interest expenses have stayed relatively low at 2.20%, 2.25%, and 2.14%, respectively. Should they

stay consistently low, Ryder will still be able to operate at a net profit.

Earnings per Share (EPS): provides a measurement of net income available to common

shareholders after issuing preferred dividends. The numerator for the ratio is net income minus preferred

dividends, while the denominator is the weighted-average number of common shares outstanding.

Ryder’s shareholders have received increasing EPS for the past three years: $3.31 in 2011, $4.11 in 2012,

and $4.57 in 2013.


Overall profitability grade: C


Competitive Environment

Macro

Political

The U.S. government has a high degree of influence in the logistics and transportation

industry. Political influence is divided into two major segments, Federal and State. At the Federal level,

regulation rests on the U.S. Customs Service and the Department of Transportation. They impose

regulations on many aspects of the industry including hours of service for drivers, freight rates, the

establishment of shipping routes, and safety guidelines. At the State level, the Public Utilities

Commission and the Department of Motor Vehicles are the two major players. The PUC regulate

intrastate trucking while the DMV deals with the registration of vehicles and licensing of drivers. The

Tariff and Licensing Branch of the PUC implement tariffs, another major regulatory factor at the state

level. The contract carrier (within the SCS, Ryder Systems) is required to file tariff rates and contract

rates schedule with the PUC. The tariffs are dependent on the classification of the goods, type of load,

weight, and the distance fright is to be hauled.

Economic

Ryder's business is impacted by economic and market conditions. 2013 was a period of

moderate economic recovery following a period of economic softness and uncertainty. Although demand

for commercial rental has appeared to stabilize, rental demand may again decline unexpectedly in 2014.

In a strong economic cycle, there is generally more demand for fleet management and supply chain

services. In a weak or volatile economy, demand for services decreases and is inconsistent and

considerably more unpredictable. During a protracted or severe economic downturn, customers are often

unwilling to commit to a full-service lease or long-term supply chain contract. Because commercial rental

and used vehicle sales are transactional, they are more cyclical in nature, and results can vary significantly

in both the short- and long-term.


The current state of inflation is stable at 1.6% over the past 5-year period. Annually, the

transportation industry faces little inflation of 0.5%. However, the past 10-year period has faced a 37%

inflation rate; while the past 30 year period has seen inflation at 109%. This is encouraging, as the

transportation industry is facing steady growth.

Diesel fuel prices represent the largest expense for trucking companies other than labor

costs and can account for 25% of total operating costs of a single business. On average, 38 billion gallons

of diesel move 10 billion tons of freight annually. In the past 5-year period, fuel oil and other fuels have

inflated 149% whereas the past 10-year period has seen an inflation of 240%. Current developments in

American natural gas may alleviate these startling trends, but it remains to be seen what the true economic

impact will be.

Seeing as Ryder Systems operates with high debt, interest rate fluctuations are a huge

factor in the health of the company. The current state of the economy is quite stable, and there are no

signs of interest rates rising significantly in the near future.

Socio-Cultural

Seeing as Ryder Systems is a business-to-business organization, socio-cultural factors

such as demographic trends, distribution of education and income, and forces driving consumer attitudes

and opinions have minimal impact in the logistics and transportation industry.

Technological

Technologically speaking, there is seemingly unlimited potential for innovation

throughout the Logistics and Transportation industry. Where it is logistic innovation in cloud computing

and integrated networking, or transportation innovation in alternative fuels and more efficient

consumption of those fuels in new engines; there appears to be no limit to the application of technological

innovation throughout the industry. The most recent and significant trends are the development of supply

chain software s that are simpler and easier to use and increased demand in transparency among carriers,


3rd-party logistics, and shippers. This demanded to provide constant visibility would make it necessary

for all parties to invest in technological infrastructure to support a totally transparent supply chain.

Environmental

The emergence of natural gas as an alternative fuel is still in its infancy, but the

technology is now viable, and a geographic footprint is emerging in several industry corridors. Several

large trucking companies and shippers are early adopters of innovative systems that take advantage of the

emerging resource; the price differential in natural gas technology versus diesel engines is making it more

attractive than ever from an investment standpoint. A nationwide network is not yet established, but it is

well underway.

The Environmental Protection Agency, among related agencies at the state level, is keen

to implement and enforce strict regulations in the transportation industry. Continued and consistent

compliance is a must throughout the industry.

