Airlines battling to keep pace with evolving shipper needs

Airlines battling to keep pace with evolving shipper needs

Modal competition for air cargo is intense, says IATA chief Tony Tyler.

SHANGHAI — The air cargo industry is in a difficult transformation period as it struggles to adapt to a changing cargo mix and rising demands from customers for better shipment visibility and a more reliable service.

Air cargo is being used for ever-more sensitive goods, requiring greater speed, tighter security, and absolute temperature integrity. This has introduced new levels of complexity into the airborne supply chain that carriers are having difficulty managing.

The navel gazing of the industry was evident in the theme of the International Air Transport Association’s World Cargo Symposium that was held in Shanghai from Mar. 10-13, which was “improving the customer experience.” For many shippers, that experience could do with some improving.

Ericsson head of distribution logistics Robert Mellin, for instance, said he was “not happy.” The telecommunications giant spends $250 million on air freight every year and Mellin complained that he was not getting the kind of service he expected.

Jason Frerich, director of global logistics infrastructure and sustainability for Nike Inc., also said the air cargo business needed to improve.

A recurring complaint is the lack of real time information that enables shippers to react quickly to problems in the supply chain. Once an air cargo shipment is dispatched, the shipper often will only know it has not arrived when the destination customer calls to ask what happened.

“That is exactly what I don’t want. What I don’t need is to hear from the customer that the shipment has not arrived,” Mellin said.

While shippers try to manage their frustrations, the airline industry is being forced to improve by the changing cargo mix. The days of moving mainly boxes of software, domestic printers and desktop computers have gone forever, said Tony Tyler, director general of IATA.

As sea freight continues to capture lower value goods from airlines, rapidly growing pharmaceutical shipments are helping to make up for the loss. Tyler said the growth in demand for pharmaceutical product shipment has been one of the defining trends of the business in recent years.

“Pharma logistics is a $60 billion market that has been a boon for air freight, compensating for the decline in other goods that had previously been shipped by air,” he said at the World Cargo Symposium.

But transporting such time and temperature sensitive cargo requires a complex supply chain that is reliable and can be monitored in real time throughout.

“Our industry faces a twin-track challenge,” Tyler said. “In addition to their usual expectations for reliability and speed, customers need adequate facilities and handling procedures that guarantee a constant temperature range, and the absolute integrity of the package.

“If these challenges are not overcome, air cargo risks losing the opportunity presented by this huge market. For let’s be in no doubt, our modal competitors are working hard to win this business.”

Tyler said the industry was going through a transformation in its relationship with its customers. “There is a revolution going on, affecting every shipper, freight forwarder, airline, technology and service supplier to this industry,” he said.

“This transformation — which is in line with our call last year for a cut in average shipment times of up to 48 hours by 2020 — will help to recapture market share, drive high-value shipments to air transport, and help to restructure the industry so that revenues and margins both strengthen.”

Airlines also levelled a series of complaints against shippers. Leif Rasmussen, president and CEO of SAS Cargo, said the movement of goods from shipper to consignee was impacted by incorrect weight declarations, incorrect pallet size, missing shipment details, missing documents, and invoicing errors.

However, not everything is in the hands of airlines or their customers. As airline bosses, air cargo forwarders and shippers left the IATA event and headed out of Shanghai pondering how to cut time out of the supply chain, most experienced the now standard delays leaving Shanghai Pudong airport.

China’s air space is controlled by the military that grants commercial airliners narrow corridors in which to operate. This chronically congests the air space and with Shanghai being the mainland’s busiest airport, it ensures that nothing arrives or leaves the airport on time.

Contact Greg Knowler at gknowler@joc.com and follow him on Twitter: @greg_knowler.