Situation

When a leading global express shipping company acquired a major less-than-truckload (small freight) Chinese transportation company, it created one of the largest network footprints in China. Before long, however, unanticipated challenges began to emerge.

The company’s initial efforts to upgrade and integrate the capabilities of its new acquisition failed to adequately consider local differences—ranging from culture and language to a radically divergent business model—resulting in a number of post-acquisition challenges.

When the client brought in Kearney to assist, it became clear that management had not anticipated the degree to which a complex set of relationships and hidden incentives between suppliers, employees, and family members drove operations. Personnel at the acquired company were extremely resistant to any attempts to change their business practices or to introduce new policies and procedures that were more consistent with those of the parent company.

To make matters worse, the client was grappling with mounting cost pressures—the result of both increased line-haul fees and the cost of complying with increasingly stringent corporate and government policies.

Approach

Working with the client, we developed a broad transformation initiative that we implemented over the course of the following year. The first objective was to stabilize local operations. Involving members of the newly acquired Chinese company was critical, particularly in establishing the initial vision. This vision guided us as we assessed and designed operational improvements. Once we were able demonstrate success with some of these new processes, we achieved acceptance and buy-in. Formalized performance metrics and incentives that focused on governance, control, and tracking were the glue that held everything together.

In tandem with these local efforts, we helped our client put in place a number of improvements to its overall transportation network, including structural enhancements to its line haul, and pick-up and delivery processes. Finally, we helped our client flesh out plans to enter the road express market—developing a go-to-market strategy, product portfolio, and sales plan—and assisted with implementation.

Impact and advantage

With the transformation initiative in place, the company experienced a 10 percent drop in operations costs and an increase of between 20 and 40 percent in delivery speed and service.

Within three months of finalizing operational upgrades and implementing its new go-to-market strategy, the company was able to offer road express service in more than 200 network locations, handily meeting its revenue and profitability targets, and positioning the company for continued growth.