Air cargo meets the challenge

Air cargo meets the challenge

The common perception of air cargo is that of a business that functions mostly on autopilot. Merchandise is picked and packed, stuffed in containers, and loaded aboard planes that fly the goods from Point A to Point B, often without much urgency.

Those working in the field, and the companies depending on its services, know better. Each day is an adrenaline-filled race against time and distance to link global suppliers, manufacturers, retailers and consumers, usually under pressure-packed deadlines. Far from being a ho-hum exercise in cargo loading and flying, the air trade is an intricate symphony synchronized by skilled professionals.

Indeed, air commerce is a daily miracle. The fact that we routinely expect such a complex and far-flung network to perform, and are surprised when it doesn't, just reinforces that view.

Today's global economy relies increasingly on air transport and the sophisticated supply chains constructed around it to connect with each other regardless of where we live and work. Air cargo facilitates and creates trade, helping to make businesses more competitive, leveling the playing field between nations, and contributing to employment expansion and higher living standards worldwide.

Some contend that air cargo's best days are over. We disagree. UPS is so bullish on the industry's prospects for international airfreight that we are continuing to invest in our global air network.

It is true that the industry is maturing and may experience moderating growth rates. It is also true that well-intentioned security proposals, such as the physical screening and inspection of cargo prior to boarding, could inject friction into what has been a largely frictionless system, thus nullifying the fundamental quality - speed - that sets it apart.

It is critical that we don't overburden the cargo sector with onerous regulations that threaten its very existence. Security concerns are paramount, but they can't be so heavy-handed as to inhibit the services that air cargo provides.

Offsetting those concerns, however, are profound changes in global distribution that, in my view, will drive strong demand for air services.

The practice of just-in-time manufacturing and inventory management was introduced more than 20 years ago. It continues to play a critical role in helping companies enter international markets or expand their global footprint in a cost-effective manner.

Successful execution of global just-in-time models has always demanded flexible supply chains that accommodate fluctuations in production supply and retail demand, meet or exceed customer expectations, and minimize inventory obsolescence by shortening delivery cycle times and expediting the flow of product.

The difference today is that the strategy is playing out across ever-widening distances between points of production and consumption. As a result, air cargo is more important than ever.

The just-in-time phenomenon has triggered a fundamental change in the perception of air cargo and, by extension, how it will be embedded in supply chains. For years, air cargo was considered a symbol for economic cyclicality - an expense ripe for cutbacks during economic downturns. That view is disappearing. Savvy companies see the service as a weapon of competitive advantage, an indispensable tool to deepen customer relationships and streamline operations.

The key factor behind this shift in perceptions is the effort to reverse the escalating costs of inventory. According to forecasts, if left unchecked, inventory-carrying costs will account for more than two-thirds of total U.S. logistics expenditures within the next 10 years. The expedited nature of air cargo changes the game by reducing time-to-market and, as a consequence, inventory-carrying expenses.

In recent years, U.S. businesses have migrated to short-haul distribution, sparking a surge in demand for regional surface transport, often at the expense of airfreight. Yet domestic airfreight services will continue to play an important role in business planning and execution.

When it comes to cutting inventory and becoming more operationally nimble, the logistics goals of domestic shippers and consignees are no different than companies doing business internationally. In fact, we see a unique opportunity for domestic air cargo to help businesses consolidate their production while distributing finished goods with rapid, precise turnarounds that enhance customer satisfaction and reduce costs.