Air Cargo Management

Freight forwarding: A logical solution

Freight forwarding

The logistics supply chain has been at the forefront of the global fight against Covid. Group editor Colette Doyle hears from two transportation technology providers on how the airline cargo sector needs to embrace digitalisation and be both creative and flexible in order to move forward

Andre van der Linden

Logistics teams based at manufacturers and retailers heavily reliant on air forwarding have needed nerves of steel for the past six months. At the start of the Covid crisis, the shutdown of passenger airlines resulted in overnight reductions of available belly-hold space by an estimated 75 per cent. With the majority of UK cargo moved in passenger aircraft, and with airfreight representing about half of the UK’s non-EU exports, manufacturers and retailers faced unenviable choices.

Our observations suggest that if logistics professionals were savvy, or lucky, enough to find space for their goods on an air freighter or reassigned passenger jet, the asking price was up to ten times the pre-Covid-19 cost. One alternative was wider options in the multi-modal mix, including road and sea.

However, that requires significant and rapid adjustments in strategy, including the need to understand and locate the shipping and carrier capacity available; a monumental challenge in itself at a time when volumes in particular sectors, such as FMCG, are spiking to levels similar to the Christmas rush.

Creativity & flexibility

We have managed this challenge by being creative and flexible – for example, contracting air charters on trade lanes around the globe using technology to predict demand in real-time.   

Now, with manufacturers and retailers beyond the immediate crisis, what is next given the uncertainty about the lasting effect of Covid-19 on the airfreight sector? The signs from IATA are that airfreight markets are improving from pandemic recession levels in June and that the withdrawal of passenger services is being offset by a 32 per cent increase in capacity via freighters.

However, whereas in the spring our view was that air cargo capacity may start to return in 2022, the summer IATA forecast is now 2024. Manufacturers face a range of challenges. First, the pressure on air charters. The spike in demand created a spike in prices – these seem to have dropped as passenger services have resumed. However, air charter capacity cannot be banked on as consistent. Regular maintenance due to significant use of aircraft in the spring may reduce capacity and, once again, force prices up.

Reduction in capacity

Second, both passenger and charter capacity could be reduced by the emergence of vaccines that will require shipping around the globe quickly. When combined with big product launches for technology companies eager to harness pent-up demand for products such as the iPhone 12, the new Sony PS5 and other consumer goods, that may leave manufacturer and retailer logistics teams relying once again on luck to move cargo.

Third is the parlous state of the UK and global airline industry. We have already seen British Airways and Virgin Atlantic in difficulty, which in turn puts the focus on air charters and alternative means of transporting cargo.

On top of all this, Brexit is looming, bringing its own set of challenges to moving goods. Moreover, infrastructure capacity for cargo operations in Southeast Asia was already a concern.

Rebalancing the mix

While founding a ‘new normal’ based on an ever-shifting landscape is almost overwhelming, manufacturers and retailers should not despair. Air freight will always be part of the multimodal mix – but ahead perhaps lies a path that seeks to rebalance the mix between air, road and sea logistics. There are trends in these modes making them more attractive in terms of efficiency and cost.

For example, big data is guiding transport collaboration between manufacturers to reduce the number of miles where hauliers are driving empty and sharing the financial dividends – similar collaboration could be explored with air charters. The capacity of the shipping industry is changing due to larger vessels, resulting in greater choice and lower rates.

The air forwarding sector is likely to experience turbulence for a considerable time. But here lie opportunities as well as challenges. For instance, the chance to reflect societal concerns about climate change in logistics decisions.

We believe that logistics technology companies have a fundamental role to play in analysing data, processing the capabilities of new supply chain innovations and understanding what needs manufacturers and retailers will have as they reconsider their movement strategies in the wake of Covid-19.

Katherina Lacey: Why digitalisation is key to success

While Covid created a challenging first half for the airline cargo sector, e-commerce presents tremendous opportunities for further growth. The question is, though: can the sector handle this growth with its traditional way of business?

Freight forward operators should be applauded alongside air cargo carriers for ensuring valuable supplies reached their destinations. However, the stress and strain of the pandemic is apparent.

According to IATA figures, there was an 11.5 per cent increase in the cargo load factor, which suggests there’s demand for air cargo that cannot be met. In addition, the sector has received broadsides from disruptive start-ups, with digital freight forwarder Beacon declaring the traditional model “surprisingly analogue”, “slow and inefficient” with a “limited use of technology”.

Dispense with tradition

Many freight forwarders still rely on basic methods, from manual allocation to paperwork for charter operations. These are prone to human error and reduce the efficiency of vital operations.

Without the correct technology, it’s nearly impossible to achieve visibility, automated allocation of containers and parcels to flights, or keep the supply chain moving reliably.

However, there are technologies that can overcome these challenges. For example, our LogisticsEngine ensures logistics networks are optimised in real-time, including sequencing and freight allocation to transportation assets such as trains, trucks and other delivery vehicles, as well as actual flights.

This technology can also effectively navigate worldwide regions to build a comprehensive route that predicts, models and allocates deliveries. It can also enable multimodal optimisation, thereby allowing total real-time visibility across the entire supply chain.

New opportunities

There has been a tremendous increase in e-commerce activity as a result of Covid. This ‘new normal’ is creating millions more shipments, many from small and medium-sized enterprises that are looking to expand into new markets.

Asia ln particular is seeing major growth in e-commerce. Singles Day in China in 2018 generated more than one billion packages in 24 hours for instance, while Indonesia’s Ramadan spending spree shifted online.

These new markets bring unique challenges. For example, say you’re a western company looking to branch out in Southeast Asia. Is your system adapted to its various, unique languages and geographical complexities? Government regulation in Indonesia is lacking when it comes to house numbering, meaning the address Jalan Terus 5 could also be known as number 20. Remote and rural locations often have no formal address at all.

When we created GeoEngine we had freight forwarders experiencing these kinds of problems as our focus. We wanted to ensure that inaccurate addresses are automatically corrected with coordinates focused on longitude and latitude, as opposed to postcodes.

Beyond disruption

As Covid’s intensity fluctuates from one country to the next, there’s no doubt that the airline cargo industry faces an uphill battle. The traditional model of the freight forwarder is handicapping operations and making it harder to compete with digitally native upstarts.

However, beyond this disruption, the circumstances look as if they will create new and exciting opportunities for the aviation sector across the globe. To succeed in the coming years, the supply chain needs to emerge out of this crisis as a far more agile and resilient unit.

Andre van der Linden is air product manager for Europe at CH Robinson, a multi-modal transportation technology platform provider specialising in FMCG

Katherina Lacey is the co-founder and CPO of Quincus, a company committed to designing effective supply chain solutions through a dedicated technology ecosystem

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