Analysis

Air cargo facing death by smart data

Air cargo facing death by smart data

AIR cargo is on the brink a very painful technological meltdown, writes Thelma Etim.

Swathes of forwarders and other players face being driven out of business, usurped by experts in technology and smart data-driven marketing.

The time for discussing digitisation has long passed and large parts of the airfreight community either don’t know this, or remain unbelievably complacent.

Successful air transport is no longer about the shipping of people and boxes – it is fast becoming a business of data engineering and automated process management. Today’s customers expect services that are easily accessible, reliable, efficient, fast, paper-free and, above all, transparent – or they will go elsewhere at the click of a button. Only technological solutions will satisfy this new paradigm.

Paper-dependent old-fashioned ‘legacy’ businesses

The schism within the airfreight industry has already resulted in the emergence of a two-tier service industry made up those old-fashioned ‘legacy’ businesses still largely dependent on paper transactions and hoping to retain their old personal customer relationships; and those proactively using new software and data specialism to re-fashion their operations at every level.

Those entities embracing paper-free operations are rapidly turning to information technology catalysts such as Unisys, CHAMP and Mercator. The change is creating new products, new expectations, fresh opportunities.

A typical example comes from information specialist Unisys, which has recently launched ‘Digistics’, a cloud-based data management system that automatically records each transport and delivery checkpoint in the air cargo supply chain. It provides airlines and forwarders with real-time visibility of their shipments and allows subscribers to track and trace high-value products quickly and efficiently. The system also enables carriers to select specific automated cargo services, including inventory management, bookings, invoicing and accounting, as well as allowing them to examine past, present and forecast performance data.

Mercator has developed a platform which includes an app for air cargo management and ground handling processes. “With this, air cargo carriers can move small consumer packages and perishable goods more effectively by having full visibility into the movements of the shipments, and by optimising air cargo management processes to reduce delays and minimise the risk of disruption,” reads an official Mercator statement.

Brendan McKittrick, chief technology officer at Mercator, asserts: “This technology can really transform the industry, providing much greater visibility, versatility and, above all, the ability to simplify what are complex and challenging processes.”

Data-driven early warning alert system for pharma shipments

The transportation of pharmaceuticals and life-science products around the world is one such vital business area where transformative technologies are not only contributing to higher revenues but, critically, are saving lives as well. This type of high-value premium airfreight is fast emerging as a stable revenue stream for airlines, and it is no wonder that some supply chain businesses are investing heavily in augmenting the quality of the temperature-controlled services they offer.

Amsterdam Airport Schiphol is even creating an early warning alert system for pharma shipments, by using collated data. The Dutch project is being funded with a €1million subsidy from the Netherlands Organisation for Scientific Research (NWO) and TKI Dinalog, the Dutch Institute for Advanced Logistics.

Elsewhere, the UK’s IAG Cargo has emerged as a market leader in this niche sector with its Constant Climate pharma premium product. In February, Drew Crawley, chief executive of IAG Cargo, revealed the carrier would be introducing “new innovations to help drive forward the digitisation of cargo and improve our customers shipping experience”.

This plan includes re-launching the cargo carrier’s website to enable IAG to “access a huge swathe of small and medium-sized freight forwarders who, frankly, we do not have the resources to get around and engage with,” he explains.

Smart data offers a big competitive edge

A key change will be simplification of the website’s bookings process to make it much faster, advises David Shepherd, head of commercial at IAG Cargo. Over the last five years the company has witnessed a change in habits whereby more and more customers are now dealing with call centres by e-mail, rather than by telephone. “Clearly, what we are looking to achieve with the [redesigned] website is to enable the customer to self-serve and be more efficient,” he adds. “It is not as if the customer is necessarily looking for a personal relationship, they are simply looking for booking and service efficiency, with all their information in one place.”

Crawley, who is quick to point out IAG has its own technological agenda internally, acknowledges how the use of data is transforming industries by providing a competitive edge. Hence, the huge demand for professional data expertise. “I believe one of the key areas of customer differentiation is going to be how companies like us use data and package that data up in a way which further develops the process of the service that we offer to customers,” he predicts.

“People need to embrace digitisation, get to know it and see how it can make their business better and make the business for their customers better. Those that do that have nothing to fear and those that don’t do it? Well, they might find themselves caught out at some point,” he wryly suggests.

