July 24, 2012
Read More »
Thank you, Sky, for that generous introduction.
And good afternoon, everyone. It's great to be with you!
As Sky said, this morning - courtesy of my Pittsburgh World Affairs Council host, Brandon Wallace -- I visited with some of the best and brightest of Pittsburgh's Generation Z… high school students from Mount Lebanon high school.
I have to admit…I was a little bit nervous about that!
My responsibilities don't allow me to spend a lot of time talking with teenagers. And you read and hear a lot about American youngsters' indifference toward their futures.
But I'm happy to report, talking with the kids was a real treat!
I came away energized by how serious and curious they are about the challenges and opportunities they'll face in an ever-changing global era.
Plus…I got a few great tips from them. I learned a few shortcuts on how to operate my Blackberry more efficiently!
You know…there are two prime customer demographics for texting devices - teenagers, of course -- and international business people trying to communicate from airports across time zones!
So we bonded!
In all seriousness, these programs are important.
I know the Pittsburgh World Affairs Council chapter is the very best in its endeavors on behalf of Western Pennsylvania's high school students.
And I congratulate you on that.
I don't think young people can start too early to begin seeing themselves not only as citizens of Pittsburgh, but also of the world.
As New York Times columnist, David Brooks, recently put it... in the coming knowledge age it won't much matter where on the planet a person calls home. Information can travel around the world in seconds.
What will matter is the last few inches of those information journeys - between an individual's eyes or ears, and that individual's brain.
Who will best understand the information?
Who will have the expertise to use it?
And who will best understand the cultural context of the information exchange?
That's the world these kids will do business in.
In fact, that's pretty much our world of business today.
The connected global economy is here -- and oil-shocks notwithstanding - it's here to stay.
If that's the case, what can we all do as business leaders to improve our competitive positions to take advantage of the global era's next wave?
I was asked to discuss the UPS point of view on that question.
It's something we spend a lot of time thinking about -- as you might imagine - since we serve as a global conveyor belt for commerce.
Each business day, UPS handles the flow of nearly two percent of the world's GDP…That includes delivering nearly 16-million packages a day to destinations around the world.
So, we're sensitive to shifts in global commerce.
We're sensitive to the shifts that will challenge our customers, and especially those that will offer them opportunities.
I'd like to touch on a few of those with you.
Let's start with a couple of key challenges we see ahead in the U.S.
One that's especially fresh in my mind relates to America's infrastructure.
It's fresh on my mind because I recently returned from a three-week August visit to Beijing.
UPS served as an Olympic Games sponsor in China.
In doing so, we handled all the transportation and logistics needs for the Games' 124 venues of competition, training, and other activities.
Did any of you have the opportunity to attend the Games in China?
If you watched on TV, you may have seen the spectacular choreography of the Opening Ceremonies.
But… what you may not have seen on television was the fluid web of roads, trains, subways, and canals that are a legacy of the Games, and that now encircle the Beijing region.
This sprawling transportation web has completely reshaped Beijing since the city was awarded the Games seven years ago.
When you see such a public works commitment first hand, you're reminded of the scale of similar, visionary public works projects in the U.S. during the mid-20th Century that catapulted American commerce forward.
But today… if you'd compare a post-Hurricane Katrina New Orleans with Beijing, you'd have to wonder if our own 20th Century vision has been reborn in the 21st Century across the world in China.
Of course, China doesn't have the infrastructure of the U.S. But the Chinese know the importance of it in a global economy. And China is committed to a long-term development program to get there.
In contrast, our own infrastructure needs seem to be relegated to the back-burner.
Recently, four mayors testified before the Senate Banking Committee about the state of the nation's infrastructure.
The Kansas City, Missouri, mayor summed up the impact apathy toward infrastructure is making, when he said…quote, “We're having a quiet collapse of prosperity.”
In an era of global trade, the demands on America's lanes of commerce…our ports, airports, highways, waterways, and bridges like right here in Pittsburgh -- “the city of bridges” -- are escalating each month.
At the same time, support for that infrastructure is not being addressed.
The American Society of Engineers has given the nation's transportation infrastructure failing reports for many years.
It estimates that bringing the nation's transportation and resources networks up to a properly functioning level would require a $1.6 trillion dollar investment and five years of work.
The payoff for such an investment would be large.
The U.S. Department of Transportation estimates that for every $1 billion dollars spent on building roads a payoff of $6.2 billion in economic activity is generated.
There are some solid public-private industry ideas and proposals on the table to address and fund America's increasing transportation needs.
Yet… in this presidential election year… you don't hear much talk at all about an infrastructure plan...
One reason may be because it's a challenge that doesn't involve a quick fix.
Some of you may know that recently, former Vice President Al Gore, recommended the nation embark on a ten-year energy plan that would result in the development of alternate energy sources.
His proposal was reminiscent of JFK's ten-year plan to put an American on the moon.
Just as important to the future of the kids I visited this morning would be a ten-year plan to develop the nation's infrastructure.
I know I'm preaching to people who know the importance of efficient trade lanes. But it's going to be up to the business community to be vocal about this timely and important need.
