UPS goes against tradition – outsider named to run its fastest-growing unit

The keys to UPS Inc.’s (NYSE:UPS) fastest-growing and arguably its most pivotal 21st century business have been handed to an outsider.

Earlier this week, Philippe Gilbert took the reins as the first president of the company’s Supply Chain and Freight operation, one of the Atlanta-based company’s three business units. (UPS’ domestic U.S. and international package units have long had presidents.) Gilbert joined UPS from the German firm DB Schenker Logistics, where he ran its 10-country Americas region. He reports to COO Jim Barber, himself an odds-on favorite to be the next CEO of UPS should David Abney, the current chairman and CEO, retire later this year as many UPS-watchers expect.

Gilbert was also named the twelfth member of UPS’ powerful Management Committee, which runs a company whose history and success have been forged by a management-by-consensus philosophy and a promote-from-within culture.

Not since UPS named Scott Davis chairman and CEO in 2008 has a company “non-lifer” assumed such a high-level role. Davis joined UPS in 1986 after it acquired Oregon-based IT firm II Morrow, where he was CEO. Yet Davis still spent years at UPS in upper mid-level positions before advancing. Gilbert, by contrast, enters at an org-chart level unprecedented in the company’s 112-year history. “It is quite unique for UPS to go outside for such a strategic leadership role,” said Evan Armstrong, president of Armstrong & Associates, Inc., a consultancy that closely follows the third-party logistics provider industry.

 UPS declined to make Gilbert available for an interview, saying he is preoccupied with getting up to speed on the four businesses under his purview: Global Logistics and Distribution; Global Freight Forwarding; less-than-truckload carrier UPS Freight; and truckload broker Coyote. In a statement, Abney said the hiring represents a “blending (of) new leadership with seasoned UPSers to build new ideas and experiences that enrich and strengthen our business.”

 Glenn Zaccara, a UPS spokesman, said the four businesses will continue to be run by their respective leaders. The difference now is those leaders will all report to Gilbert, whereas in the past there were multiple lines of reporting responsibility, Zaccara said.

Gilbert’s hiring reflects Supply Chain and Freight’s increasing prominence within the UPS ecosystem, and the need to have one seasoned person overseeing the entire enterprise. In prior years, the unit was perceived as a supplement to the company’s core package-delivery business. Now, as more companies, large and small, look to expand globally and require complex and far-reaching services to do so, the unit’s capabilities have come into sharper focus. Such services also usually generate higher margins, which offsets margin pressures felt by the package business competing in a commoditized industry with the likes of Amazon.com, Inc., (NASDAQ:AMZN) which aims to be the low-price provider in everything it touches.

In the third quarter, the unit’s revenue rose 12 percent to more than $3.5 billion, exceeding the revenue of UPS’ international package unit. Operating profit rose 24 percent to $242 million, while adjusted operating profit increased 33 percent to $260 million. The adjusted profit figure excluded “transformation charges” of $18 million, UPS said. The freight forwarding business led the way with 17 percent year-over-year revenue growth, UPS said. The unit ranked ninth on Armstrong’s 2017 list of global 3PL providers.

A by-product of Gilbert’s hiring is that there will be a formal reporting path for Coyote, which UPS acquired in 2015 for $1.8 billion, its largest transaction ever. At the time of the purchase, UPS said it would preserve Coyote’s free-wheeling culture, despite the fact that it ran counter to the parent’s more buttoned-down way of doing business. Over time, however, UPS, as it’s done with all its prior acquisitions, began exerting more control over Coyote. The deeper involvement was amplified when Coyote’s founder, Jeff Silver, first was moved from Coyote to a global strategic role at UPS, and then left UPS last year.

Today, Coyote is effectively run by UPS, according to an executive familiar with both operations. Coyote media representatives did not respond to a request for comment.

Gilbert’s supply chain management chops are impressive. Before Schenker, where Gilbert spent nearly six years, he was executive vice president for GEODIS Wilson, the freight management division of French international logistics firm GEODIS Group. There, he supervised a network of 57 countries and more than 80 agents. Gilbert has also held leadership roles at Saga S.A., Circle International, and Eagle Global Logistics, all major international 3PLs. He is fluent in four languages.

Gilbert’s hiring indicates that even a largely insular culture as UPS is willing to look outside if the right person matches the needs of the position, according to Armstrong. “It shows how UPS (Supply Chain Solutions) is transforming into a more globally focused company,” he said. “It should benefit from Gilbert’s world view, international transportation management and integrated solutions experience