Transportation
Co. CIO Says IT Matters If You Make it Your Business
The name
Ryder means one thing to a lot of consumers and business owners —
it’s the company you call when you want to lease or to rent a
truck. However, that’s just one part of Ryder System, Inc.’s
business, based in Miami, Florida. With yearly revenues exceeding $5
billion, this global organization ranks as the leader in providing outsource
services for supply chain management. For example, Visteon, a 1997 spin-off
from Ford Motor Company, outsourced the logistics of its freight transportation
system to Ryder, which includes everything from international oceans
to airfreight.
IT has
definitely helped Ryder distinguish its supply chain service, as well
as fleet operations, from its competitors. This situation might run
counter to some of the themes in Nicholas G. Carr’s Harvard
Business Review article (May 2003), “IT Doesn’t Matter.”
The article caught the attention of a lot of major IT executives, especially
Robert E. Sanchez, CIO, of Ryder System.
Sanchez
has kindly taken the time to answer some questions about how he runs
his IT organization, what cost cutting initiatives he’s taken
over the years, and, of course, what he has to say about the B-School
article. Sanchez, who received a Master’s in Business Administration
from The Wharton School at The University of Pennsylvania, held several
senior operational positions at Ryder, including president of the fleet
management solutions area, before he was promoted to CIO.
Q.
Can you describe the IT infrastructure that supports your supply chain
or transportation outsourcing business?
Our supply
chain business unit has a series of logistical systems we have integrated
with some homegrown software. That system can manage anything in the
supply chain both inbound and outbound, including transportation, distribution
centers, and interfaces with suppliers. Our platforms consist of UNIX,
Windows, and AS400s.
Q.
What cost cutting or improvement initiatives have you spearheaded over
the years?
We outsourced all of our applications development and
management to Accenture. In 1997, we decided to bring that piece in-house.The
cost savings were significant. In 1995, we also designed an asset management
system to improve the company’s North American fleet of 150,000
truck rentals and truck leasing business unit. In addition to owning
these vehicles, we have about 700 shops scattered across the country
that maintain these vehicles. This system enabled us to have more accurate
information about the status of these vehicles. As a result, we’ve
made better use of our fleet across the country. The system was built
on a client server called PowerBuilder. The data resides in an IBM DB2
database.
Q.
What’s the business model you have for IT?
Our internal IT organization operates as a shared service
with about 250 employees. We operate with a combination of cost allocation
and also direct costs in some areas going to the business units. We
also outsource the management of our infrastructure to IBM Global Services.
Some IBM employees reside at our facility.
Q.
How do you work with your business units?
Having run one of the business units, I know what it’s
like to be sitting across from IT folks. I’m also a member of
the company’s leadership team which consists of the nine top leaders.
We make a lot of the strategic decisions for the company.
We also have a pretty structured IT steering committee
and IT strategy process we go through. The process enables systems administrators
to identify, document, and gain support for projects we need to work
on. There is also a strategy team which works with each of the business
units. Each team consists of a director level individual who helps prioritize
the identified projects. Once a year, the strategy team meets with the
leadership committee to decide which projects, based on the allocated
budget, will be carried out in each business unit.
Q.
Do you use any kind of best practices such as Six Sigma or ITIL?
During the past three years, we’ve spent a lot
of time developing a process called ACE or analyze, chart, and execute.
The idea of it is to develop standard processes across the company,
not just for IT, mainly for our supply chain business.ACE entails documenting
all the different processes we use in the supply chain.
Q.
How do you measure your success?
We tie our success to the success of the business units.We
don’t look at “did we get our project done on time”?
Instead, we consider how well that project translated into value for
the organization.
Q.
Did you build up the infrastructure during the dot.com era, and did
you have to deal with the aftershock of your purchases?
Like many companies, we created the rate of spend by
purchasing a lot of hardware and software during the dot.com period.
We felt a lot of pressure not to fall behind. A lot of the software
we bought didn’t turn out to be very useful. Today, we’re
really focused on the key technologies that add value and that work.
For the supply chain, we selected a standard transportation management
packaged and integrated into our homegrown system.
Q.
What projects are you working on that are really important for the next
year or so?
We’re continuing to enhance our supply chain in
terms of the in-house proprietary tools. We’re working on fleet
reporting and analysis tools for our truck leasing and maintenance side.
We want to allow our shops to view their fleet information online and
provide our technicians with tools that can make them more productive.
Q.
Did you read the Harvard Business Review article?
Yes. However,
I didn’t agree with everything he [Nick Carr] says. First of all,
he limits his definition of IT infrastructure to servers, LANs, WANs,
and some components of ERP, such as general ledger. Based on this definition,
I would agree with his comment that this type of an IT structure would
not help an organization strategically differentiate itself from the
competition.
The author refers to a lot of proprietary technology
as being outside the IT domain. I don’t agree with this. For example,
the systems we have to manage our supply chain and fleet business, according
to the author, are not part of IT. By developing these systems, we can
continue to gain a competitive edge.
Our scenario is similar to FedEx. Where would it be
without its tracking systems? That technology enabled FedEx to grow
and distinguish itself from the competition. The supply side of our
business is really about selling IT. The supply chain is really interesting
because we mostly sell IT. If you come to us and want to outsource all
of the components of your supply chain, we’ll bring you the people,
the process, and the technology. Many of our customers have tried to
handle their supply chains, but failed.
Q.
What are you looking for in your manpower requirements?
We’re
considering technical expertise, expertise in the Web development area.
We also have a need for individuals who have combined their technical
skills with a business background, perhaps an MBA.
Q.
Your leadership team decides on the projects IT will carry out. How
do you handle the day-to-day management of these projects?
My group has directors that are aligned with each business
unit. These directors, in turn, have program managers who carry out
these projects. The program managers report to the IT organization,
but they sit with the business unit. The co-locating arrangement, which
began in early 2003, provides us the best of both worlds. On one hand,
we decentralize IT by enabling individuals to sit close to the groups
they support. On the other hand, everyone in IT works under the same
IT umbrella. No one has a dotted line to a business unit.
We also have programs managers who oversee that IBM
Global Services meets its service level agreements. Q. Has you role
changed since you became CIO? We’re focusing more intensely on
the value of IT and making sure that the money being invested in technology
provides the appropriate return on the appropriate value. These things
have become a big part of what the CIO needs to be able to provide.
He or she needs to know when to veto decisions if the IT value doesn’t
translate to business value. I say no to technology daily. For example,
I said no to installing an ERP system for general ledger and finance.
The cost was out of line for the organization. reporting and analysis
tools for our truck leasing and maintenance side. We want to allow our
shops to view their fleet information online and provide our technicians
with tools that can make them more productive.
Q.
Your leadership team decides on the projects IT will carry out. How
do you handle the day-to-day management of these projects?
The supply
side of our business is really about selling IT.
Robert
Sanchez, CIO Ryder System, Inc.
