In view of fast-paced technological advances and the world’s increased globalization, transportation companies are constantly having to re-evaluate their strategic plans. That task at United Parcel Service Inc. falls to Jan Willem Breen, the well-known Brussels-based vice president of international strategy, who is responsible for UPS’ strategic planning throughout the world with the exception of the United States.
Mr. Breen joined UPS last year after a career as a partner at the consulting firm McKinsey & Company and slightly more than 11 years as director of global marketing and sales at the international courier delivery service provider TNT Global Express.
During an interview with Global Atlanta on a recent visit to Atlanta, Mr. Breen said that he valued his position primarily because the company has the financial clout to execute new strategies.
“It is interesting to work for a company that is that strong that it can do things that have impact and knows how to execute,” he said. As proof, he pointed to its daily activities. “You see it everyday on the street,” he added.
The Dutch native admitted that he was an unusual UPS executive since he didn’t rise through the ranks. Nevertheless, he finds its deeply rooted Southern culture appealing and enjoys working among what he refers to as “home-grown timber,” while also dealing with the expanding workforce outside the U.S.
As an example of the technological developments that he has to keep an eye on he pointed to the use of drones for delivery, which he said are being used on a fairly widespread basis in China and which he expects to see used more in developing areas where there are few roads and people are widely dispersed.
There isn’t a corner of the world where he doesn’t evaluate the need for UPS services, but he is especially in touch where the services are growing most quickly in Europe and Asia.
His interview follows:
Global Atlanta: You are responsible for driving the strategic business policies affecting UPS’ transportation policies generally, which means that you have to keep a close watch on technological developments. What major developments do you foresee affecting the company in the future?
Mr. Breen: From marketing to billing, technology is transforming every aspect of transportation. Almost every project I’ve worked on during the last 20 years has involved technology in some capacity. If anything, the last two decades have proved that leaps in technology produce limitless possibilities for the transportation sector and beyond.
Global Atlanta: In what ways, specifically?
Mr. Breen: I’d like to make a distinction between inward-looking operations technology and customer interfacing technology, which has become increasingly important. For most companies, using technology to bolster operations is a constant process — honestly, this takes at least a decade. Think of things like improved capacity planning, route optimization software and barcode readers.
The hype now is about drones and autonomous vehicles. The headlines are mostly focused on drones bringing packages to your downtown doorstep or aircrafts without pilots. But immediate changes are more mundane, happening within warehouses and many other spaces I would call controlled environments in the supply chain.
In the port of Rotterdam, for example, robotic cranes now lift containers off ships and place the cargo in its designated location. In the next few years we’ll see truck platooning, where vehicles drive very close to one another while being electronically connected — where the driver of the first truck in fact controls all trucks in the queue. This saves energy and avoids accidents. Drones will more likely be deployed to rural areas, perhaps in tandem with delivery vans that stay on the main road
Global Atlanta: And on the customer side of things?
Mr. Breen: As for trends in customer-interfacing technology, expect greater visibility and a shift in decision making from shipper to receiver — consignee — buyer — consumer. Customers want to know the exact location of their container, pallet or package and why it’s delayed at all times, not just the occasional scan. In logistics, a greater amount of power is shifting to buyers and consumers. In e-commerce, customers do not only want to determine where and when to buy but also how, where and when their orders will be delivered at little or not extra cost. The most forward-looking companies know how to design their websites, mobile apps and, of course, their networks to meet these demands.
But here is a healthy reminder: Nobody knows for certain exactly what the transportation landscape will look like even five years from now. Many of the supposed next big things from 10 years ago never delivered on their promise. That’s why companies must be nimble, constantly evolving as the world changes faster than we ever imagined.
Global Atlanta: You probably know as much about the impact of globalization on your industry as anyone in world. How is globalization affecting emerging markets and what do you think about off- and near-shoring?
Mr. Breen: Globalization doesn’t just stimulate Gross Domestic Product growth. It also means that transportation becomes a larger part of total GDP, as well as more profitable, thanks to the value of satisfying complex issues like customs clearance and long-distance delivery.
With the exception of sea, global players and networks are limited. But I expect that to change.
Airline alliances are getting stronger, connecting multiple hub-and-spoke networks. Express integrators are trying to consolidate the market. But rail is still hyper local in most parts of the world with the exception of China to Europe. Emerging markets in the Southern Hempishere in Latin America and Africa and true intercontinental flow focused hubs like Dubai could redefine network design.
However, there is no one-size-fits-all strategy for off-shoring versus near-shoring. That decision is shaped by a number of different aspects, such as foreign exchange rates, fuel prices and labor costs. Those factors change on a daily basis. I can say that the traditional search for cheaper labor will become less relevant in a growing number of markets.
And not all transportation sectors seem to equally profit from globalization. For example, excess capacity often destroys profits in commodity air cargo, and the almost constantly growing airline passenger industry still creates no or little value as defined by returns greater than the cost of invested capital.
Global Atlanta: Is e-commerce reshaping the logistics industry?
Mr. Breen: Yes, especially for companies that provide last-mile delivery.
E-commerce provides a wave of opportunities for postal operators facing the constant decline of their traditional mail volumes. They’re all now heavily involved in parcel delivery and have found a new growth market. And yes, there’s a rigorous debate about whether postal operators are on a level playing field with companies like UPS, DHL and FedEx.
The most dramatic change is yet to come. E-commerce not only creates new logistics entrants like Amazon and Cainiao in China, but also Uber-type networks that could change the competitive landscape. Incumbents still handle B2C operations in a very traditional way. Most postal operators use the same infrastructure for letters and parcels, and package companies believe they can use their B2B networks to handle B2C. Those companies are in for a reality-check.
B2C parcels are becoming the new normal. We’ll see changes to overnight mail and air express or ground parcel networks, which are still tailored to office opening hours. Shipping networks need to better reflect 24/7 production factories, the global flow of goods and shoppers looking to make purchases during all times of the day — and night and not wanting it to be delivered at their home while they’re out working.
Global Atlanta: Does a globalized world create any new challenges for these types of innovations?
Mr. Breen: Cross-border transactions, including cross-border returns, is the elephant in the room here. While not as problematic in the United States, much work remains in Europe and Asia. With cross-border, e-commerce experiencing double-digit, annual growth, consumers and governments require instant service at low prices. The challenge is finding a profitable way to meet those demands.
Global Atlanta: How worried are you about the impact of environmental concerns on the transportation industry globally?
Mr. Breen: It’s unfortunate that this topic is too often an emotional rather than a rational debate. Some companies want to trumpet their green agenda but don’t want to pay for fuel efficient modes of transportation. Wherever I travel, people are worried about the environment. Whether it’s in the Netherlands, where sea levels are rising, or China, where they struggle with air quality, or Australia, where they are cognizant of the effects of greenhouse gas emissions, this is a major topic of discussion.
Global Atlanta: In this more globalized world, do we need more effective trade policies?
Mr. Breen: Common markets and trade agreements will continue to be major drivers of economic growth and transportation. Increasing, “deminimis” value, below which you don’t have to pay duties and taxes on items, helps for sure as well. This might result in lower profits for brokerage and customs agents, but increased trade — and the greater flow of goods — is beneficial for the broader transportation sector. It would be good if we could resolve the current issues and finalize trade agreements, such as the Transatlantic Trade and Investment Partnership.