Great, Benn, let’s start off with a cheery subject - the economy.  First of all, is everybody done eating?  That’s very important.  We get a good look at the economy at UPS.  We move nearly 7% of the GDP every day in our trucks and our planes.  And we also use the other barometer of Fed research to compare what we see.  And not surprising to anybody, it’s a bad economy, it’s a tough economy out there.  And probably will be for a while.  Whenever a recession is induced by a financial crisis, generally the recession is longer and deeper.  I think people estimate that probably one- and-half trillion dollars will be lost by financial institutions around the world.  If you use a typical 12-to-1 leverage ratio that means about $18 trillion dollars has disappeared from credit.  It has evaporated so it is not surprising to see the credit crunch that we find ourselves in today.  I think that the good news is the Federal Reserve and the Treasury have reacted earlier in the U.S. than they have in most of the rest of the world.  If you think about it, the Federal Reserve started lowering interest rates over a year ago.  I think they lowered interest rates 100 basis points in 2007.   Just last week we found out we’ve been in a recession for over 12 months.  I think we in the transportation world feel like we’ve been in a recession for about two to three years.  I’m not sure about your businesses, but it’s been weak for quite some time.  But I do think the bright light is that we’ve got the right people hopefully making the right decisions.  We are running into challenges that we’ve never seen as a country, and probably as a world.  Nobody knows for sure - including Chairman Bernanke and Secretary Paulsen - whether the solutions are absolutely going to work or not, but I think if you look at Chairman Bernanke you probably nowhere in the world have a better historian of the Depression than him.  And he is going to do everything in his power to make sure we don’t get into a worse recession.  So, I think we’ve got the right people making the right decisions.  My own personal opinion is that we need to get the psychology back to where it needs to be.  We need to get to a bottom in housing.  And I think everybody is focused on trying to lower the mortgage rates, lower the long term fixed rates.  That could help us get there a little bit quicker.  So I think we are not too far away from the bottom in housing.  The next big worry, clearly, is jobs.  We are not at the bottom in jobs yet.  It is likely in the next 12 months the job situation will get worse.  And that’s why I think in the Stimulus Program the new administration brings, it’s critical that it’s going to add a lot of jobs.  I think President Elect Obama has certainly focused his attention on a job creation type of Stimulus Program.  I don’t think rebate checks will solve the problem.  I think the consumer is scared.  The consumer would probably keep it in his pocket and save it.  Saving is not bad, but we also need some spending going on.  I think the biggest challenge we will have in the next 12 months will be unemployment.  I think a Stimulus Program that creates jobs will be very important. 

I think it’s important.  I think you need to blend together Ph.D.s in economics.  You need business people and you need some historians.  I think they’ve done a pretty good job balancing that.

I think they need some more Ph.D.s in computer science, but that’s okay.  Dave, how have the economic factors impacted the IT strategy at UPS?

Well, Benn, we have all the normal issues that companies in general have.  With a recessionary climate on, there’s no doubt that the senior management team at UPS is forced to take a look at where we can do better cost management and we certainly are well known for our capabilities in that area.  But perhaps most importantly, we spend our time looking at the other side of the coin.  One of those things we can do is to expand our horizons in the market places; expand the value proposition that we are bringing our customers. So we spend more time trying to balance our activities in that direction than we do trying just to plain cut costs.  The horizon we use in our governance mechanisms to take a look at how we would invest IT dollars is always adapted from a long-term view.  We tend not to have a microscopic, short-term view.  We tend to look over a longer period of time and that tends to give us a little bit more clear sight in terms of how to drive out of these recessionary periods stronger than when we went into them.  And then we focus on that.  Now that being said, I don’t want to kid anybody - we all know as CIOs in this group today that we are pushing hard to cut costs.  You can cut costs in many different ways.  The key is to cut those things that really don’t have a material impact to your business - which aren’t bringing near-term gain and aren’t changing your strength in terms of your market position over time. So, we look at those projects that might be cost cutting that are a little farther out - two or three years - that bring less robust returns.  We might actually curtail those and instead shift that money over toward new product development.  So, Benn, it has material effect, but we are pushing for the longer term view.  We think that’s the sounder way to go and be fiscally conservative in the meantime.

Well, it’s certainly an information intensive industry and economy up or economy down, that doesn’t change the volume and velocity of information that’s a key part of the industry.  And so it is interesting to see how it impacts priorities.  Any observations?

