Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
 Due to globalization, demands for commercial transportation worldwide have increased. With the increased volume of commercial transport, the logistics business has become more complex, and legislative changes have placed overhead strains on smaller carriers. For example, transportation companies must comply with Department of Homeland Security and Department of Transportation Security regulations that control who may engage in motor carrier operations and set guidelines for safety and financial reporting.[2] Ryder's large scale ($6.57B in 2007 revenues) make it possible to absorb these costs without a significant hit to operating margins,[citation needed] and Ryder has grown as a result of a robust transportation and freight need, expanding its revenues at 7.2% CAGR between 2005 - 2007.[3]
[edit] Business Overview[edit] Business SegmentsThe company divides its operations into 3 segments:
 The FMS business is Ryder's largest[11]
Note: Ryder's revenues above do not include negative eliminations that are a result of cross divisional charges. Of all of Ryder's businesses, the Supply Chain Solutions group is growing its revenues fastest, at 24% in 2006, and 11% in 2007.[13] This is a result of changing needs in its customers, as customers retool their supply chains to meet demands of globalization, leading to more international revenues. [edit] Financial Analysis
Ryder's revenues growth is moderate, at under 10% a year for the years 2006 and 2007[18], and margins have been predictable at 6.2-6.3%.[19] This is a result of the nature of the business - growth is slight as the gain on marginal business is slow, and the margins for the business are slim but consistent and predictable - headcount, fuel costs, and leasing profits are stable and predictable for Ryder, especially at its nearly $6B scale.  Most of Ryder's revenues are earned in North America[20]
More than 90% of Ryder's business has come from the domestic North American market (including Canada), and reflects how large the business and need for commercial leasing is in the North American market. The business had been slow to expand in the emerging markets of Latin America until the late 1990's, and Asia in the 2000's.[22] The segment that operates primarily internationally is the SCS business. [edit] Trends/Forces[edit] Continued outsourcing of supply-chain management the primary cause of revenue growthFueled by globalization, many of the North American industrial sectors have tried to migrate their supply chains, including manufacturing, assembly, packaging, and other operations, into lower-cost areas in order to be competitive. As a result, Ryder has grown both the SCS and the DCC segments to take advantage of this trend. In 2007, these segments contributed 34% and 9% respectively to overall revenues, growing at a 12.5% and 1.5% CAGR (DCC lost business in 2007, its a smaller business so is vulnerable to individual contracts) between 2005-2007.[23] In addition, due to increased costs associated with the purchasing and maintaining of a fleet of vehicles and additional costs from Department of Transportation (DOT) regulations[24] such as driver screening, training and testing, and record keeping, more companies are migrating their entire freight business to Ryder. [edit] Over 90% revenue exposure to North America and high client concentration a risk in the face of North American recessionDespite a global footprint, about 90%[25] of the company's revenues are still earned in North America, with special dependence from the Fleet Management Systems segment, the Americas-centric business. High dependence on the US would restrict the company's growth, a particular concern with recessionary concerns facing the American economy. These concerns stem from the U.S. Housing Market bubble burst of 2007-2008, which is restricting the access of consumers to credit to finance consumption. As Ryder is a provider of commercial shipping solutions, it is dependent on the needs for supply chain and freight of the industrial firms that it supplies and consults to, who are in turn dependent on those household consumers. The company's SCS and DCC businesses are more resilient against recession than the FMS business, due to the more long-term nature and more "fixed" natures of those businesses. In addition to these concerns, the SCS business faces high client concentration, in which the top 10 accounts contributed 72% of revenues for the business. Losing a single account will lead to a significant decline of SCS revenues in the face of a recession.[26] [edit] Company is engaging in small-regional acquisitions in AmericaRyder has been actively acquiring smaller regional competitors in the domestic North American market, capturing their consumers, and then taking cost synergies from closing down the former competitor's infrastructure and moving it over to Ryder's existing facilities. Acquisition from 2005 onward have included 4 G's Truck Renting Company (New York), Pollock NationaLease (Canada), Lilly Truck Leasing (NE U.S.)[27], and Gator Leasing (Florida)[28] It can be seen that these acquisitions are part of Ryder's continued growth strategy, and since it already has so much infrastructure in place, grabbing the accounts and this cost cutting by sharing fixed cost is paying dividends to the national player. In addition to realizing the plant-closure synergies, Ryder's scale lets it pool and hire drivers, overhead costs, and fuel negotiating power to keep general costs low. [edit] Competition[edit] Commercial Vehicle Rental
[edit] Supply-Chain ManagementFedEx and UPS were both originally freight-haulers, shipping goods from point to point. However, both evolved into B2B (business to business) companies on the supply chain side, routing much of the traffic for both industry and manufacturing giants as supply chains became more complex due to Global sourcing, as well as the E-Commerce crowd as their businesses grew during the 90's. Both offer fully-outsourced shipping as well as the option to consult and provide advice to their customers. [edit] Market Share Ryder has approximately 17% share in the global industry According to Datamonitor research, the Global truck rental/leasing market was sized at approximately $24.3B in revenues in 2006, with 1.5MM units leased.[29] The company's own estimates place the broad market of all commercial vehicles at $26B domestically.[30] This market corresponds to Ryder's FMS (Fleet Management Solutions) segment, which earned $4,096.05 MM in 2006, giving the company approximately 17% share in the global market.
The company also estimates the global supply chain business to be sized at $317B dollars globally[32], in which its own $2.25B of SCS revenues in 2007 would constitute under 1% share.[33] [edit] References
|
The Shelf
|
Edit
History
Bookmark
