Global Logistics and Supply Chain Strategies - September 2008 - (Page 62)

Is Export Growth More Than Just a Short-Term Trend? Scott Szwast of UPS One of the world’s largest logistics companies helps small and medium-sized companies ramp up their export business. With the U.S. economy suffering from a prolonged slowdown, the one bright spot is an increase in exports. The question is whether this trend is just a short-lived blip caused by the low value of the dollar, or is it a longer term pattern reflecting greater emphasis on selling abroad? To get the perspective of the largest logistics company in North America, we spoke to Scott Szwast, an 18-year global logistics veteran currently serving as director of marketing for UPS’s global freight services. Scott directs a team that aligns global enterprise resources for brokerage and a suite of supplier management services for strategic sourcing compliance and visibility. the U.S. has long provided. The rising standard of living has been gradually increasing since 2002 and the export flows have risen accordingly. There is no sign of this trend abating. Regardless of the value of the dollar, demand for higher value trade goods is going to remain strong because of the rising tide. Q: The Department of Commerce, the Federal Reserve and other government agencies are touting the upsurge in export activity from the U.S. How do you see this trend? Szwast: We have seen two different types of export trade flows growing. The first is the spike that started in late 2007 and has accelerated ever since. This growth is primarily driven by the worldwide surge in commodities. The weak valuation of the U.S. dollar is supporting this surge, as is the increase in infrastructure investment in China, Southeast Asia and Eastern Europe. All of these trends have come together to create a demand for commodity exports from the U.S., especially for scrap metals. The other trade flow has been longer in developing, and we believe will last much longer. It is related to the economic growth in emerging markets throughout Asia, Eastern Europe and elsewhere where there has been a steady increase in general prosperity. The growing middle class in these regions is stimulating demand for consumer products and many other types of products the U.S. has to offer. The U.S. has always been a leading exporter of foodstuffs and other agricultural products. As emerging economies grow a larger, more prosperous middle class, these people want more protein and high-quality food in their diets. They also are increasing the demand for lifestyle consumer products that Q: Do you attribute this only to the drop in value of the U.S. dollar compared with other major currencies? Szwast: The value of the dollar relative to the euro and other major currencies puts U.S. products on sale, but that is only part of the picture. Sourcing is based on many factors other than currency. Companies in foreign countries look at the total opportunity cost. They want to source from areas that create the greatest value-add with the lowest opportunity cost. While the value of currencies is important, companies look just as intently on such things as embedded transportation costs, the frequency and capacity of transportation services, compliance and regulation, taxation and environmental issues. All of these things create a total opportunity cost of sourcing for a region. Many countries restrict the hours when planes can fly, when ports can operate, the speed vessels can enter and exit ports, and so on. The U.S. has very favorable opportunity costs when compared with competitors in Europe, Asia and elsewhere. We have strong logistics capabilities, abundant availability of transportation by various modes, a trade-friendly business environment and limited regulatory and environmental stipulations. Q: Is UPS involved in export flows for commodities, scrap and the other items you mentioned? Szwast: UPS is best known for its huge smallpackage business that handles 7.9 million shipments every day and moves about six percent of the GDP of the U.S. through its network. But UPS also acts as a large multimodal international freight forwarder and trucking company. As for UPS Supply Chain Solutions, there are no trade flows that we do not partici- 62 SEPTEMBER 2008

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Global Logistics and Supply Chain Strategies - August 2008 Contents Editorial GL&SCS Exclusive Fast Forward Up Front Cover Story: Free The Enterprise: Busting Silos in the Supply Chain Business Process Management Merits New Look fromCorporate Strategists Ships and Ports Explore Many Ways to Go Green The Right Information Should Help Avoid Any Kind of Risk Industry Voices

Global Logistics and Supply Chain Strategies - September 2008

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