Global

As economies are recovering and stabilizing throughout the world, businesses of all sizes

are willing to expand and/or improve upon their logistics and transportation. Currently, Hertz Global

Holdings, Inc. holds a significant market share in the global logistics and transportation industry.

However, they are mainly staked in North America and Europe; there is great promise in emerging

industries throughout Southeast Asia and South America.

Industry

Logistics and Transportation

Ryder operates in two subsectors: Logistics Services and Trucking. In general, the Logistics and

Transportation industry is auspicious; despite high competitiveness and high bargaining power of the

buyers. Due to Ryder being well positioned as a major player in the logistics services and trucking, the

current state of the industry is favorable to them.


Porter’s 5 Forces Model

Threat of New Entrants: Low

At the local level, there are little to no barriers to entry into the transportation industry.

Access to distribution channels is readily available and there is little degree of product

differentiation as smaller organizations fight in low-cost strategies. However, at the regional,

national, and global scales (that Ryder Systems operates in) the immensities of entering the

logistics and transportation industry become apparent. At such a macro level, economies of scale

are very large and result in an extremely capital intensive structure. The competitive structure is

built around differentiation and government policies are strictly implemented and enforced.

Threat of Substitutes: Low

There are three major substitutes for trucking in the transportation industry:

Trains

Relatively slow


Cheap

Good for coast-to-coast shipping

Very limited destinations due to railways

Planes

Fastest means of transportation

Expensive

Good for coast-to-coast shipping as well as global shipping

Limited destinations due to airports

Boats

Slowest means of transportation

Very cheap

Good for global shipping

Limited destinations due to ports

Trucking offers efficiency and cost effective advantages over major substitutes in the

industry. They are a relatively fast means of transportation while at a competitive price point. The

greatest advantage is the access to seemingly unlimited distribution channels and destinations, as

the U.S. highway system greatly favors the trucking sector of the transportation industry.

Power of Buyers: High

Due to the specific nature of the logistics services, buyers have some power within the

logistics and transportation industry. Logistics are highly customized from customer to customer,

and it is up to Ryder Systems to appeal to those needs. For fleet management solutions, buyer

switching costs are relatively low (compared to supply chain solutions) which is generally not

favorable and is a point of differentiation within the competitive environment. Although


substitute services are not a threat to trucking, access to those substitutes are available to buyers

and may be required to integrate into logistics solutions.

Power of Suppliers: Low

The supply and maintenance of the automotive industry is an expansive and competitive

environment. There are little threats as Ryder Systems acquires the majority of their trucks by

purchasing them from their customers, rather than direct from the truck manufacturers. This

process increases the diversity of the trucking fleet, allowing Ryder to be less dependent on a

fewer number of automotive suppliers. One trend to take note of is the introduction of alternative

fuels and the improvement of fuel efficiency in engines. As the automotive industry advances,

those in the logistics and transportation industry must react and keep up-to-date.

Intensity of Rivalry: High

Ryder is in an extremely competitive industry and subsector, with several major

competitors and a large number of smaller, localized competitors. Many of the sales and revenues

that logistics and transportation suppliers receive are from long-term contracts. In order to win

over customers, both differentiation and cost effectiveness are major factors within the industry.

The logistics and transportation industry is very stable, but there are trends for continued global

growth as well as continued acquisitions of smaller organizations by the larger players.

Direct


Hall’s Competitiveness Model

After the analysis of relative delivered costs and differentiation, Ryder has been placed

on the line of Zone of Competitive Battle and Danger Zone. Since Ryder is currently pursuing

improved debt management strategy and focusing on improving operational efficiency in the

form of decreasing operating costs or increasing revenues, it hopes to move away from the

Danger Zone and towards the Zone of Competitive Battle. Ryder’s goals are to implement key

marketing and sales strategies to increase revenue. They also have goals to deliver consistent,

industry-leading and cost-effective solutions to customers through continued process

improvement and re-design, productivity initiatives, and technology improvements, thereby

increasing Ryder’s differentiation amongst their competitors and pushing them into the Zone of

Competitive battle.

Internal

In general, Ryder’s internal operations are favorable. Their general

administration, human resource, efficient and effective operations for their customers, and


customer services are great strengths for Ryder. However, their operational costs and

procurement expenses from acquisitions are hurting their profit margins.