One thing I wanted to hit on - since we have a lot of vendors that we’ve had come to this organization to help put on this event - one of the things that we look at is how to work with them to extract more value.  We talked about a couple of those in presentations today.  The value I’m talking about isn’t specifically how much we pay.  Instead, it’s that partnership concept where we try to say what are the things we can do together that we couldn’t do alone that could bring a value position out to our customers.  Those things have become much more material.  And it’s interesting, Benn, to see how it resonates much more with the strategic partners that we have working with UPS and the other companies that are here today.  We are getting more things done in shorter periods of time than we could have done before.  There is truly a call to action.  And it has a material impact. You might think of it as a catalyst for change -  the ability to move things along a little faster than what might have happened in normal business. 

UPS has long paid attention to those themes that we now call sustainability. They have certainly been a part of the ethos of the company for many, many years.  And many people are quite familiar, at least on the side of environmental concerns, with the focus on fuel efficiency and the vehicle side of it. But green IT is playing a role as well in these domains.  Can you speak to that for a minute, Dave?

If you look at sustainability, some companies are just now getting to that party.  And it’s become something.  You have to look green.  At UPS this isn’t something new to us.  This is something we’ve been working on for a number of years.  Looking back in our automotive fleet environment, our first electrical vehicle was back in 1935.  And we are continuing to pioneer new things today.  If we take a look at the broader side of just plain IT, take a look inside the data center.  I can remember a couple of vendors that we worked with on new product acquisition and we are talking about efficiency rates in terms of power conversions units.  And this is whether to laptop, a PC or a large server.  And if you were talking this three, four or five years ago, you used to get these blank looks.  The deer in the headlights look from the vendors.  It was like bring us the engineering side of your company because this is a serious issue we are talking about.  Today that is manifested into the products we see.  Whether it’s Intel who is here today with its 25 watt chips that are out, or whether it’s power conversion factors that are incrementally better than what they were just three years ago, these are significant impacts in terms of the overall use of electricity.  Perhaps even more interesting is to take a look within UPS’s data centers.  We’ve put some pretty innovative technology in place.  One of them is here in Atlanta trying to manage our power consumption and the rates we pay.  Most of us have large data centers and use chillers and other technologies to cool down the heat the equipment generates.  In the Atlanta facility we have at Windward, we chill the cold water that runs through those chillers at night.  We have a 500 gallon tank buried beneath the data center.  We chill the water at night.  We get lower electricity rates at night and then we use that chilled water during the hot summer days to chill the plant down.  It’s very, very environmentally sensitive.  It reduces the demand for power generation at peak times during summer days. 

It keeps you from building new plants.  It lowers our costs.  The other thing we started a few years back was running everything hotter.  It was an interesting commentary again as you get into the engineering side of equipment. Just how hot can you run a data center?  I think when most of us started years ago it was always a refrigerated room when you walked in there.  It was humidity control for good purposes and, by the way, still good purposes - but very cold.  Today if you walked in ours they are luke warm.  And so the issue of having to chill these things down really isn’t something that’s very efficient.  So we are running them a lot hotter.  There are people today that are actually running equipment without cooling.  I don’t really purport to that.  I think you still have an air flow mechanism problem, but we are finding new and more novel ways to reduce our energy.  Looking beyond that and perhaps, again, most strategically important for UPS is extending the idea of sustainability out to our customers and looking at ways we can partner with them to bring novel new techniques that make their businesses greener to improve their sustainability.  One of those is a real simple one - eliminating paper from international shipments.  International shipments have always been complex to clear borders.  And the common paradigm you have today is there is a tremendous amount of paperwork - commercial invoices and all sorts of declarations - which are attached to these packages that flow through these regulatory environments.  Working with regulatory agencies around the world on a sustained, long-term project we were able to achieve a paperless environment.  We have eliminated all that paper off the packages.  The only thing there is a label.  All the other information is electronic.  We manage this to and from customs agencies around the world.  It not only reduces about 1300 tons of paper a day, but more importantly it improves the time in transit that we offer for customers’ packages.  So it’s a double win - environmentally better, better time in transit.

