Global Logistics and Supply Chain Strategies - September 2008 - (Page 64)

INDUSTRY VOICES pate in. Exports of commodities and bulk products move through our network as well as the higher-value consumer goods. ize on short-term trends. You capitalize on these shifts with outsourced manufacturing. exports. Among the fast growing groups are electronics and components, vehicle parts, aircraft parts, industrial machinery, fabricated materials, foodstuffs, ag products, chemicals, medical and surgical supply, telecom products and high-value consumer products. These are in addition to the commodities that have been enjoying cyclical growth. Our marketing efforts align closely with this list from the Census Bureau, but we are especially strong in high-tech, retail, consumer goods, healthcare, industrial products, automotive and government supply chains. Q: How sustainable is this trend? Do you think it will continue even if the dollar strengthens and U.S. products are not as price competitive? Szwast: The commodity trend is not sustainable. As currency differentials change, the value-to-opportunity equation will change and commodity-oriented exports will diminish. But the larger trend is different. Look at any car today. There really is no such thing as a foreign or domestic car. The most American brand car has an engine that might have been made in Japan, electronics constructed in Malaysia and other components from Mexico and Canada. Business is inherently international. Q: Do you see a corresponding drop in import and foreign sourcing activity from U.S. companies? Szwast: You might assume that a boom in exporting would mean a fall-off in imports and foreign sourcing, but we have not seen that happen to any great degree. The trans-Pacific eastbound import volumes in the West Coast are down about eight percent this year, but that is just temporary. Foreign sourcing is a business strategy, not just a cyclical trend. All the studies we have seen show that supply chain managers will continue to source from foreign suppliers. In fact, they will grow that sourcing by 40 percent over the next five years. The key driver is not currency valuations that fluctuate. It is total opportunity costs that includes embedded transportation costs, labor costs, the regulatory costs, etc. What we are seeing is an increase in foreign-to-foreign sourcing, so multinational corporations are sourcing from one geography to another completely outside of where they are domiciled. They are not moving all of their sourcing and production from one geography to another to take advantage of currency valuations. Companies will create value by managing total opportunity costs and relying more on outsourced solutions such as contract manufacturing rather than investing in facilities. One of the great truths of sourcing is that orders will follow short-term opportunities, but facility investment will follow a much longer trade pattern. You can’t get a facility up fast enough to effectively capital- Q: Is the export trends primarily among large companies or small ones? Szwast: Today, international trade is the province of small, agile companies. In fact, government statistics show that 90 percent of all export declarations are filed by small and medium-sized businesses. At the same time, the UPS business monitor survey shows that only about one third of these small and medium companies are actively participating in international trade and only about nine percent are exporters. That means international trade represents a huge opportunity for growth, and it is especially strong with companies we already have a relationship with through our small-package business. We know that the companies that do export report top-line sales that are six to 28 percent higher than the domestic-only companies. So with a relatively small portion of companies actually doing the exports, marketing opportunities abound. These smaller companies are learning quickly that international business is the fastest way to grow. And when these companies are ready to expand into international markets, UPS and its various divisions are there to help them. Let me give you an example. We worked with a small company that made high-fashion leather goods that were made locally in the U.S. by a family business and sold domestically. A famous celebrity appeared on a Hollywood awards presentation carrying one of these products, and suddenly the product became a sensation worldwide. This company that had never envisioned selling out of state let alone internationally was suddenly faced with a wave of orders from all over the world. They needed much more robust order management as well as an entirely new capability for international shipping and delivery. We were able to get them into the export business very quickly and successfully. About 90 percent of export declarations are coming from companies exactly like this one. They have an innovative product, but no support structure to tap into for international sales. They do not want to invest in fixed network, just pay for what they need as they need it. Q: What types of industries do you see being most active in this new export wave? Q: Which international markets are the most attractive for these new exports? Szwast: The growth is everywhere, but it is especially strong in the BRIC countries of Brazil, Russia, India and China, as well as the rest of Southeast Asia. We helped many companies source from China, and now we are helping these same companies penetrate that market with their exports. What makes an attractive market is the same the world over: Increased business culture, increased infrastructure investment and an emerging middle class. Where that pattern exists, there is demand for foreign products. Q: What type of help do these exporting companies want from UPS? Szwast: The scope of service we are providing runs the spectrum from global package delivery to multimodal transportation to full supply chain solutions that go well beyond transportation. Companies used to go to different providers for each type of transportation mode. Increasingly they are combining different modes into a single shipment. We have a service called Trade Direct where we combine the efficiency of ocean freight with the precision of small-package delivery. From the customer’s standpoint, it is a single transportation decision, but it is ocean and small-package in the same end-toend supply flow. One of the biggest challenges in international trade today is compliance. Just since 9/11 there have been 25 new security regulations that govern international transportation. To access this article online, visit The Digital Edition at www.SupplyChainBrain.com. Szwast: The list is quite long, according to the Census Bureau, which tracks all Resource Link UPS, www.ups.com 64 SEPTEMBER 2008 www.supplychainbrain.com http://www.SupplyChainBrain.com http://www.ups.com http://www.supplychainbrain.com

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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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