We see first-hand the payoff of attention to infrastructure in bustling trade centers like Hong Kong and Singapore.
It's no less essential to the economic futures of America's great cities - like Pittsburgh.
A second thing that could challenge prosperity ahead is how we come to terms with what I describe as a protectionist mindset.
I know I say that in a region that's suffered some of the nation's most wrenching disruption and job losses over the past 30 years.
The old days of a self-sufficient industrial America were prosperous, no question.
But the biggest problem with dwelling on it is it takes our eyes off the new reality, and hitting the new pitches that are coming our way out of the park.
The good news is no country is better positioned to move forward in a global arena than America.
To do so though, we must figure out ways to provide retraining and health insurance measures for workers whose jobs are displaced by global change.
Most Americans want to work and to be good providers.
Enlightened policymaking can help them do that.
Pittsburgh has certainly shown it can transform with the times.
A great example of one such firm that's taking advantage of global collaboration to grow is Jesse and Frichtel Dental Labs.
Founded in l994, Jesse and Frichtel, now operates a 14,000 square-foot lab facility at its Golden Mile Highway location.
One of the company's founders - Mark Frichtel - is with us today.
Jesse and Frichtel has become a leading partner to America's top dentists, and now offers a line of high-quality, cost effective products worldwide.
The latter growth opportunity depended on finding the right partners to help with the lab work.
You see… in the U.S., the training of dental technicians has been too narrow to handle Jesse and Frichtel's requirements.
But in Asia, technicians typically receive a broader base of training that is also two and a half years longer than in the U.S. Bottom line, after a worldwide search, Jesse and Frichtel found the lab partners with the technical expertise it needed in China and South Korea.
As you might imagine, a key characteristic of the Jesse and Frichtel business model is speed in serving its dentist clients.
In one case, a local dentist came to the company with an interesting request.
A Pittsburgh bride had decided she wanted to correct a gap between her two front teeth before her wedding day.
Could Jesse and Frichtel handle the lab work?
And oh… by the way… the wedding day was next week!!
Not a problem. A UPS International team hurried the impression to the Shenzhen China lab.
There… the experienced technicians quickly worked their magic to create veneers for the bride's new smile.
The pearly whites arrived at the dentist's office the day before the wedding!
For Jesse and Frichtel, the glue to managing such speed and an operation that spans hemispheres is logistics technology.
The firm uses electronic customs brokerage to handle all its flow of commerce from a computer screen. That provides the visibility to know where everything in transit stands.
The company gets an e-mail alert of any potential glitches in arrivals and deliveries. It then can institute steps from the keyboard to clear any issues electronically in a matter of minutes.
Although 21st Century technology applications like this are the new enablers of commerce, the essential flow of business across borders is as old as the Silk Trade Routes established during the times of Alexander the Great.
It's a flow of business that's as natural as the flow of the Allegheny and Monongahela Rivers into the Ohio, and down through the Ohio River Valley.
The currents of business… like those of the Ohio River… simply follow the path of least resistance.
Even though it's human nature to wish otherwise, protectionism in the form of tariffs and regulation -- puts up an artificial dam that bottles up and inhibits that flow to everyone's ultimate detriment.
Today, some wonder about the impact escalating fuel costs and fossil-fuel emissions will have on a global business era we've seen expanding since the fall of the Berlin Wall in '89.
It's true… our world of business is influenced by a remarkable web of complex factors.
We've all felt the incredible run-up of gasoline prices that brought $4 a gallon prices at the pump. We've seen crude oil prices double in one year.
Believe you me, that can give a transportation guy a case of acid reflux.
Each dollar hike in the price of a barrel of crude oil, for example, adds some $465 million dollars in airline jet fuel expense.
Will that cause some companies to rethink their supply chain strategies?
It may result in regional supply chains becoming more prominent.
In North America, manufacturing in the maquiladoras region of Mexico may pick up some steam.
In addition to fuel cost considerations, the wage differential between China and Mexico has narrowed due to inflation in China.
In 2003, Mexican workers made over twice what their Chinese counterparts did. Today, that gap has narrowed to 1 point one-five times.
We're also seeing many large industry leaders -- including UPS - marshalling their engineering and operational expertise to green the way they do business.
By minimizing fuel consumption and carbon footprints, companies are accomplishing the twin goals of operating responsibly and efficiently…a win-win for all concerned.
All that said, what we're also seeing in today's climate is that companies - although they may tweak -- are not abandoning the essence of their global supply chains, which they've established at considerable investment.
And you have to put this year in perspective.
Even though global trade growth has slowed -- and not growing at the pace of a couple of years ago, it's still projected by Deutsche Bank to grow at a 3.9 percent clip through this year and 3.2 percent next year.
Two-thirds of that growth is coming from emerging countries, whose economies will expand at a nearly seven percent clip this year, against an anemic one-plus-percent rate for the U.S., Japan, and Euro zone economies.
And that leads me to the opportunity side of my discussion.
I can sum it up in a single word - export!
Permit me to take you back to China one more time.
China is the U.S.'s fastest-growing export market.
The U.S. exported $65 billion dollars worth of goods to China last year. Over the past five years, exports to China have grown by 150 percent.