Benn, I think Dave has summed it up pretty well that we’ve been at this for a long time.  At UPS we serve pretty much every community in the world.  First of all, it’s the right thing for us to pay attention to the environment.  We also have probably the largest fleet of vehicles out there.  We are the ninth largest airline in the world.  So, we have to pay a lot of attention first of all to our carbon footprint and, as Dave said, I think that today more and more customers are paying attention to their carbon footprints.  And it’s going to be more so every year.  The new administration is going to get the U.S. more focused on the environment, on sustainability.  We were in Europe for a symposium a month ago.  And there is so much more focus on sustainability in Europe than in the U.S. that we have a ways to go to catch up.  But for us I think our customers are going to demand it.  They are going to look for what it is their vendor, their supplier, is doing to help them control their carbon footprint.  At UPS we are proud of our carbon footprint. We are efficient in how we utilize energy.  Everything we can put on the rail, for example, will take off trucks.  And rail is about four times more efficient than trucking, as far as energy consumption.  Everything that goes on airplanes that we can put off and put it on a truck to make the time in transit is eight times more effective than airplanes.  So, our network is far more efficient than anybody else in the transportation world.  We have been masters of this for decades.  How do we get it there in the most energy efficient manner?  It’s going to be a big deal going forward.  We have to do it.  It’s the right thing to do. There’s going to be more regulations in the U.S. And the customers are demanding it.  They understand that they need to have an efficient carbon footprint.

I know it’s certainly become a serious issue with the domestic customers.  It seems like it’s almost a mandatory issue with customers around the world that probably are ahead of us in thinking about the central nature of many of these initiatives.  Is that fair?

It’s fair.  I mean, clearly, Europe has got a cap and trade system today.  Congress is certainly warming up to that idea and I think you’ll likely see some form of a cap and trade system in the future in the U.S.  It’s all back to what’s the right thing for us to do?  And, you know, we spend a lot of time, a lot of effort investing in alternative vehicles right now.  And we are proud we have over 2,000 alternative energy vehicles today.  To do that we’ve tried a little bit of everything - compressed natural gas, propane, hybrid electric, electric, as Dave said, all the way back to the ‘30’s.  We are still testing electric vehicles today. We need a little work on the battery. 

To get there.  But hydrogen cells, fuel cells.  There are all kinds of different alternatives out there.  What we have to do as a country is tart with companies and governments to figure out what is the best solution.  The problem we have today is that any one of these solutions is very expensive.  Certainly some states and cities will subsidize some of the alternative fuels, but to get it where it economically makes sense you need to get a variety of companies - maybe Southern Company, UPS and AT&T to get together and say the right answer is hybrid electric.  And manage their fleets with hybrid electric.  But you need to get together and you need the governments to get together.  Right now every city, every state and federal government has a different idea what the right solution is.  You are not really going to get there until you have some scale.  So, it is going to take a lot of collaboration.  I was at a session with David Ratcliffe from Southern Company just a couple of months ago.  We had eight Republican governors in this session and we couldn’t get agreement among any of the eight as to what is the right solution.  So we’ve got a lot of work ahead, but it is something we are going to have to do.  And I think that as we move forward we are going to get there pretty quick.

You know, Benn, I was just thinking that on the fleet side, as Scott said, we don’t do just one thing.  There are a number of things we are trying to do.  In terms of engine technologies, we burn a multitude of fuels. We take a look at the hybrid electrics that we talked about. We also have a hydraulic hybrid - there are only a couple of those in the world.  The concept of storing energy in the battery is an issue that we think will continue to improve over time.  In the meantime; an alternative view is how to store energy as a hydraulic fluid in a tank - that has some promise to it.  But perhaps more importantly, there are things we can do as a network organization.  At the end of the day UPS is a global network company and we are already an efficient network. We put some of the brightest minds that we have within UPS to work on a project and say, “If you could do it over, how would you do it?  How could you take the basic components of the job and find a more efficient way, a more environmentally sustainable way of doing it?”  One of the things we looked at was the simple art of how you load the packages in a package car before the driver takes out for delivery.  When I was in college, I worked as a part-timer at UPS - a very short time ago, about 31 years ago.  It seems like a very short time ago.  And if you were a pre-loader in the morning, it was a great college part-time job.  Get in there before class.  But you have to memorize the routes of three drivers.  A very painful process because if you misloaded that package and you put 101 Main St. behind something else, the driver had to loop back and that’s not very efficient.  It doesn’t make service and it burns up a lot more fuel.  So we thought there has to be a different way of doing it.  We’d done it one way for 90 plus years at the time.  We are very good at it - industry leading.  How could you do it dramatically different?  We threw out all the norms and developed a system called Package Flow Technology.  Just one small aspect of that program was to take a fresh look at how you optimize networks.  And as a result of optimization routines that we put within that software within the practices at UPS, we were able to reduce our mileage in a given year in the United States alone by 30 million miles - that’s about three million gallons of fuel. And perhaps more important to all of us it represents 32 million tons less of CO2.  It’s those types of pioneering things - sometimes they are right in front of you and you can grasp that they can dramatically move your business forward. So we’re always working on that, Benn.

