UPS

Jim Casey’s words are as appropriate today as they were in 1932 when our nation was in economic turmoil. They capture the philosophy of how UPS operates through changing economic and business conditions.

We are resilient and adaptable, with a highly flexible global network that allows our company to meet changing market forces, while creating new solutions to help our customers succeed. At the same time, we never lose sight of the future, taking the steps necessary to ensure UPS remains the world’s leading transportation solutions provider.

Managing through 2008 required all of our skills as the business environment worsened rapidly. At the beginning of the year, global economies and small package markets were expected to grow. However, the U.S. economy weakened, followed by sharply escalating fuel prices. Then the credit crisis erupted, causing substantial slowing of economies outside the United States.

UPS’s supply chain and freight capabilities are integral to our vision of synchronized, transportation-focused solutions that help move our customers forward. To that end, we were very encouraged by the significant performance improvement of our Supply Chain and Freight segment, which posted a 5.3 percent revenue gain and a $276 million increase in operating profit.

The Supply Chain operations, namely Forwarding and Logistics, capitalized on initiatives that enhanced revenue management and customer service, while reducing operating cost. In the Forwarding business, international air freight forwarding made notable progress.

Ocean freight forwarding will be a priority in 2008. Logistics streamlined its operations and posted significant profit gains on moderate revenue growth. In 2008, its focus will be on developing solutions for the health- care and technology sectors.

UPS Freight® experienced a very good year in 2007 with revenue, profit and shipment growth. This was especially noteworthy given the U.S. trucking industry’s highly competitive operating environment. The UPS brand strengths of reliability and technology associated with our small package business are attracting customers to our freight services. We intend to continue leveraging our small package customer base through cross-selling the full complement of UPS services.

UPS is a major player in world commerce; we enable it and we benefit from it. Long-term industry fundamentals are favorable for our business and, in fact, play to UPS strengths. These include expanding global trade, direct-to-consumer shipping, and outsourcing supply chain management.

Increasingly, supply chain strategy means that research and development, production, component-making, final assembly, marketing and distribution are located where the best resources are available, and where the most value can be added to the end product. Today’s supply chain leaders are focused on “time-in-trade” — ensuring that each component of the value chain arrives at precisely the right location, at the right time, and at the most competitive cost — in short, synchronized commerce.

In today’s global environment, our market opportunities are significant. UPS participates in a $225 billion global arena that includes small package shipping, domestic less-than-truckload freight and global air freight. We have about a 20 percent share of this highly competitive space, in which there is no leading player. Additionally, the ocean freight forwarding sector in which we compete is a $60 billion industry, and the outsourced logistics market is estimated at almost $190 billion. Therefore, growth opportunities abound.