Architecting the Enterprise

A TOGAF Services Provider

ZExpress
Case Study Brief

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 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 CO 2 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-of-
the-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 21C-
COM 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) CIO of Home and Colonial Carriers

VP Operations (COO) COO of ZExpress
General Manager North America Ex CEO of ZExpress
General Manager Pacific Rim Ex President Pacific Rim Logistics
General Manager Europe and Africa Ex CEO Home and Colonial Carries
VP Innovation Snr VP Japan, Pacific Rim Logistics
VP Marketing (CMO) Ex CMO of ZExpress

Scale of Business

Not all information is currently available to the architecture team.

ZExpress Home and Colonial Pacific Rim

Carriers Logistics
Current share of worldwide package 12% 5% 4%
delivery market (by value)
Packages handled per day 35,000,000
[Represents packages under control]
Package tracking enquiries per day (web 400,000
site plus call centres)
Number of aircraft in fleet 110 0 42
Number of vehicles in van fleet 68,000
Average miles per day per vehicle 175

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 Home and Colonial Pacific Rim Logistics

Carriers
IT Development Centres Atlanta, US Chipping Sodbury, UK Sydney, Australia
Rio de Janeiro, Brazil Bangalore, India
Major Data Centres Atlanta, US Chipping Sodbury, UK Sydney, Australia
Package tracking Toronto, Canada Melbourne, Australia Tokyo, Japan
Transportation Rio de Janeiro, Brazil Toronto, Canada Dallas, USA
management
Billing
Accounting
HR
Regional Centres Atlanta Newcastle Hong Kong
Package tracking Washington Frankfurt Beijing
Transportation management Los Angeles Paris Singapore
Dallas Atlanta Pittsburgh
Calgary, Canada Stockholm Auckland
Toronto, Canada Mumbai
Chicago Nairobi
Seattle Cape Town
Denver Delhi
Columbus, Ohio Singapore
Boston Perth
Mexico City Melbourne
Bogota, Colombia New Zealand
Buenos Aires,
Argentina
Santiago, Chile
Delivery Depots 230 depots 300 depots worldwide 180 depots
Terminal access to package worldwide worldwide
tracking system
Call Centres for Customer Support Atlanta, US Sheffield, UK Mumbai, India
Bangalore, India 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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 ZExpress Home and Colonial Carriers Pacific Rim Logistics
Package Tracking In-house Web-based Bespoke systems developed in Bespoke system
service developed by the mid 1980s, written in PL1 developed in 1998,
formal Global Express and running on a Fujitsu (IBM written in C++ and
employees and small plug-compatible) mainframe running on HP UNIX
web companies during system. Regional data centres servers. Regional data
the late 90s. connected via leased lines using centres connected via
Uses dedicated Red proprietary synchronous VPNs across the internet
Hat linux servers in communications. System access using IP based protocols.
global ISPs based in at regional data centres and call Web-based front end
New York and Rio. centre via terminal emulation on available at regional data
Customers can track PCs. centres, call centres and
their packages from Major customers have access to to all customers.
immediate pick-up to package tracking via dial-up
delivery via the web. links, also using terminal
emulation.
Transportation COTS package running COTS package running on IBM Bespoke systems written
Management on IBM (AIX) servers (AIX) servers in C++ and running on HP
UNIX servers
Billing COTS package running COTS package running on IBM Heavily modified version
on Red Hat linux (AIX) servers of Oracle ERP running on
servers Windows NT4 server
Accounting COTS package running COTS package running on Heavily modified version
on Red Hat linux Windows NT4 server of Oracle ERP running on
servers Windows NT4 server
HR Peoplesoft running on Peoplesoft running on Windows Heavily modified version
Windows 2003 Server 2003 Server of Oracle ERP running on
Windows NT4 server
Sort Management Several bespoke Mostly control systems in Several bespoke and
(Management and applications running distribution facilities connected COTS applications
operational control on Red Hat linux to mainframe. running on HP UNIX.
of package sorting servers. At newer delivery depots Different national
and management of Different bespoke applications on multiple implementations.
distribution implementations at platforms. Selection tied to in- Available at all regional
systems) regional centres and facility control systems. distribution and delivery
all distribution Integrated to mainframe system depots
centres. through messaging & file
transfer
Route Management Interstate route Mainframe application managing Heavily customized COTS
management by cargo space booking on logistics application on
bespoke system on commercial carriers. Integrated HP UNIX. Manages
Red Hat linux servers, with major carriers through a aircraft routing.
running at each variety of communications
transportation methods. New bespoke truck
management centre routing application
piloted in Singapore. J2EE
environment on Solaris
10
Office Productivity Microsoft Office 2003 Microsoft Office 2000 Microsoft Office 2003

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Group in the United States and other countries.

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