That’s a great segue into the next theme I’d like to address, which is related to IT and UPS’ strategy in general.  I’d like to discuss for a few minutes the issue of alignment of IT and the role of strategy from your different perspectives as CEO and CIO.  Can you speak to that for a minute, Scott?

Talking about the role of IT in UPS - often when I’m talking to investors I tell them that we’re about half a transportation company, half a technology company. And 20 years ago that wouldn’t have been the case.  Twenty years ago we were a package transportation company.  Get the package from point A to point B.  Today, clearly, in the last 20 years, information about that product is as important as getting the product there.  So, it really has changed the way that UPS does business.  The way we do business at UPS is we look ahead long term.  David talked about long term.  We spend a long time looking ahead 10, 15, 20 years using scenario planning and say, “What’s the world going to look like in 10 or 15 years?” And we are going to have to dust that off again based on what’s happened in the world this year.  Things are changing, but clearly 15 years ago we looked at different scenarios - we called it a brave new world. We felt that borders would come down and we would see a lot more free trade.  And with free trade comes much more complicated supply chains.  And as you start sourcing and selling goods throughout the world the need for technology, the need for visibility, the need for information is absolutely critical.  At UPS, we have a strategy steering committee that does a lot of this scenario planning.  Dave is clearly a partner at the table because technology, as I said, is as important as anything we do in the company.  So Dave’s in on it on the front end and gets his two bits in on where we think the world’s going, but understanding strategically where the company is going. From there we go to other committees that Dave chairs. That’s our Project Planning and Oversight Committee that has the joy of trying to prioritize all the major projects in the company, whether they are marketing, product development, or operations related.  The reason Dave chairs that is that he’s got such a wonderful background of understanding the business.  He understands the business extremely well, as well as anybody on the Management Committee.  He’s been at it, as he said, for many years.  He’s done a lot of different jobs in the company and understands the business extremely well. So, at UPS, IT is core to everything that we do.  Information is critical to our customers. For our customers to be able to serve their customers they have to have this information and we have to be integrated with those customers - connected with those customers.  And David has done a wonderful job of leading us down that path. 

We all know that CIOs want to be at the table and that table gets the different acronyms and different talks and different dialogues.  The key is to be up front and assign strategy.  Nobody really wants to be at the other end of it which is basically where you are just an order taker.  If you are not involved with the key members of your management team helping to set the strategy of the company, at the end of the day all you are is an executer of the strategy. Not that that’s something to be taken for granted, but I think all of us aspire to doing something much more significant.  The role I play is really one as a business generalist.  I take a look at it from a solutions aspect, certainly with a technology perspective.  But I can grant you in those meetings, as much as we drive technology, it’s not a meeting talking about what’s the meanest and baddest server I can put in the data center.  Those types of topics are not what we are discussing there.  They are very important.  They are part of the role of the CIO, but they are pertinent to the strategy table only in regards to the implications of what we can do with the technology.  That’s very important, especially at UPS.  A large amount of our business is working with our customers to outsource a lot of their logistics to us.  To do that you must be fully integrated from a technology and business process perspective.  It has to be seamless.  It’s not going to work - we are not going to have value - unless we can remove the friction from the environment, make the supply chains work better.  And we are very good at doing that.  But the key to that is we have a long-term vision.  We have a management team that is focused on strategy.  We plan our projects around our strategy - taking a look again at where we are trying to position in the marketplace with a clear view of how we differentiate and what is our value proposition for our customers.  It works pretty well.

It’s almost misleading to talk just about IT and UPS strategy because everything you do relates to the strategy of your customers.  And that’s a continuous challenge as well.  In aligning with their wishes and aspirations at the same time, you are dealing with your portfolio services.  Is that fair?

