How Exports Will Fuel Cities of the Future

If we treat export growth as our North Star, the possibilities are limitless.

Juan Perez | UPS

UPS Chief Information and Engineering Officer Juan Perez spoke at the Southern California Logistics and Supply Chain Summit on April 20, which examined critical trends at the intersection of technology and international commerce.

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Virtually all population growth in the future will come from developing nations.

I’d bet that many of us in this room, given our day jobs, are true believers. True believers in trade, I mean.

More than four in 10 goods that come into and leave the United States travel through your backyard here in Southern California. So this area is one of the best examples of why free trade is the path to a brighter future for people of all backgrounds and businesses of all sizes.

But let me tell you this: We have not seen it all yet.

Consider that by 2050, the global population is expected to increase by roughly 40 percent – and hit nearly 10 billion people.

Two-thirds of those people will live in cities. In fact, megacities will mushroom, further testing already strained transportation and logistics networks. And this will happen in places you might not expect.

Meeting needs in new places

When I think of bustling, urban areas, I think of Tokyo, Mexico City, New York and of course, Los Angeles.

But what about Mumbai, India, and its 42 million residents in the year 2050? Or Kinshasa, in the Democratic Republic of the Congo, and its 58 million people in the year 2075?

And then there’s Lagos, Nigeria. With more than 88 million residents in the year 2100, Lagos is expected to be the most populous city in the world.

For context, all of Los Angeles County has roughly 10 million people. Squeeze more than eight times as many people into L.A. County, and you have Lagos in the year 2100.

Virtually all population growth in the future will come from developing nations. By 2050, for example, Africa’s population is expected to double.

That’s a lot of people – and perhaps more importantly, a lot of needs.

This is a tremendous opportunity for those of us involved in moving goods, both to transform this booming middle class and get them what they need in a more sustainable fashion.

Exports are the future

Exports are the fuel that will power these megacities. Exports, one could argue, will be the lifeblood of these megacities. And to extend this metaphor, exports will be the connective tissue of the global economy in a future when the economy truly is global.

But to better understand the future, we must better understand how we got here today.

When people talk about trade, it usually comes down to three things: jobs, jobs and jobs.

And that commentary isn’t always flattering.

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Technology has made it easy for small businesses to build an international brand.

But here’s a fact: Between 2004 and 2014 alone, U.S. trade-related employment grew more than three times faster than total employment, according to government figures.

That sounds like a pretty good performance review to me.

But this is about more than numbers and statistics. This is about people like Lara and Joe Francisco, a California couple that developed a line of stylish hospital scrubs and lab coats that resist bodily fluids and stop bacteria from spreading.

At first, Lara and Joe struggled to gain traction overseas. Customers around the world would order their lab coats and scrubs – but when they were delivered, the orders also came with a bunch of unpaid duties and fees that they couldn’t calculate in advance since the fees and duties varied from city to city.

In too many instances, the buyers were so shocked by these additional fees that they wouldn’t accept delivery. And then Lara and Joe had to pay to have their products shipped back to California.

But they kept working, and with the help of our local team, developed a system that lets customers in 23 countries calculate duties and fees accurately before placing uniform orders. They have since seen a steady rise in revenues.

With 95 percent of consumers living outside the United States, we can’t wall ourselves off and sell only to the 5 percent here in the U.S.

This is no isolated story. Technology has made it easier than ever for small businesses to build an international brand and find new customers globally through e-commerce.

Technology drives commerce

Thanks to my day job, I get a first look at the innovations and technologies that will transform our service not just today, but also in the decades to come.

We’re experimenting with drones, an array of alternative fuels and delivery trucks of the future.

But nowhere is this innovation more important than in the brokerage space. This is where we want to tap into technology to foster the frictionless movement of goods.

We know that market-opening commitments don’t amount to much if your product is stuck in customs, and we need modern trade agreements that address the express industry’s unique need for expedited clearance and effective risk management.

We also know that small companies aren’t competing on a level playing field. Many lack the resources and the experience to negotiate tricky exporting rules.

And depending on governments and geographical factors, they could encounter one headache after another.

