Automotive air freight small volume large value
For the automotive industry use of air freight is at best the speed at which a part or a finished vehicle get to the line of production or to a launch market; but often air freight option is a reaction to a urgent problem in the supply chain.
When it comes to evaluating modes of transport used in automotive industry supply chain, air cargo is intangible in terms of transported volume but on value terms it is significant because air cargo is many times more expensive than all other modes of transport. Many large original equipment manufacturers (OEMs) move tonnes of freight by truck each year and ship thousands of containers around the globe, the material it sends by air is very negligible in the entire transport pie chart. Experts estimate this to be just over one percent of the total volume. But the percentage of transport cost for the plant or model for which the parts are being flown could be 20 times that. In many cases, air freight is seen only as an option of last resort — an emergency on account of an important part required to fill a production gap before the plant shuts down a line or holds up a launch. In fact DHL is looking to increase the amount of shipping it does for car companies at the pre-launch and launch stages by offering an integrated approach. Shipping everything from pre-production parts to test cars for press launches via air, rail, road and sea was currently worth hundreds of millions of Euros to the company. The company recently said that it wants that to rise to more than a billion Euros in the future. The work DHL does on vehicle launches represents 10 percent to 15 percent of the firm's automotive air freight business. Very often, launch logistics tend to be neglected as a total approach,” said Fathi Tlatli, president, Global Sector Automotive, DHL Global Customer Solutions & Innovation. Evolution Time Critical, an emergency logistics specialist with significant interest in automotive logistics, gives several instances of providing cost effective and time saving solutions for many of their auto clients when it comes to delivering auto parts just in time for uninterrupted production. An automotive component supplier called in Evolution to investigate alternatives to a costly aircraft charter movement they were incurring nightly, from Northern Italy to Birmingham. The solution it offered involved the supplier having the parts ready just 1one hour earlier at 21:30. This enabled Evolution to access their direct night freighter leaving at midnight, arriving in the UK at 01:00. The result was that the required 04:30 delivery time was still achieved, as it was with the aircraft charters, but saving thousands of pounds each night. Then there are opportunities for cargo operators to transport high end premium finished cars for launches and auto shows around the world. These also include vintage cars being transported around the world to take part in vintage car rallies. There are also the Ferraris, Bugattis and Lamborghinis, the super luxury cars owned by rich individuals, especially from the Middle East, being flown in cargo jets to different holiday destinations for travel during their holiday. Air freight is used with relative frequency for spare parts logistics, particularly when dealers order urgent parts for waiting customers. Depending on OEMs’ regional stocking strategies, flying parts, both internationally and domestically, is fairly common. It is reported that at Guarulhos Airport in Sao Paulo, Brazil, about 7,000 tonnes of automotive spare parts were handled in 2012. According to the airport’s cargo department this volume is about five percent of all air cargo passing through the airport. Historically the automotive industry has always been focused on just-in-time and sequenced inbound logistics with mature processes and numerous sub-contractors integration. The demand for Integrated Logistics solutions in the automotive industry has increased substantially. All customer specific models are individually designed, but usually implemented and operated according to Integrated Logistics solutions global IT and process standards, located in shared environments. This enables leveraging on cost and best practices across the large panel of automotive sub-segments. For many airlines and airports, the automotive sector is currently a growth segment. With the market soft in Europe, this rise is most notable in Asia. Several logistics providers serving the markets in Asia the automotive air freight growth is predicted to be around 25-30 percent per year. The growth is largely been driven by the need for just-in-time manufacturing, a reduction in lead times and increasingly demanding inventory management metrics across the sector. The growth rate in Asia is so significant because the demand for cars and other automobiles is huge and always on the rise. There are automotive parts moving by air from Europe to Asia and there are supply going from Japan and Korea to various parts of Europe. While emergency shipments are far from being the only or dominant reason for automotive air freight, a large amount of such transport is driven by season or model demand. While the balance between regular and urgent air shipments appears to vary in general it appears that the factor most influencing automotive air freight is global automotive production volume rather than manufacturers’ supply chain strategies.