McKinsey’s Seven S’s

Style

Ryder Systems’ leadership style defines itself by focusing on customer service, sound

ethics, corporate governance and integrity in order to accelerate business growth and success.

Ryder puts an emphasis on creating a productive and fun workplace where employees are

challenged to meet daily goals with collaborative thinking and working together to foster

innovation, because differences in outlook, perspective and background add value. Employees

believe that Ryder encourages a team oriented culture with a supportive management. Also

employees believe that Ryder’s does a great job in preparing them for on the job work through

their training programs. Ryder employees throughout the world are expected to conduct business

in accordance with the highest ethical standards.


Staff

Ryder System’s staff is created to bring diversity and inclusion into the company. Ryder

looks to hire self-motivated individuals who will power their whole culture of customer service

innovation and collaboration. Ryder employees are the overall driving force on sustaining a

diverse and inclusive workplace and engaging community partnerships and diverse suppliers to

ensure long-term business success. Ryder makes all U.S. based employees complete their training

titled “The Inclusion Journey: Delivering on the Potential of a Diverse Workforce”. The course

focuses on developing individual skills that enable employees to work effectively in a diverse

workplace with people of different backgrounds, ethnicities and values. Ryder believes “As the

world becomes more mobile and connected, as demographics change and our customers become

more diverse, it’s essential to have a workforce of individuals who contribute a variety of

approaches and perspectives.”

Skills

Ryder’s wide range of skills as a company gives them differentiation power within the

market as it adds value to their services. Ryder provides effective and efficient operations within

both of their business segments (Fleet Management Solutions and Supply Chain Solutions) while

providing their customers with top of the line customer service. Ryder uses their excellent

customer service to gain further, more established business while continue to grow through new

product innovation. Ryder’s has been named a top five third party logistics provider by “Inbound

Logistics Magazine” for the last 16 consecutive years.

Strategy

Ryder Systems’ grand strategy is to grow fleet management and supply chain outsourcing

services by targeting private markets (utilizing FMS) and key industry verticals (utilizing SCS)


with innovative solutions, operational excellence, best in class talent and information technology.

In order to reach Ryder’s goal of getting future customers to outsource their fleet management

and supply chain need to Ryder Systems they need to excel in a number of crucial priorities. One

priority is to improve overall operations by continuous productivity and process improvement to

solve customer problems. Developing innovative products, solution, and support services is

another key priority that will deliver value to targeted customer segment and strengthen customer

relationships. Another priority is to increase overall sales and accelerating the growth rate through

effective marketing and product innovation. Attracting, developing and retaining the best talent

while developing a culture where leaders engage their people to innovate, pursue the vision and

build on core values. The final priority is to improve operational efficiencies through information

technology.

Structure

Ryder System’s upper management team is combined of talented and experienced

individuals. Most of Ryder’s upper management team have worked within the company for 20+

years and have the companies’ mission, goals and objectives embedded in their blood. In the past

5 years Ryder has brought in individuals who held upper management positions in very

successful companies to improve the diversity and success of the company. Those individuals

include the President of Global Fleet Management Solutions, Dennis Cooke who joined Ryder

after a long career with GE and Senior Vice President and Chief Marketing Officer, Karen Jones,

who joined Ryder after a successful career DHL.

Systems

Ryder Systems get through day to day operations by providing cost effective service to

their customers. With Ryder primarily providing service to their customers, having cost effective


service not only benefits their customers but themselves. Ryder has a successful capital

budgeting system due to continually operating well within the limitations of its committed

primary lending facilities.

Shared Values

Ryder Systems was founded on the common belief that service is everything: delivering

value through personalized attention, maintaining personal relationships, and fostering trust,

honesty and respect. Ryder believes that a diverse and inclusive culture enriches their ability to

serve their customers, create a more productive and engaging workplace for employees and

accelerates business growth and success. As a diverse organization with operations ranging from

one-man satellite truck leasing hubs to large corporate offices and logistics centers, keeping

everyone connected is essential. Ryder’s shared values bring together and unite them in team and

spirit.


Value Chain

Seeing as Ryder offers a complete service, rather than a product; a complete

analysis of the value chain was performed. General administration and human resource

management are seen as beneficiaries to the value chain, as explained by the organizational

culture, leadership, and McKinsey’s model. Technological development was given a negative

valuation due to the fact that, although Ryder has successful technological initiatives and

services, they do not invest in technological research and development. Although they do not

currently have the overhead capital to do so based off of the financial analysis, this limiting factor

compounds their limited margins. Procurement was given an average valuation due to the fact

that Ryder grows through acquisitions; however, these acquisitions are costly and add to

operational expenses in decreasing profit margins.