We were having a discussion with a friend of mine earlier today and we were talking about EDI.  Actually EDI at UPS is still growing.  Our customers demand a significant growth rate.  It averages out about 28 percent a year.  But EDI is just one method of communicating and certainly I think there are many others that are very preferable.  But the issue, Benn, is that we have to be able to understand our customers’ businesses and be able to talk about what is that superior business model, that process model that drives value.  And we have to be able to integrate our technology and theirs together.  The integration we do, it’s millions of customers.  We have about eight million total customers on an average day - about two million we pick up from and about six million we deliver to.  And so if you can think from a technology perspective if we go to that side of the job, there are innumerable different technologies we integrate with. So, there is no one answer, Benn, there’s a multitude of answers.  We have to find a way to take the network of UPS that moves on the average over 15 million packages a day and make it right-sized with the time in transit offering the right value to a customer, meeting a specific set of demands for a customer.  Yet at the same time run the network, which means it all has to come together.  It’s how to get customization at the same time as being a network company.  It takes advanced technology to do that and a lot of forethought and we are working hard at that now.

And your question, Benn, to understand the customers’ needs is what drove us to do about 40 acquisitions since our IPO in 1999.  It caused us to go from being a package transportation company to an enabler of global commerce, which broadened our service offerings tremendously.  We became a solutions provider and the key to that is technology.  We did a lot of acquisitions with freight forwarding companies, distribution companies, and brokerage companies - big challenges there on the technology side.  They all had different types of technology and for us to put those together into standard platforms was a heck of a challenge and certainly our IT group played a key role in making that happen.

Every year I beg and trick and cajole Dave to come in and talk with my exec MBA students, and one of the comments that always comes back is their understanding of what they think a CIO is and they almost act often bewildered - “He talks like a CEO.”  You find that’s also the reciprocal issue, too - in Scott’s background you find that he’s not shy about dealing with technology and technology requirements. Scott is 22 years with UPS.  At many companies you would say that is a very impressive and long tenure.  Well, at UPS he’s the newbie.  He’s only been there 22 years.  And, I think, on the Management Committee there is only one person with less tenure than you.  And yet at the same time you came and were sourced from an acquisition yourself, from a technology acquisition where you were CEO and prior to that CFO.  Has that played a role in the way you two work together?

First of all, no one says that I sound like a CIO. What’s the deal?  Seriously, it’s helped.  I came in an acquisition, a hardware manufacturing company in Oregon that we sold to UPS in 1986.  That was really at the start of the technology revolution at UPS.  That was when it was decided there was a need for visibility and a need to track packages.  And our role, initially, was to help build the electronic clipboard you see our package drive with today - the DIAD - which captures information electronically.  The second role was for us to develop a communication system that sends that information back to the mainframes.  At that point in time there was not a good solution.  We thought we were probably going to have to do it through 220 MHz RF system and it ended up being the greatest RF project of the time.  You know, it had a lot of great RF engineers. And then we solved it through cellular technology -- a much simpler solution.  But that’s how we got started.  I learned quickly that as we developed products in Salem, Oregon for UPS that we had to understand the business.  So, the first thing we did was put on our browns and get out and work with the drivers and understand what goes on everyday and what information do they gather from the customers and what needs to be provided.  It’s always been the way UPS has operated, but it taught us real quickly early on in my UPS career you better understand the business if you are going to be successful at it.  So we had all of our engineers out there, all of our sales people, learning the right way, I think, of how the business operates.  It’s been very helpful for me to come through that background.  I also learned quickly that trying to get a marketing group and engineering group together is very challenging.  Engineers never finish a project and the marketing people want it out the first day before it was ready. And in my job today, I understand time-to-market is very important. But you also have to balance the sales and marketing and development side of the business. Dave manages that every day, I think - the urgency in getting the goods out.

