Logistics Capabilities: The Building Blocks of Global Trade

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Logistics CapabilitiesThe Building Blocks of
Global Trade

• Gene LongPresident, UPS SCS Consulting Services

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Todays Discussion

• Effective logistics strong global trade
• Requirements for effective logistics
• Emerging patterns

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The Growing Global Economy

• Global trade activity grew 10.2in 2004
• 10 of worlds GDP flows through global
  marketplace
• Global economy grew 5 in 2004
• Foreign exchange transactions10 billion a day
  in 197010 billion a second today

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Linking The Worlds Businesses and People Through
Globalization

• Growth in world trade has exceeded the rate of
  output every year since 1950
• 1973 - 1999 World trade grew at an annual rate
  nearly three times higher than world GDP
• Trade to GDP Ratio
• U.S. tripled since 1970
• World doubled since 1970

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Eras of Globalization

• 1.0 (1492-1800) the country as dynamic agent of
  globalization
• 2.0 (1800-2000) the multi-national company as
  dynamic agent of globalization
• 3.0 (2000-present) individuals and small groups
  have the need, capability and power to globalize
  themselves

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Supply Chain Leadership

• SCM a strategic imperative in complex global
  environment

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UPS Enabling Synchronized Commerce

• Expanding capabilities
• Coordinating movement of goods, information
  funds
• Synchronizing every aspect of order management
  cycle
• Reducing complexity and friction
• Moving supply chain from operational efficiency
  to customer intimacy stage

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Strong Companies Strong Trade Strong Countries

• Growth from trade helped U.S. achieve
  unparalleledjob creation
• Between 1980 and 1998, America replaced 44
  million antiquated jobs with 73 million good new
  jobs
• Completely open global trade would increase U.S.
  household income by 4,500 annually
• On global basis, trade helps alleviate poverty
• Open markets grow faster, have a greater respect
  for property rights and the rule of law, and
  result in more peaceful political relationships

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SCM Reduces Amplitude ofBusiness Cycles
Benefits

• Increases responsiveness to market demand of the
  flow of inputs into production
• Reduces investment in inventory
• Frees up capital for other uses
• Higher velocity of inventory transfer creates
  demand for more services

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When trade crosses borders, armies dont
Cordell Hull
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What Does It Take to Trade?
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Physical Assets

• Skilled workforce
• Roads, bridges, airports, seaports, rail
• Adequate communications networks

Governmental Support

• Government policies
• Customs procedures
• Monetary policies/banking regulations
• Technology investments
• Education and training

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Open Skies Agreements
Benefit More Than Carriers

• Nations expand linkages to global economy
• Consumers achieve gains through increased
  competition
• Businesses ability to increase trade, enter new
  markets, develop truly global supply chain

• Creates need for further liberalization in other
  sectors
• Simplify and harmonize customs clearance processes

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How Forces Are Converging to Drive New Patterns

• Changing consumer market
• Changing sourcing market
• Innovative response to business

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Emerging Patterns

• Growing global middle class
• 95 of consumers live outside of U.S.,60 in
  Asia
• 52 developing nations with population of1.5
  billion reaching middle class
• China growing middle class by 1 annually 300
  million total
• India tripled middle class since 1985

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China A Domestic Market, Not Just a Source of
Manufacturing

• Worlds second largest economy in 11 years
  largest by 2039
• 1 billion in FDI arrives each week
• 350 million cell phone users
• 100 million Internet users
• Fourth largest market for consumer electronics
  worlds fastest growing life insurance market

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Henry Fords Assembly Line Goes Global

• Li Fung dis-assembly model
• Zara flexible supply chain processes
  innovation add value
• Boeing from manufacturer to master planner
  snap-together assembler

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Growing Corporate Responsibility

• Certain activities required of countries
  tostimulate growth
• Infrastructure
• Policies
• Other activities required by companies
  tostimulate growth
• Educate employees on benefits of global trade
• Create sustainable enterprises
• Utilize resources of 3PLs
• Make SCM a strategic priority

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Logistics CapabilitiesThe Building Blocks of
Global Trade

• Gene LongPresident, UPS SCS Consulting Services