Ryder’s operations are essentially the inbound and outbound logistics of their

customers, so the three were combined and given an average valuation. Ryder is well known for

offering exceptional service and cost effective and efficient solutions to their customers. This


gives them differentiating power, which adds to their revenues. However, their operational

expenses are high, partially negating some of that added revenue differentiation brings. Marketing

and sales is given an average valuation because, although they have distributed operations and

marketing potential, their sales have remained stagnant the past few years. If Ryder wants to

increase their margin, they need to continue to develop and implement effective marketing and

sales strategies. Ryder’s largest strength, customer service, greatly adds value to their brand.

Their account managers throughout local, regional, and domestic areas work with teams that have

expertise in specific target industry verticals. This expertise brings specialized and customer

specific solutions while also building long term relationships that result in revenues to Ryder.

Overall, Ryder’s operations, along with value added general administration and

customer service, create substantial revenue streams. However, their profit margins are being

diminished by high operational expenses. They are given an overall average rating, due to the fact

that Ryder’s margins are still positive, despite being low.


SWOT Analysis

Strengths

General

Ryder System Inc. is a global leader in transportation and supply chain management

solutions; providing customers with a variety of fleet solutions that are designed to improve their

competitive advantage. They also provide a large selection of used trucks, tractors and trailers through a

used vehicle sales program. Ryder’s services are recognized as best in class in the market, having been

named a top five third party logistics provider by Inbound Logistics magazine for the last 16 consecutive

years.

Marketing

Ryder has dedicated account managers that touch base in local and regional areas

throughout the domestic and international market. They differentiate themselves by providing deep

expertise and customized services to targeted industry segments. The primary industries served are

automotive, retail and consumer packaged goods, high-tech and industrials.

Finance

Although operations are financed with high debt, Ryder has consistently shown their

capability to pay interest and stay financially able to manage their debt. Over time, Ryder is gradually

decreasing their debt and receiving increased financing from equity. For their committed primary lending

facility, the Global Revolving Credit Facility, Ryder continues to operate well within limitations. Ryder’s

debt to net worth and secured indebtedness is 177% and $318 million, with the maximum allowable

balance being 300% and $2.59 billion, respectively.

Operations

Ryder serves over 650 customers in North America and Asia, markets that have

significant growth opportunities for outsourced logistics. Ryder provides customers with a variety of fleet

solutions that are designed to improve their competitive position. By outsourcing these services to Ryder,


customers can focus on their core business, improve their efficiency and productivity, and lower their

costs. Ryder is known for having effective and efficient operations within both of the FMS and SCS

business segments, as well as excellent customer service. This gives them differentiation power within the

market as it adds value to their services. Having effective and efficient operations also allows Ryder to

tightly control their operating costs, thereby ensuring optimal gross profit.

Information

Ryder is continually upgrading and consolidating their systems; including making

changes to legacy systems, replacing legacy systems with successor systems and acquiring new systems

with new functionality. These information systems add great value to the services that Ryder provides to

customers.

Management

The organizational structure is working exceptionally well. Ryder has employees all over

the world, in North America, Canada, Europe, and Asia. These employees are organized by labor unions

such as the International Brotherhood of Teamsters, the International Association of Machinists and

Aerospace Workers and the United Auto Workers and their wages are governed by 93 labor agreements

that are renegotiated periodically. The CEO’s and CFO’s are have recently changed, bringing new and

exciting perspectives to the table. Ryder considers their relationship with employees to be good, they

have never experienced a material work stoppage or a strike. Safety is highly stressed by Ryder; training

is a critical component of the safety program. There are monthly safety training programs to ensure the

highest quality for employees.

Weaknesses

General

Although Ryder is successful at providing effective and efficient services to their

customers, Ryder faces some weaknesses associated with the nature of doing business in the logistics and


transportation industry. Their largest weakness is the significant amount of carried debt that gives them

risk in future operations.

Marketing

Due to the long-term commitment nature of the logistics and transportation industry,

Ryder must fiercely compete for customers, especially the larger, more established organizations.

Although Ryder has dedicated account managers that touch base in local and regional areas throughout

the domestic and international market, Ryder should look for ways to attract more customers and, in turn,

generate more sales.