Benn, you hit on that earlier. We don’t have a technology strategy here and over here we have a UPS strategy.  We have a UPS strategy. And because we are together, we are a pretty tight management team.  We come from varied backgrounds.  We have the luxury of a board.  If you take a look at who’s on our board, you get an idea of just how much we believe technology is at the core of our business. It’s Ann Livermore from HP and Duane Ackerman, retired CEO of BellSouth. We have John Thompson who is now retiring from Symantec. That’s just an example of the many people we have.  We believe technology has to be a part of products.  We offer products that are technology enabled.  But enablement isn’t really the issue. It’s more the forefront that we get out with customers.  We understand their needs. We take a look at what we can do to drive value to them.  That’s been the material difference for UPS for years and it works very well for us.  It resonates quite well.  We were talking about airlines. Scott mentioned we are the ninth largest airline in the world.  And that’s a statistic that’s shocking to a lot of people. When you think about here we are in the home of Delta, certainly one of the largest in the world, and quite a capable one at that.  We have all the stuff that airlines have that we run as technology groups with the exception that we don’t have passenger reservation systems and seating charts, but we do have where containers go and how all your packages are managed.  But we take a look at airlines.  We challenge ourselves with this idea of getting involved with customers of all types and sizes.  One was the FAA.  And one of the challenges that we took on was there’s got to be a better way to manage the way airplanes take off and land and the way they descend in the airports. And it’s just that typical UPS concept that we call “constructive dissatisfaction”.  We never think we’ve got “the” right idea.  We think we’ve got some good ideas, but we are always challenging, “What’s the next thing?”  And on the airline side we were taking a look at, “Why do we all hop in these planes?”  We all fly in this group a lot.  We all have the fun. I’m flying out tonight. And you get in the planes and you go out and then you park out there somewhere on the airport. And you are just out there burning all that jet fuel.  From the UPS engineering point of view, it never made sense to us.  It seemed to us that that’s nothing more than something you put a couple of people together and figure out a routing logic.  And we actually worked with the FAA and we actually put that in place in airports like Louisville, Kentucky.  So if you were to go there and watch our planes, they don’t take off until they are ready to take off. They just taxi out and take off.  They don’t go park for a half hour, running those engines, and then take off.  It’s a dramatic reduction in fuel and it’s something that can be done at every airport.  Another thing we took at look at is, you notice how a plane comes down?  The pilot tells you, “We’re descending.”  And you go straight for a while, you descend - you’re stair-stepping down.  Every plane does it in the United States and basically around the world.  It has nothing to do with efficiency.  It is really old school.  If you think about it for a minute, what’s probably the most efficient way?  Just gradually descend down to the airport.  Well, again, working with partners like the FAA we are able to put that technology in our planes.  We are fully capable of full descent landings which eliminate that stair step.  Planes are much more efficient.  Idle those engines back.  You can’t turn those engines off, but you can certainly idle them back and glide in.  It’s this type of creativity and innovation that we apply to supply chain logistics. I can tell you my job is just a thrilling place to be because there are just so many different aspects of our company that we find unlimited areas that we can improve. 

Along those lines, a little plug to President Elect Obama’s infrastructure program. You know, air traffic control is so antiquated in this country.  The GPS you’ve got in your car is more sophisticated than how we manage a fleet of airplanes today.  We’ve got 1950s technology - using radar - which is so inefficient. Anybody who can get this message back to the President Elect, you should say we need to get some of that money diverted to air traffic control.  It is so inefficient.

A couple of questions from the audience that have come up.  One issue, Dave, is you’re the third CIO for UPS over the last 25 years.  The very colorful Frank Erbrick being the first and Ken Lacy being the second.  What are you doing internal to the company to grow the next generation of IT leaders?

That’s a challenging question because you have to look at it from both ends.  On the entry level, we all read the statistics and we’ve seen the reduction of people participating in MIS computer science degrees in U.S. schools, and so we know we’ve got a problem. You can put it off for a while, but the bottom line is there’s less people coming into engineering and we have to do something to change that course.  So, we’ve partnered with a lot of universities here in Atlanta.  We have a great program here, as you were told this morning.  It’s one of the top programs in the country and something we are proud of.  This is something Atlanta has, the Southeast has.  But beyond that UPS not only works with the universities, but we actually have a luxury.  It’s something many companies don’t have.  We have thousands of college students that work for us in part-time ranks in our sorting facilities and operations around the U.S.  So it’s a kind of neat position of being able to pick and choose the best of the best of those that have come to us and said they want to be in technology. They typically already have a four-year degree and we will pick 25 to 50 of those a year to bring them up in entry level jobs and train them from the get-go.  Whether it’s training them in COBAL or advanced computer science - whatever it is - we bring them in at the entry level and grow them from there.  Because they are already experienced UPSers, they come knowing our culture.  They have that can-do spirit, that spirit of constructive dissatisfaction. They really move pretty fast in their careers. And that’s a great place.  On the other side, which is the more senior members, it is taking a look and saying, “What are the qualifications to be CIO down the road?”  Certainly, you have to have some founded in technology.  Perhaps not as much as it used to be years ago, but nonetheless, you have to have some founded in technology.  But we all know, more importantly, you have to develop that business acumen that makes you successful when you attempt to sit at the strategy table and work with you peers.  If you can’t talk the language of business and you don’t understand the language of business then you are only at the table.  You are not an active participant at that table.  So we work very hard to cross-train our people.  We believe in promotion from within and we do an awful lot of moving people around in different roles as they pursue their career which at the end of the day produces a pretty high caliber individual to take our places. And we have a very active succession plan and we are always lining up several individuals to fill all the key positions.

