Richard Loi

Senior Vice President

UPS China

September 9 2006

Richard Loi

Senior Vice President

UPS China

September 9 2006

Integrated Air Express Industry and the Development of Middle and Northeast China

Integrated Air Express Industry and the Development of Middle and Northeast China

Logistics Challenges in China

– In 2005, total logistics cost in China is 3.4 trillion RMB, up by 12.9%,

and accounts for18.6% of total GDP. Comparing with the figure of

less than 10% in US, Japan and EU, China still has a lot of room to

improve.

– According to statistics, 50% of the retail price of the general

products in China goes into logistics cost. Over 90% of the time in

auto parts production are in storage, loading and transportation.

– “Accelerate the development of service industry, particularly IT,

finance, insurance, logistics, tourism and community services and

continue to increase the ratio and quality of service industry “ –

Premier Wen Jiabao, Eleventh Five Year Plan, March 2006

Case Study on Global Supply ChainJesse & Frichtel

Global Supply Chain and Outsourcing - Jesse & Frichtel

–Jesse & frichtel is a high-quality, cost effective dental lab– It found a partner in Shenzhen for production– A real case: A Pittsburgh birde made a last-minute decision to

correct the gap between her two front teeth just one week before her wedding:

– Friday: impression made– Friday evening: impression shipped to UPS’s Worldport

Facility in Louisville, Kentucky– Saturday: UPS customs brokerage cleared the shipment

at Hong Kong, delivered to Shenzhen– Monday – Thursday: Production in Shenzhen– Friday: new set of teeth arrives at Pittsburg

Jesse & Frichtel

Global Trend of Air Express Industry

Globalization - “The World Is Flat

- Thomas Friedman, New York Times Breakthrough the time boundaries Synchronized World Commerce Real time information

• Case One: A new cell phone worth 400 USD will depreciate 50% in six months. Reduction of a week’s transit time could save 8 USD loss.

• Case Two: Customized Scaled Production – NikeID

NikeIDCustomized Service Based on Scaled Production

• Customized service

• More Value-added with Global Supply Chain

• Competitive Advantage with Differentiation

• 100% Customer Satisfaction

Air Express Industry Contributes to the Development of Middle and Northeast China

• According to a study by the US-China Business Council in 2003, an

unrestricted integrated air express industry can bring additional 3 billion

investment to the major export industry, additional 84 billion industrial output

and add 800,000 job opportunities in five years.

• The study also finds out that the air express industry could help China

balance the development gap between the coastal area and the inland areas.

• When a company in the inland areas has the same access as a company in

Beijing or Shanghai to the global express network, the advantages of

resources and cost in the west area will not be offset by the higher cost and

longer time of transportation.

• The development of air express industry will further optimize the investment

environment and promote industrial restructuring.

Public Policy Environment of the Air Express Industry in China

• Aviation – opening of air rights and operational coordination

• Postal – A rational postal monopoly and level playing field

• Customs – further facilitation in support of hubs

• Multimodal – infrastructure and policy support

About UPS

• Largest package delivery company and leading supply chain solutions provider

• 2% of world GDP (6% of US GDP) goes through UPS each year.

• Serves over 200 countries and territories, covering all North America and Europe.

• 2005 Revenue: 42.6 billion USD

• 2005volume: 3.75 billion pieces

• UPS Fleet: 268, 9th largest airline

• Chartered Fleet: 309

• Daily flights: US: 1,071 ； International: 767

• Employees: 407,200 (Overseas: 58800 ； US: 348400)

– Headquartered in Shanghai

– 11 customs clearance facilities

– 23 branches covering over 200

cities

– 21 branches of UPS Supply Chain

Solutions

– 40 facilities of UPS Supply Chain

Solutions in mainland and HK

– Over 4,000 employees

UPS in China

DalianBeijing

TianjinQingdao

Nanjing

Suzhou

WuxiShanghai

Kunshan

HangzhouNingbo

Fuzhou

Xiamen

Guangzhou

Shenyang

Hong Kong (SAR)Shenzhen

YantianUPS facilities

UPS Supply Chain Solutions branches

Xian

Chengdu

Wenzhou

Changzhou

Dongguan

Fuoshan

Zhongshan

Shijiazhuang

Chongqing

Mumbai

EuropeOsaka

747-100

UPS Connects China with Asia and the World

Incheon Tokyo

Taipei

HK

Beijing

Guangzhou

Shenzhen

Bangkok

Penang

Kuala Lumpur

Clark

Cebu

Singapore

Jakarta

Fiji

Sydney

Anchorage

RockfordNewark

LouisvilleOntario

Honolulu

– 84 flights connecting Asia and US per week

– Next day delivery in major Asian cities

Shanghai

Richard Loi

Senior Vice President

UPS China

September 9 2006

Richard Loi

Senior Vice President

UPS China

September 9 2006

Integrated Air Express Industry and the Development of Middle and Northeast China

Integrated Air Express Industry and the Development of Middle and Northeast China