Architecting the Enterprise

A TOGAF Services Provider

ZExpress Case Study Brief

Background
In the face of major changes in market conditions, one US based package delivery company, ZExpress, based in Atlanta, has decided to acquire and merge with a number of European and Asian delivery companies. They wish to create a major force in the distribution and logistics markets and use their brand name and marketing capability, recognised as the best in the industry, to create a single worldwide distribution company, and to seek major new business opportunities. Similarly Pacific Rim Logistics and Home and Colonial Carriers had already decided to merge to form a single new United Package Express for exactly the same reason. This merger has yet to be formally completed. The major drivers for these market mergers are major changes in market conditions: The market leader Global Express Deliveries threatens the survival of these smaller companies A fourfold increase in the price of oil has changed the fundamental economics of the package delivery market An expected requirement to develop plans to minimise or mitigate CO2 and other greenhouse gas emissions. The characteristics of the market leader, Global Express Deliveries, are: Totally global coverage. Ability either directly or through local partnerships to deliver a package to any location on earth. Sophisticated tracking capabilities so that the sender and recipient can track a parcel from origin to destination. A dedicated airline and trucking fleet. Broad market presence. Strategic partnerships with a number of major companies to provide full logistics support to their supply chains. However, as a large company, with a dominant market share, Global Express Deliveries is beginning to show signs of complacency and a lack of agility. ZExpress has proposed to the newly forming United Package Express that they merge together to become one distribution and logistics company and exploit the ZExpress marketing reach. Pacific Rim Logistics and Home and Colonial Carriers are very keen to do this but their plans and investment are already underway to merge with each other. The management and shareholders have agreed to merge the two businesses and leverage the best of each. The Chief Operating Officer of Global Express Delivery has been recruited as the new CEO of ZExpress. He recently resigned from Global Express Deliveries following a difference of opinion with the CEO over corporate strategy. He is tasked with bringing the three companies together to create a single organisation under the ZExpress banner.

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Each of the existing business will take initially assume responsibility for one of the three geographic regions. Pacific and Asia Europe and Africa North and South America ZEXPRESS ZExpress is currently a successful company. It has a good US base and has built its business by being agile and operating only in lucrative markets. Its Executives were formerly business and marketing executives at Global Express Deliveries who found their way blocked by senior management. They have focussed on opening up the US and South American markets. They have been able to build on their inside US market knowledge but they have limited knowledge and capability for expanding outside their American facilities and diversifying further. They see this as a major obstacle to business growth. They are an enthusiastic team and want to spread their wings. However, Global Express Deliveries is increasing its dominance and the recent four-fold increase in the price of oil means that the company is now on the verge of reporting a loss-making quarter for the first time in its history. UNITED PACKAGE EXPRESS Currently consists of two companies: Pacific Rim Logistics - Headquarters in Sydney, Australia. Service all of the major territories around the Pacific Rim, including the major industrialised areas of Asia and North America. Pacific Rim Logistics is currently losing money. It has cash reserves to continue losing money at its current rate for no more than 18 months. Home and Colonial Carriers - Headquarters in Chipping Sodbury. A long standing British company with strong Commonwealth connections which has recently (last 20 years) extended to Western Europe. Home and Colonial Carriers is barely breaking even. Prices set by Global Express Deliveries are lower than Pacific Rim Logistics and Home and Colonial Computers can afford to deliver. Both companies are losing market share. Both companies are expecting to make major redundancies in their operations as a result of the merger. Both companies fleets are getting old and they are looking to replace all their vehicles within the next 2 years. This is becoming a major cost issue for both organisations. They are not currently planning to replace their aircraft fleet so are looking at approaches to keep them in service or alternative services (from, for example, scheduled airlines or contracted air freight)

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The Business Context The new CEO of ZExpress Before being recruited as President and CEO of ZExpress, the new CEO was Chief Operating Officer for Global Express Deliveries, a position he took up a year ago after heading their Asia Pacific operation. Since leaving Global Express Deliveries he has engaged in discussions regarding a strategic partnership with the Bonsai Motor Corporation. Bonsai Motor Corporation has shown an interest in a partnership with ZExpress because they feel that Global Express Deliveries lacks agility and does not show sufficient interest in the potential relationship. On the announcement of the merger, the new CEO explained his vision as follows. I have four business goals for the organisation
1. Increase Revenue - I believe that the combined capabilities of the three companies will enable us to offer a much broader range of services, and enter into strategic partnerships in completely new areas of business. I expect to increase our combined worldwide market share from 12% to 30% over the next 2 years. 2. Reduce Costs - There is considerable duplication between the companies. By eliminating duplication I expect to reduce our costs by 30% in the same period. This will allow us to match Global Express in terms of price. 3. Improve Customer Service Simplification of our systems will enable us to invest in state-ofthe-art services to track packages from pick-up to the point of delivery. We will become the market leader in customer service. 4. To continue to be the most exciting organization for our staff and suppliers to work for and ensure that we retain and grow our resources worldwide to be the best distribution and logistics company there has ever been. Our joint teams are working on an infrastructure that will enable us to be agile and responsive to our customers business needs across the world.