Operations

Since Ryder is managing logistics for other businesses, should these other businesses

have poor performance or poor organizational management, Ryder could be affected. For example, should

a customer mix up arrival times for their shipments, Ryder would be at great risk for increased expenses

and loss in revenue.

Finance

Ryder carries significant amounts of debt, totaling over $3.8 billion. If they were to add

additional debt, their cost of borrowing could increase significantly. This also makes them at risk of

interest rate increases due to fluctuations in the economy. Should interest expenses rise above the

available operational income, Ryder could face serious problems that include possibilities of default and

bankruptcy.

Information

Currently, Ryder diverts little to no funds to internal research and development.

Advances in technology require increased investments to remain competitive, Ryder’s customers may not

be willing to accept higher prices to cover the cost of these investments, and their reputation may suffer if


outages, system failures or delays in timely access to data occur in legacy information technology systems

that support key business processes.

Management

Ryder may face difficulties in attracting and retaining drivers and technicians and may

also face issues with union employees. Ryder hires drivers primarily for the SCS business segment.

There is significant competition for qualified drivers in the transportation industry, and due to increased

government intervention by the Compliance, Safety, Accountability (CSA) program, the industry's pool

of drivers may shrink as those drivers with unfavorable scores could leave the industry. As a result of

driver shortages, Ryder could be required to increase driver compensation, let trucks sit idle, utilize lower

quality drivers or face difficulty meeting customer demands, all of which could adversely affect growth

and profitability. Similarly, Ryder hires technicians in the FMS business segment to perform vehicle

maintenance services on the lease, contract maintenance and rental fleets. Recently, there has been a

decrease in the overall supply of skilled maintenance technicians, particularly new technicians with

qualifications from technical programs and schools, which could make it more difficult to attract and

retain skilled technicians. Ryder has 3,300 employees that are organized by labor unions whose wages

and benefits are governed by 93 labor agreements that are renegotiated periodically. Some of the

industries in which Ryder currently engages have experienced a material work stoppage, slowdown or

strike. Ryder’s business and operations could be impacted in the event of labor strikes or work stoppages

involving employees organized by labor unions in both FMS and SCS business segments.

Opportunities

General

Outsourced logistics is a market with significant growth opportunity. More sophisticated

supply chain practices are required as supply chains expand and become more complex, product needs

continue to proliferate and companies look for lower cost supply chain alternatives. Global logistics is

approximately an $8.3 trillion market, of which approximately $643 billion is outsourced. Logistics


spending in North America and Asia equates to approximately $3.2 trillion, of which $275 billion is

outsourced.

Economic

Due to globalization, demands for commercial transportation worldwide have increased.

Economic developments in recent years have led to the creation of complex company networks and

systems of goods flow - in the process, the globalization of procurement, production and sales as well as

the division of labor have increased. In addition, the complexity of international logistics systems in many

sectors has grown as a result of increasing product variations and differentiation. Another factor is that

many companies are concentrating on their core skills and are reducing their vertical integration. The

efficient management of the resulting global flows of goods has boosted both the business and economic

significance of logistics.

Technological

Alternative fuel solutions using new technologies are transitioning from diesel fuel to a cleaner,

domestic energy source without the costs, complexity or risks of private ownership. Ryder continues to

evaluate natural gas, electric and hybrid vehicle technology to determine the most viable transportation

solution.

Natural Gas - Dozens of commercial fleets, both large and small, are moving to natural

gas because of its low emissions, low cost and high performance. Natural-gas-powered trucks offer a

variety of environmental and cost-saving benefits. They offer long-term, sustainable fleet advantages to

commercial rental, full service lease and dedicated customers with local routes in high-density regions.

Natural gas is more affordable than diesel fuel and offers improved operational efficiencies and a variety

of benefits. Natural gas is affordable, runs clean, is domestically produced and in abundant supply, which

helps to reduce both environmental impact and dependence on foreign oil.

Electric - The original green transportation option, electric vehicles are powered by

electricity instead of fuel. Electrifying delivery trucks is an ideal approach for high-density intra-city


routes because range is not an issue for battery-electric trucks dropping goods off at convenience stores,

restaurants and retail shops.

