United Parcel Service Inc.’s CEO keeps his eye on the future, and he anticipates big changes in what now are called “emerging markets.”
“You can think about it as a challenge, or you can think about it as a concern or you can embrace it as an opportunity, which is what we think we have to do,” David Abney, UPS’ top executive, told a Kiwanis Club of Atlanta luncheon on Tuesday.
He predicted that by 2020 “almost half of the world’s consumption is going to occur in these emerging markets.”
“That’s not very far away,” he added.
By 2030, he said, three fourths of the increase in the world’s gross national product will be taking place in the developing countries leaving only 25 percent of the growth in the developed world.
Yet he seemed confident that his company would be ready for these developments as it has overcome other challenges in its 108 year history.
Founded in 1907, UPS began as a messenger company, but with the proliferation of the telephone had to reinvent itself by acquiring a fleet of trucks to become a package delivery firm.
As the U.S. middle class began to acquire automobiles and regional shopping centers emerged, once again it had to change by committing to ground delivery service throughout the country and then adding air service.
The next step was to go international first entering Canada and then Germany.
“We learned quickly that just because it works in the U.S., it doesn’t mean it works in the rest of the world,” he said.
Having begun his career with UPS in Greenwood, Miss., as an 18-year-old freshman in college and eventually undergoing the cultural shock of being sent to “Jersey City,” he suggested that part of the company’s success where it now does business in 220 countries and territories mirrors his own.
“We’ve had to adapt and grow and take people out of their comfort zones,” he said.
The development of UPS’ supply chain business enabled the company to wrap itself around the world. It also has been specializing in the delivery of health care products to the extent that it has 50 buildings dedicated to health care logistics covering 5-milliion-square feet.
Meanwhile, service remains a key ingredient.
As an example, he said that a small package containing only a $2 rivet has to be taken seriously since it belongs to a $1 million engine, which in turn is responsible for enabling a plane to fly. “That $30 million aircraft is not going to move until it gets that $2 rivet,” he added.
And as the company’s focus on delivering medicines and other health care products increases, packages are no longer considered as simply packages, but rather as “patients.”
Given the nature of UPS’ businesses, Mr. Abney has been on the front lines in Congress battling away in favor of free trade legislation.
He spoke of his satisfaction that the Trade Promotion Authority passed, enabling the government to continue its negotiations on behalf of the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.
In addition, he repeated several times his support for the Trade Facilitation Agreement, which contains provisions to ease the movement, release and clearance of goods and sets out measures for effective cooperation between customs and other authorities.
Should this agreement be widely adopted, he said citing a study by the Peterson Institute for International Economics in Washington, 21 million new jobs would be created with 18 million of those located in emerging markets.
In response to a question, he criticized the 35 percent corporate rate that the company pays annually while competitors abroad are faced with taxes often amounting to 10 percent less.
When asked if UPS handled operations in Rwanda, Mr. Abney said that in such emerging markets the company starts working with agents to develop relationships with local firms and make available its global services..
Once those relationships solidified, they then seek out joint ventures where UPS retains a certain amount of control. Finally if there is enough opportunity, UPS will set up its own operations on the ground.
Switching gears, he also cited the enormous challenges faced in the emerging countries and quoted George Bernard Shaw’s dictum that “Poverty is the greatest of evils and the worst of crimes.”
“There are 160 million malnourished children under the age of five,” he said. “According to UNICEF, 22,000 die each day from starvation or other health issues.”
A video about the nonprofit Heart for Africa’s work with the large orphan population in Swaziland was shown as an example of the projects that UPS supports.
UPS moved to Sandy Springs from Greenwich, Conn., in 1991. Last year it had revenues of $58.2 billion.
Mr. Abney received the club’s annual international award.