This is an exciting time for the distribution and logistics business. Thank you. The new VP Innovation for ZExpress With the focus on providing a best in-class customer experience, the CEO has created a new post to reflect the importance of broadening the range of services and new strategic partnerships. That this person came from Japan is significant and reflects the importance placed by the CEO on building a relationship with Bonsai Motor Corporation. He is also charged with investigating strategic partnerships with 21C-COM, a 3rd generation cellular telephony provider.

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Bonsai Motor Corporation Bonsai Motor Corporation is a wholly owned subsidiary of one of the major Japanese car makers. It has been created to respond to a worldwide demand for a completely new approach to motoring in the light of increasing oil prices. The Bonsai Cron (pronounced mu-cron) is a new small lightweight three wheeler car, built in India, based on the design of the auto-rickshaw that is ubiquitous through most of Asia. With a hybrid battery/petrol design this vehicle will accommodate the driver and two passengers. The design has been updated to
Meet US and European emission control regulations Meet US and European safety regulations Provide protection to passengers against most weather conditions

The vehicle has been demonstrated to travel in excess of 120 miles on a US gallon of petrol. Bonsai Motor Corporation is seeking a strategic partnership with a global logistics company for the distribution of accessories and spare parts for the Cron. The logistics company will hold stocks of parts and guarantee delivery within 24 hours to any location in the world. The new CEO of ZExpress believes this could be the first of many such arrangements for ZExpress. In order to get this business ZExpress must be in a position to demonstrate full global presence with a recognized global identity within 6 months. 21st Century Telecon (21C-COM) 21C-COM is a worldwide network of 3G cellular service providers. In common with most providers they are struggling to pay debts associated with acquisition of 3G licenses and investment in infrastructure. They have a great deal of spare capacity and across all of the providers cover 92% of the worlds population. While at Global Express Deliveries, the new CEO of ZExpress had exploratory talks with 21CCOM about using their network together with GPS enabled devices to provide a real leap forward in package tracking. Global Express Deliveries did not feel the need to make such a service improvement. The new CEO of ZExpress wants to examine this further as a way of leap-frogging a rather complacent market leader.

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Existing Business Processes Distribution Services ZExpress use credit card services for all their payments plus call off contracts for volume customers. No cash is accepted. Processes are:
Delivery o Customers order through web and call-centres. o Collection and order management through independent local delivery teams. Each independent delivery team has their own collection points and distribute to local customers. o Each State has a grid reference service o Local teams deliver to the next grid reference service for inter-state deliveries o Inter State collection service transportation to other States, often by long-haul truck o All movement is tracked on the web Administration o All accounting recovered at Regional level using local currencies. Same accounting package and services/forms used o All HR is done at local level most members of staff are outsourced independent operators. Most HR work is on contract management.

Home and Colonial Carriers only accept packages from companies who have a contract with them. Processes are:
Establish contract, which means checking the credentials of the customer and in some cases taking an initial up-front payment. Customer phones to advise that a package is ready for collection. Home and Colonial send a driver to collect the package. The package is then taken to the nearest Delivery Depot and if necessary transferred to the Delivery Deport nearest the delivery address, using whatever form of transport is appropriate. Home and Colonial have a fleet of vans, but for air travel purchase space on commercial flights. The package is placed on a van for local delivery and delivered. When the driver returns to the depot after successful delivery, the status is changed to delivered. At any stage the originator of the package may phone the call centre to find out the status which will be one of o Collected o In transit to destination o Out for delivery o Delivered

Pacific Rim Logistics accept packages from any company or individual, whether or not there is a contract in place.
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Processes are:
Customers who have a contract may phone their local delivery depot to request collection, or in major cities post their packages in delivery boxes placed at central locations that are checked several times per day. Customers who do not have a contract must phone their local delivery depot to request collection. The agent who collects the package has the ability to accept credit card payment at the point of collection. A hub-and-spoke system is used for carriage. Packages are taken to the nearest regional centre to the point of collection and from there transferred to the nearest regional centre to the point of delivery. Pacific Rim Logistics runs its own fleet of planes linking its regional centres and fleets of vans for local delivery. If air transportation is necessary between the local delivery depot and the regional centre, commercial scheduled flights are used. The package is placed on a van for local delivery and delivered. When the driver returns to the depot after successful delivery, the status is changed to delivered. At any stage the originator of the package may phone the call centre to find out the status which will be one of o Collected o In transit to regional centre nearest collection point o In transit to regional centre nearest delivery point o In transit to local delivery depot o Out for delivery o Delivered

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Organization Structures ZExpress (Current)

Pacific Rim Logistics (Current)

Home and Colonial Carriers (Current)