Right now, some 60 to 70 million Chinese are considered middle-class. In five years, that number is expected to double!
In addition to the huge Olympic venue cities of Beijing and Shanghai with a collective population of some 60 million, you have fourteen other cities the size of Chicago that are growing at a rate of nine percent a year.
India is a similar story. By the mid- 2020's, it's expected to have a middle-class population of 400 million.
Did you know that the Ukraine - according to the consulting firm A.T. Kearney - is now considered the world's fifth largest market for retailers?
The Ukraine will be hosting the Euro Cup in 2012 and will be investing $30 billion dollars in transportation and infrastructure.
I could go on about opportunity markets like these around the world. They are rising quickly and all need U.S. quality technologies, medical equipment, consumer products, you name it.
And they need services. You hear so much about the trade deficit.
But the U.S. in fact runs a huge trade surplus in professional services like accounting and legal, in insurance, in travel and licensing services and others. It's a distinct American global economy advantage.
So the next question is how do midsize and small American businesses with limited resources get started in reaching these opportunity markets?
Well, the fact is today it's not as complicated, or as expensive, as you might think.
I mentioned the way Jesse and Frichtel uses logistics technology to achieve visibility and speed in transit.
Other technologies will automatically calculate costs associated with exporting like shipping costs and duties.
You can even fill out customs paperwork without the paper, using a simplified, paperless invoice application.
What about the business development and market research insight that's needed?
Here's my tip to you today for listening to me…The U.S. Commercial Services…1-800 USA TRADE…or www.export.gov.
Yes, it's a government agency…just like the IRS is a government agency…but it's got whole different attitude.
That's all I'll say. I don't want to be audited!
The Commercial Services has “feet-on-the-street” experts located in 80 countries and can be a valuable business development resource to midsize and small firms on everything from choosing business partners, to understanding cultural norms, to protection of intellectual property.
You won't see them advertising these services, because as a government agency they can't.
But here's a true-story testimonial. I promise to keep it short.
It's about a spunky lady who lives in Berkeley, California, named Patricia West.
Not too long ago, Patricia suffered from breast cancer and received radiation treatments. The treatments left her extremely tired and out of energy in the afternoon.
Always curious…to help alleviate some of these side effects… Patricia studied aromatherapy. She developed a homemade lip balm and mixed in peppermint oil for some extra zip.
Continuing to experiment, Patricia added a chocolate delicacy made by a couple of her friends at the nearby Berkeley Chocolate Factory.
Friends tried her concoction. They loved it. They encouraged her to sell it at a local salon.
She did. It was a hit. And her business - “Ganache for Lips” -- was born.
Soon a distributor in Japan contacted Patricia and requested that she sell her product overseas. Patricia was intrigued.
That's when she reached out to the U.S.Commercial Services for assistance.
The Agency's specialists helped her develop an international sales strategy, and determined which distributors she should work through to navigate customs regulations.
She also partnered with UPS to set up the technology tools -- like those I mentioned earlier -- so that she could direct all her shipping operations online, and handle her billing electronically.
Today, 15 percent of Patricia's business is international and exporting is a critical piece of her growth strategy.
She's still a one-woman business developing new recipes in her kitchen.
Her only associate is her UPS driver, Mike, who arrives every day for pickups and deliveries, and is greeted warmly by Patricia's dogs - Mochi and Emma, who know they'll be getting a biscuit treat.
Mike initiates the first part of the journey of Patricia's products around the planet -- to premium food retailers, gift shops, salons, spas and beauty care stores in Japan, Germany, Australia, Canada, Taiwan, and South Korea.
I love that story. If Patricia can manage an export operation from her kitchen table, surely larger firms can as well.
Patricia's story also reminds me of a South Georgia native and colleague who works with me at our Atlanta headquarters.
He likes to tell me that when people visit his native south Georgia coastal islands they marvel at the stately live oak trees that are so beautiful there.
Occasionally, as my friend says, a visitor from the Northeast will ask a South Georgia native when is the best time to plant one of these oaks?
And the answer from the locals is always the same… a hundred years ago!
That might be the same answer to the question of when is the best time to launch a U.S- only business venture.
UPS is one of those 100 year old enterprises that grew for its first 80 years exclusively in the U.S., and from humble beginnings as a Seattle bicycle messenger service.
That was then. But now, if you asked the question, “When is the best time to plant an international business?”
The answer might well be… right now!
Now is the ground-floor opportunity. The dollar is down. And that's even more of an incentive.
But the biggest factor is that two-thirds of the world's purchasing power resides outside the U.S. And that two-thirds is now connected to the one-third by technologies like the Internet.
Maybe you'll have me back in ten years and we can see how well I did at forecasting.
We'll see how Pittsburgh firms that took the exporting plunge or expanded their exporting initiatives, stack up ten years from now with those that chose not to.
I'd feel pretty good about that prediction.
And I feel very confident in American business's ability to compete successfully during the global era's next wave.
I think three factors are going to have a great influence. They are:
Thanks so much for having me today.
I'd be happy to take a few questions as time permits.
 |
 |
 |
|