Hybrid - Commercially-viable hybrid trucks offer a variety of benefits, both

environmental and financial. Hybrid technology improves fuel efficiency, helps reduce smog-producing

particulate matter and maximizes fuel savings. Plus it helps reduce dependence on fossil fuels. When

traveling at low speeds, the hybrid's electric motor supplies power to the truck, which reduces both fuel

consumption and emissions.

Political/Legal

Should federal and state governments continue to increase regulation and active

enforcement efforts, Ryder will spend money in lobbying in order to influence decisions made by officials

in the government which will ultimately benefit the company.

Threats

General

Ryder operates in a highly competitive domestic and global industry. Most companies

choose to internally manage their own supply chains and logistics operations, although some may choose

to obtain similar or alternative services from other third-party vendors. The top ten SCS customers

generate 43% of revenue. If any of these customers were to leave or go bankrupt, Ryder would have

decreased financial performance. This also allows customers to exert pricing power.

Economic

Ryder's operating results are affected by cyclical economic and market conditions in the

U.S. and globally. In a weak or volatile economy, demand for Ryder’s contractual services decreases and

may be inconsistent and less predictable as customers are often unwilling to commit to full-service leases

or long-term supply chain contracts. Customer uncertainty can serve to increase demand for Ryder’s

transactional services, including commercial rental and used vehicles sales, which do not involve long-


term commitments, these product lines are generally more cyclical due to their transactional nature, and

results can vary in both the short- and long-term. Uncertainty and lack of customer confidence around

macroeconomic and transportation industry conditions may impact Ryder’s future growth prospects,

business, and results of operations could be materially adversely affected.

Technological

Failure to maintain, upgrade and consolidate Ryder’s information technology networks

could adversely affect them, and may be subject to cybersecurity risks which may be beyond their control.

Ryder is continuously upgrading and consolidating their systems, which include making changes to

legacy systems, replacing legacy systems with successor systems with new functionality and acquiring

new systems with new functionality. These types of activities subject Ryder to additional costs and

inherent risks associated with replacing and changing these systems. Advances in technology require

increased investments to remain competitive, and our customers may not be willing to accept higher

prices to cover the cost of these investments, and our reputation with our customers may suffer if outages,

system failures or delays in timely access to data occur in legacy information technology systems that

support key business processes.

Political/Legal

Ryder Systems is subject to regulation by various federal, state and foreign governmental

entities. The DOT and various federal and state agencies exercise broad powers over certain aspects of

Ryder’s business, generally governing such activities as authorization to engage in motor carrier

operations, safety and financial reporting. Ryder must comply with licensing and other requirements

imposed by the U.S. Department of Homeland Security and U.S. Customs Service as a result of increased

focus on homeland security and our Customs-Trade Partnership Against Terrorism certification. Ryder

may also become subject to new or more restrictive regulations imposed by these agencies or other

authorities relating to carbon controls and reporting, engine exhaust emissions, drivers’ hours of service,

security and ergonomics. Increased regulation and active enforcement efforts by federal and state


governments require more stringent and costly operational processes and oversight. Operating in a highly

regulated industry, including worker hours and environmental concerns, exposes Ryder to a variety of

potential fines and penalties that could ultimately lead to the loss of contract that would hurt financial

performance. New regulation could also substantially increase costs.

In summary, due to the industry being favorable to Ryder, there are opportunities available to

continue their successful operations. Ryder strengths slightly outweigh their weaknesses; this is evidenced

by their low, yet still positive net profit margins. Their operations are efficient and effective and add

intrinsic value to the Ryder brand; however, high operating costs and debt financing are glaring

weaknesses. Should operating costs rise due to continued acquisitions, profit margins would shrink and

Ryder would not be able make interest; thereby defaulting on their debt. Should interest rates rise due to

unstable/fluctuating economic conditions, Ryder’s net profit margins would shrink significantly, possibly

bringing them into the negative.


Models for Strategic Analysis

Abell’s Strategy Evolution


Product Life Cycle

Hofer’s Market Life Cycle/Competitive Strength


BCG Portfolio Matrix

Ansoff’s Product/Market Mix


GE 9-Cell Matrix

Dawar & Frost Strategic Options for Local vs Global Competitors


Pearce & Robinson International Strategy Options

Christensen, Berg, and Salter Grand Strategy Matrix

ryder systems, inc. case study: comprehensive business analysis and review

Business

organizational structure

information systems

organizational culture

organizational goals

capital structure

marketing audit

key strategists

human resources