This is where technology comes into play. Let’s start with blockchain.

When people hear about blockchain, the completely transparent digital ledger behind Bitcoin, they think about the banking industry. We believe that blockchain can be a game-changer for trade.

For global e-commerce to thrive, the movement of goods, funds and information must be both secure and seamless. A technology like blockchain would allow consumers and businesses of all sizes in all places to participate.

Global trade has not kept pace with technological innovation. Supply chains desperately need more transparency and faster verification of shipping information. This would reduce those frustrating bottlenecks slowing trade today.

This digital ledger could create end-to-end visibility while giving customs and government officials the information they need to move goods along the supply chain.

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We believe that blockchain can be a game-changer for trade.

And the best part? Way less paperwork. For small-and-medium businesses, paperwork alone can stop them in their tracks.

But what if we created the Turbo Tax of Brokerage?

We’d like to leverage artificial intelligence to simplify navigating customs. Imagine an AI Expert that could walk customers through every step in the brokerage process.

Using learning systems, the expert could study a customer’s behavior, examine the regulatory environment and solve those frustrating problems that keep people from exporting in the first place.

We also want to harness predictive and prescriptive analytics to give customers proactive feedback when moving goods internationally. We previously used data to explain past actions or even to predict what might happen next.

We now use data to determine the best action to take – you’ve probably heard of ORION, UPS’s proprietary routing software that helps drivers select the most efficient route in a given day.

In the customs space, data will help us identify problems before they even materialize.

We’re also big on optical character recognition, or OCR, and other technologies to easily inject information critical to facilitating brokerage, customs processing and security into the necessary systems.

And finally, robotics and other automation – coupled with human ingenuity – will drive efficiencies up and down the supply chain.

Change is coming

We know this much: Emerging technology has not yet been leveraged like it should to grow exports.

But I’m confident we’re going to get there. Change is coming. That’s because there are billions and billions of dollars on the line.

For UPS, it’s about the three S’s: speed, simplicity and satisfaction.

Tech advancements would allow us to work with all stakeholders – governments, customs officials and customers – to make the process better for everybody.

As I said earlier, this is about people and jobs and building those cities of the future.

Exports of goods and services directly support 11.5 million jobs in the United States, according to the International Trade Administration. Since 2009 alone, roughly 900,000 export-related jobs have been created, the government agency estimates.

While that’s great for us at home, I’d also argue that it’s great for cities like Mumbai. That means we’re growing to meet their needs.

But we can – and must – do more.

The U.S. Small Business Administration estimates that small entrepreneurs generate two-thirds of America’s net new jobs and half of our economic output. Still, according to government figures, the percentage of those businesses that export is less than 1 percent.

Such statistics should serve as a wakeup call to business and labor leaders everywhere.

We know that small businesses engaged in global trade are 20 percent more productive and produce 20 percent greater job growth.

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Small businesses engaged in global trade are 20 percent more productive.

Technology is turning the old rules of competitive advantage upside down. Small companies are acting like big companies, as technology levels the playing field and allows them to plug into global supply chains.

But that’s only if we create an environment for aspiring entrepreneurs to succeed. I believe that technology and innovation will get us there.

Exports as our North Star

I say this because we’ve been here before.

UPS has always been a tech company, of sorts. Long before we were testing drones, our drivers rode bicycles and streetcars in Seattle, where UPS was founded.

We’ve moved from bicycles to clipboards to mobile devices (allowing us to electronically capture signatures) to telematics to analytics to ORION.

All of these advancements were made in the name of efficiency, which drives business performance. But they also contribute to improved customer service and experiences.

So what is the next step? What is the next big thing?

This is no small-scale solution for transportation and logistics companies looking to connect all corners of the globe, because if anything, those cities of the future are certainly big.

It will require big innovation, big collaboration and big investments in technology.

But if we treat export growth as our North Star, the possibilities are limitless.

You might also like:

Making the World of the Future

Reimagining Financial Services with Blockchain

Getting Smarter About Our Cities

Juan Perez is Chief Information and Engineering Officer at UPS.

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