This is a rather tough question for both of you. What technologies have the greatest impact on your success over the past three to five years?  I’m sure that every few minutes you would give a different answer for it.  But off the top of your heads, what strikes you as a technology that has had a significant impact on the company?

I’ll start, Dave, and you can correct me.  I think probably the most game changing for us is our Package Flow Technology that really changes the way we manage package operations.  It allows us to capture all information from the packages coming in the night before to plan our routing the next day much more efficiently, much more orderly.  It’s saved us millions of miles a year in more efficient transportation.  It also de-skills the loading of the package cars.  In the past, people had to memorize street addresses and zip codes.  Today it’s done for them.  Basically, it tells you to put this package in this bin in this package car.  It really simplifies the process.  It has saved us tremendously from an operating standpoint - we’re much more efficient in our operations.  It also gives us the ability to offer new products that we couldn’t do before.  We have a package intercept service where if somebody shipping a bunch of sweaters to a Macy’s in Atlanta decides they need to go to a different store because they are out of inventory, we can intercept that package.  So it’s been an efficiency thing for the company, an environmentally sound thing for the company.  And, obviously, a good product development issue for the company.

Package flow would definitely be at the top of the list, but if you look at things, Benn, in addition to that, I think I would be hard pressed not to talk about the Internet.  UPS.com and the portal presence that we have and what we do to transact business and the services that we bring our customers. It’s old school today.  We all take that for granted. We thought of this stuff 10, 15 years ago.  But that’s still evolving for us - it’s still a primary area of investment for UPS.  We are still going that way.  And high-end visibility systems would be another.  Scott talked about the fact that we have package level information on all the packages that flow in the UPS network worldwide.  That’s across some 200 countries and territories, from the smallest letter all the way to air cargo size.  All that comes together in a very large data warehouse business intelligence environment and we play that back not only internally to improve the quality of our business and to improve our operating practices to allow us to have the leading level of reliability in the industry.  Perhaps more importantly, we integrate that back into our customers. So, if you are a large retailer, you can see what’s coming to you on any day.  You can also see, if you look today, what’s going to be coming Thursday, or Friday or next Monday.  You can do some amazing things if you have that type of deep visibility into your supply chain.  It challenges and changes a lot of the paradigms that have been set over time.  It opens up a door to more innovative approaches for supply chain management.

So, it’s big versus the operation side of the business. And I think that, again, it all starts with us looking at where the world’s going.  And global trade is driving a lot of the products.  Dave referred to the paperless invoice which is simplifying the process.  Small business people in the United States are scared to death of exports and we’ve been to a lot of sessions with them and with the trade services group, the government.  And they’re afraid of it.  So you need to simplify it.  And things like paperless invoice simplifies it tremendously and takes that fear factor away from the customer.  Returns are another great example, especially international returns.  It was very difficult in the past to return goods if you buy anything over the Internet. It doesn’t always work and you’ve got to figure out an easy way to get that back to the supplier.  So international returns is another technology advance for us to simplify the process.

There’s many ways.  With UPS logistics, you can take a look at some of the largest e-commerce retailers out there.  By working closely with UPS, we are able to co-locate facilities where we have our airport properties and UPS airlines operating. And that opens up new doors. One of them is the largest retailer in our space. You can call them up to 1:00 a.m. today and you will have that order tomorrow morning.  And the reason is that we are fully integrated - it’s that level of integration I’ve talked about before.  The orders that are processed by them can go right into a pick and pack operation, be pulled, fulfilled and go right into the UPS airline.  The last pick up of the day in the Louisville airport is for our key customers.  And that allows them to open up doors that enable them to position themselves better to their competitors and drive more business in their direction.  This has worked out quite well. Things like fixing laptops. We have a very large engineering team that repairs UPS equipment.  We do self warranty repair on almost everything we have only because we have hundreds of thousands of everything:  scanners, computers, PCs and laptops.  So we became pretty proficient at it.  If you are buying Toshibas and they are being repaired, that’s UPS logistics doing those repairs.  And so you will send it in and returns will pull it out of the airline and rush it over to the air park.  Our repair group will repair that and send it back out.  And you get it the next day or the day after depending on parts availability and things like that.  So, innovation is the key, Benn.  It’s not one size fits all.  It’s the ability to offer a tight fit like a glove to give customers what they need and to offer them solutions, not just technology.