The two-tier fragmentation within the air cargo supply chain could not be more stark than in the freight forwarding community. Aside from market leaders, among them CEVA, Yusen Logistics, DSV, Agility, Geodis, JAS Forwarding, Expeditors, SDV, Kintetsu, SEKO, Kuehne + Nagel and Panalpina, the classic forwarding model is under severe pressure to reinvent itself.

The major issue for many forwarders is that digitisation brings increased transparency – and given that forwarders seem to benefit from operating in silos and pricing opacity – the question remains: how will they cope with the new digital order?

Forwarders will see an increase in competition of agents

Richard Overton, chief executive and founder of X2 Logistics Networks, which provides professional connections for independent freight forwarders seeking networking opportunities, warns that the road to remaining competitive and relevant amidst technological disruption will be very testing for some.

“[Coping with the new digital order] will be challenging because forwarders are traditionally ‘guarded’ with their communications,” he admits. “And the freight industry is quite unique in terms of the risk factors that are involved and the financial liabilities.”

At the heart of this weakness is unstable cashflow. Many forwarders pay shipping lines in advance, airlines in advance. They do not qualify for credit. But their customers – shippers – demand credit and the cash flow gap becomes difficult to manage. At the same time, the large number of separate transactions and individual processes involved in shipping add to the challenges of adopting new digital technology.

Last month, X2 held a series of conference workshops in Bangkok aimed at assisting its members to address these issues. It is the realisation, asserts Overton, that forwarders need to connect with the best information technology service providers.

“We are constantly evaluating and reviewing these types of [technology] companies for our members and there are new ones almost daily,” he reveals. This is complicating matters further because there are clearly some fundamental questions that forwarders should be asking themselves, such as: How can we add digital technology to our ‘physical’ network? What processes and systems can we automate that would improve customer service, competitiveness or return on investment? Who can we trust with all of this?

“If you don’t have the skills in your company to evaluate, then reach out to a professional network for assistance,” he stresses.

So, where does he see logistics and freight forwarding in five years’ time? “In five years, we will see a much greater impact of the key challenges facing the industry today,” he warns. “Forwarders will see an increase in competition from agents in the same geographic markets and there will be increased customer demand for price reductions globally.

‘Companies hindered by volatile, opaque shipping rates..’

“Also, I expect more challenges with systems and law in the freight industry regarding legal and security requirements. The freight forwarder who will succeed will really need to adapt to change.”

Another digital disruptor is Israel-based Freightos, which claims its newly-launched international freight index – which aggregates freight rate data from hundreds of carriers, forwarders and shippers – is ushering in transparency in the sector. “Companies have been hindered by volatile, opaque shipping rates,” asserts Dr Zvi Schreiber, chief executive and founder of Freightos. “We regularly see retailers and manufacturers overpaying on importing by up to 30 per cent. Freightos is shining a light on freight to fix that market distortion,” he declares.

Despite all these challenges to the status quo, Glyn Hughes, global head of cargo at the International Air Transport Association (IATA), is quick to dispel the idea that the forwarding community may be largely to blame for the industry’s snail-like progress towards e-freight. “I think the forwarder’s role has changed and will continue to, and they will continually need to evolve in a market that’s also evolving. But rumours of their imminent demise, I think, are greatly exaggerated.”

The role of the forwarder remains critical for today’s supply chains, Hughes adds. “It will continue to be critical, but I would certainly agree that they, as every other member of the supply chain, need to evaluate internally the value proposition, evaluate how they are embracing technology, and really evolve the product so it continues to provide relevance to the marketplace.”

Hughes points out that it is the inherent complexity of the supply chain that is obscuring the e-freight vision. “There are so many issues with trying to get a whole industry mobilised and then when you look at the complexity of the supply chain, there are so many different aspects to it.”

Customs, the ground handler, forwarder, carrier, along with the technology, all need to be aligned, and people need to be motivated, he notes. “In any different market, one, two, or three of these critical components may, or may not be at the same level of readiness.”

Hughes admits that achieving the association’s electronic airwaybill (e-AWB) penetration target of 62 per cent this year will be exacting. “For me, e-AWB [penetration] has now moved on from a programme that initially was just embraced by the few – the major freight forwarders with their major customers. Now we are seeing a significant amount of smaller forwarders participating, [along with] carriers not in the top 25. So the breadth of the programme has increased greatly.

“It will be a challenge, but I am encouraged by the number of people whom I meet who have now changed the rhetoric, or phraseology, from ‘Why should I do this?’ to ‘How can I do this?’ and soon it’s going to be: ‘Let’s just get this done’.”

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