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ZExpress Merged Company The organization structure of the new company is still evolving. The new President and CEO has been appointed. Short term responsibilities during the merger process have been assigned as follows: VP Information and Technology (CIO) VP Operations (COO) General Manager North America General Manager Pacific Rim General Manager Europe and Africa VP Innovation VP Marketing (CMO) Scale of Business Not all information is currently available to the architecture team. ZExpress Current share of worldwide package delivery market (by value) Packages handled per day [Represents packages under control] Package tracking enquiries per day (web site plus call centres) Number of aircraft in fleet Number of vehicles in van fleet Average miles per day per vehicle 12% 35,000,000 400,000 110 68,000 175 0 42 Home and Colonial Carriers 5% Pacific Rim Logistics 4% CIO of Home and Colonial Carriers COO of ZExpress Ex CEO of ZExpress Ex President Pacific Rim Logistics Ex CEO Home and Colonial Carries Snr VP Japan, Pacific Rim Logistics Ex CMO of ZExpress

The lead time for purchase of a new cargo plane is ~ 8 years. Price is approximately $150m. Pre-owned planes are readily available for between 25 and 50% of that price, depending on age, but fuel consumption is typically 35% higher. Optimised routing could reduce the miles driven per day by up to 15%, but that depends on accurate information about packages to be collected and delivered.

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Information Technology Context All three companies have extensive IT systems to enable parcel tracking and general Management and a network of distribution centres and depots to support business operations.

ZExpress IT Development Centres Major Data Centres Package tracking Transportation management Billing Accounting HR Regional Centres Package tracking Transportation management Atlanta, US Rio de Janeiro, Brazil Atlanta, US Toronto, Canada Rio de Janeiro, Brazil

Home and Colonial Carriers Chipping Sodbury, UK Bangalore, India Chipping Sodbury, UK Melbourne, Australia Toronto, Canada

Pacific Rim Logistics Sydney, Australia Sydney, Australia Tokyo, Japan Dallas, USA

Delivery Depots Terminal access to package tracking system Call Centres for Customer Support

Atlanta Washington Los Angeles Dallas Calgary, Canada Toronto, Canada Chicago Seattle Denver Columbus, Ohio Boston Mexico City Bogota, Colombia Buenos Aires, Argentina Santiago, Chile 230 depots worldwide Atlanta, US Bangalore, India

Newcastle Frankfurt Paris Atlanta Stockholm Mumbai Nairobi Cape Town Delhi Singapore Perth Melbourne New Zealand

Hong Kong Beijing Singapore Pittsburgh Auckland

300 depots worldwide

180 depots worldwide Mumbai, India

Sheffield, UK Bangalore, India

IT Support for Major Business Processes Microsoft has given notice that withdrawal of support for NT-4 is imminent. Home and Colonial Carriers are finding it increasingly difficult to get staff skilled in the use of PL1 to maintain their package tracking system.

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Package Tracking

ZExpress In-house Web-based service developed by formal Global Express employees and small web companies during the late 90s. Uses dedicated Red Hat linux servers in global ISPs based in New York and Rio. Customers can track their packages from immediate pick-up to delivery via the web. COTS package running on IBM (AIX) servers COTS package running on Red Hat linux servers COTS package running on Red Hat linux servers Peoplesoft running on Windows 2003 Server Several bespoke applications running on Red Hat linux servers. Different implementations at regional centres and all distribution centres. Interstate route management by bespoke system on Red Hat linux servers, running at each transportation management centre

Transportation Management Billing

Home and Colonial Carriers Bespoke systems developed in the mid 1980s, written in PL1 and running on a Fujitsu (IBM plug-compatible) mainframe system. Regional data centres connected via leased lines using proprietary synchronous communications. System access at regional data centres and call centre via terminal emulation on PCs. Major customers have access to package tracking via dial-up links, also using terminal emulation. COTS package running on IBM (AIX) servers COTS package running on IBM (AIX) servers COTS package running on Windows NT4 server Peoplesoft running on Windows 2003 Server Mostly control systems in distribution facilities connected to mainframe. At newer delivery depots bespoke applications on multiple platforms. Selection tied to infacility control systems. Integrated to mainframe system through messaging & file transfer Mainframe application managing cargo space booking on commercial carriers. Integrated with major carriers through a variety of communications methods.

Pacific Rim Logistics Bespoke system developed in 1998, written in C++ and running on HP UNIX servers. Regional data centres connected via VPNs across the internet using IP based protocols. Web-based front end available at regional data centres, call centres and to all customers.

Accounting

HR

Sort Management (Management and operational control of package sorting and management of distribution systems)

Bespoke systems written in C++ and running on HP UNIX servers Heavily modified version of Oracle ERP running on Windows NT4 server Heavily modified version of Oracle ERP running on Windows NT4 server Heavily modified version of Oracle ERP running on Windows NT4 server Several bespoke and COTS applications running on HP UNIX. Different national implementations. Available at all regional distribution and delivery depots

Route Management

Heavily customized COTS logistics application on HP UNIX. Manages aircraft routing. New bespoke truck routing application piloted in Singapore. J2EE environment on Solaris 10 Microsoft Office 2003

Office Productivity

Microsoft Office 2003

Microsoft Office 2000

The Open Group Certification logo is a trademark and the word TOGAF is a registered trademark of The Open Group in the United States and other countries. ZExpress Case Study Brief Copyright Architecting the Enterprise Ltd. 2011 May 2011 Page 52