Nobody’s got that purity of vision to where everything is going to work out. If everything’s working out you’ve go to ask yourself if you are taking enough risk.  Because I would make the point that if you have no failures you are too risk averse.  So you have to find a balance.  If you have too many failures that good relationship you had with your CEO probably goes away too.  But there have been some failures.  One of them we had, interestingly enough, was an early Internet device. We had taken a look and pioneered building of a technology device that we were going to put out to very small shippers in retail markets where counter space was really a scarcity item.   And so we had co-developed from an engineering aspect a device that’s all integrating phone and Internet, etc.  Before we got it to market broadband killed it.  So those never made their way out.  There were things like that that come and go.  We are not unwilling to push the window.  When Scott was talking about the company he was with, it was building the DIADs.  We came to build those ourselves because we went out to the industry and we said, “Listen, this is a pretty simple thing.  We put this carbon paper in.  We have two sheets and a pen.  Drivers are out there in 100 degree weather sweating on it.  It’s kind of a mess and we have to store all those millions of records every day.  We just want put that on a computer.  Not a big deal - we just want to carry it with you and drop it a lot.  And it needs to run 12 hours and it needs to collect a signature and upload.  What’s the big deal?  Why can’t you sell us one?  We are ready to buy.”  And the industry’s response to us was, “You guys are dreaming.”  And we said, “Well, we are dreamers.  We think that’s part of the issue.  You have to get out of the box.  You have to be able to look long term to see these substantive value changers.”  And they said, “It just can’t be done.”  We also believe things can be done.  So we worked with Scott’s company and ended up buying the company.  And then engineered our own DIAD.  And it wasn’t until we actually had it up working, a real one, all the boards, the chips, the whole thing, that the industry came back and said, “You know what?  We see now that that can be done and we’d like to build it for you.”  And we changed that whole industry that you see today. Those types of things are there for everybody to participate in.  We have another generation of DIADs  coming out that they are working on now that will be just as revolutionary. But you’ve got to keep pushing the window and working with partners.  You can’t do it alone.  We believe very much in a partnership.  As Scott has said, we believe that you’ve got to be very tightly joined with your customers.  You have to be sensitive to listen to what they want and being able to differentiate in the marketplace.

I think any company that spends money in IT is going to have failures.  I think more of our failures have come in the marketing piece of it.  Not so much the technology was bad - it was our perception of what that technology was going to do in the marketplace.  I think the market research could have been improved in that situation.  But today’s point, if you are not failing, you are not trying.  We’ve got to fail fast, a zillion times. Don’t delude yourself into thinking this is going to work - you must fast.

How is the economy affecting UPS relations with the competitive environment and the commerce infrastructure in general where it deals with cooperation, as well as competition.  Certainly, technology plays a role in creating synergies in that arena.  Can you comment on that?

I consider us a technology company and we are a company that looks into the future.  You have to have your CIO at your table with you in the strategy formulation of the company.  It is absolutely essential, I think, that the CIO probably has a better idea of what’s doable and what’s not doable, but that person also needs to understand the scenarios we see out there and how the world is changing.  And I think that makes the other piece we discussed early on - the understanding of the business - critical.  And when your CIO does have a good understanding of the business as Dave does, then he clearly is an equal partner at the table and needs to be there.

Scott, you were very nice.  I appreciate that.  Benn, one of the things that I think also works is, you’ve got the business of IT.  The way we work that at UPS is we are very transparent - where we invest money and what those investments are driving.  All of that is rolled up.  People get to see that at the senior levels all the way through to mid-management.  There are really no secrets in IT.  And it’s driven more like I said before because we are so focused on just UPS strategy.  So that spirit of openness - there’s no real defensiveness scenario.  IT allows us a little more clarity of purpose and I think that works well for me to have a good relationship with Scott because he knows everything I’m working on.  More importantly, the partners I have in management all know what the priorities of UPS are.  So, we can make sure we are aligning the investments that we are making - whether it’s new planes or new technology in those areas - that will make a significant difference.  Being open like that takes the friction out.  There aren’t any head butting scenarios going on.  It’s easier to talk openly about business issues in the context of technology than technology trying to look for a business problem to solve.  So, we have it perhaps easier than many companies because we are like that, Benn, but nonetheless there’s some friction sometimes and we work through that.