Digital disruption, the new normal in air cargo

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Has the air freight industry finally emerged from its slumber, ready to modernise and innovate? Positive signs are beginning to show. A technological transformation is underway within the air cargo industry moving from legacy systems to more customised interfaces.

Surya Kannoth

Technological innovation is here to stay, and the efficiencies it brings with it are undeniable. Not too long ago, ideas like 3D printing, the Internet of Things (IoT), drone delivery, and augmented reality were things of science fiction. Today, digital transformation is disrupting several industries, creating additional opportunities for value creation. The same applies for air cargo, with the potential of digital technologies profoundly reshaping the way key players interact with and serve their customers along the value chain.

“Pushing innovation forward is a top priority for us. Nevertheless, we realised early on that we are only one part of the air cargo supply chain. To address the growing demands and complexities of our industry, we must leverage the strengths of all of our supply chain partners,” explained Dirk Schusdziara, senior vice president - cargo at Fraport AG.

At the 73rd Annual General Meeting (AGM), IATA urged air cargo participants to accelerate the modernisation and transformation of the air cargo industry. The aim is to ride on the back of the momentum of the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA).

“The TFA commits governments to making trade faster, cheaper and more efficient. Air cargo processes are stuck in another century. To ensure that air cargo is ready to benefit from the expected $1 trillion boost in trade growth arising from the TFA and the improving global economic environment, we need a major overhaul of industry processes. And there is no time to lose; our customers already expect the efficiency of electronic documentation,” said Alexandre de Juniac, IATA’s director general and CEO.

There are innovative carriers with data-driven businesses that respond dynamically to market changes using the cloud, sensors, analytics, and digital business. But there is a gap between these leaders and the bulk of the global industry. The good news is that they have laid a clear trail to follow. But to delay is to be left behind, and it is beginning to show. “In an increasingly complex economic landscape and highly competitive global marketplace, the air freight industry must reassess how it uses technology to create more innovative and adaptive business models. With Asia Pacific accounting for the largest share (37.5 per cent) of the global cargo industry, this region is well placed to drive the transformation of the industry globally,” forecasts Dheeraj Kohli, VP and global lead of travel and transportation, Unisys.

Receptive to change but unsure of way ahead
Industry veterans feel that while the air cargo fraternity is receptive to technological innovations, there is a need for a common platform to push such innovations ahead. Furthermore, there is a need for more innovations specifically catered to the air cargo industry.

“Any change is always facing resistance. Nevertheless, the new kinds of commodities (e-commerce, pharma) are forcing the industry to work differently. This is associated with the new generation of staff that is joining the industry, all born in the ‘cloud’,” said Adrien Thominet, CEO, ECS Group.

“The air cargo industry wants to adopt technological innovations -- the biggest problem is that no one is building the innovations that the industry needs. Carriers have outsourced their risk to master consolidators, but they’ve also given away their margin--and their ability to differentiate based on value. The ideal technological innovations will help carriers increase efficiency to lower operating costs, and differentiate to increase their margin,” believes Neel Jones Shah, SVP and global head of airfreight, Flexport.

“I miss a burning platform and/or a shared idea that is felt by all stakeholders in the same way so that we can execute ideas. At Schiphol, we experience this regularly. For example, the compliance checker we developed: some parties such as AF/KLM and Swissport really appreciate this automated Customs compliance check, but others do not, and they will pursue other priorities, very often their pressing daily business,” said Jonas van Stekelenburg, head of cargo, Amsterdam Airport Schiphol.

“The air cargo industry is at a tipping point where modern technologies now enable transformational innovation. One of the biggest challenges we see is that many air cargo carriers are still maintaining and operating their own legacy IT systems, which slows their reaction times and puts them at a competitive disadvantage. Overall, they are receptive to change, but many are not sure what the best way is to proceed,” said Unisys' Kohli.

“We founded the ‘Air Cargo Community Frankfurt’ a few years ago – an association that brings together all the players involved in the air cargo business and is dedicated to promoting the interests of air cargo-related companies at FRA and to optimising logistics processes. Together, we have started an intensive dialogue including shippers and government authorities. The idea is to jointly develop new ideas and innovations, which make handling at FRA even faster and more efficient,” shared Schusdiara.

The need for faster transit times, greater reliability, and enhanced transparency in air cargo has never been greater.

Getting tech savvy
The rise of the Internet of Things (IoT), Industry 4.0-driven technologies, Blockchain, Big Data, artificial intelligence, and open API platforms have fundamentally changed the air cargo industry allowing for a real-time digital view of the entire air cargo supply chain. These technologies can really transform customer experiences by providing much greater visibility, reliability, and above all, faster transit times.

A major crusader for innovation is DHL, which currently operates an Innovation Center in Bonn, Germany, which has already produced valuable technological contributions to the company, including the Parcelcopter and the EffiBOT. DHL, in a press conference, revealed that it is testing the Parcelcopter, which is the company's version of a delivery drone. Which is used to deliver packages in extreme weather conditions and to remote locations, and will soon start implementing the EffiBOT — a cart that scans a human, then follows that human wherever he or she leads — to assist warehouse workers with order picking and carrying loads within warehouses.

Such cutting-edge technologies in automation and artificial intelligence is expected to not only streamline DHL's supply chain, but it will also produce greater cost savings and a sharper competitive edge against companies like FedEx and UPS, who trail in innovation.

At this year’s IATA World Cargo Symposium, Mercator introduced the Intelligent Cargo Ecosystem, which reduces costs, improves efficiencies, enhances flexibility, and allows for greater air cargo speed and scale—while encouraging innovation on a previously unforeseen level.

“Our Intelligent Cargo Ecosystem includes a set of breakthrough apps for Offer & Order Management, Logistics, Warehousing, Regulatory Compliance, Service Management, Revenue Management and Analytics. The Warehouse App, launched during IATA WCS, enables air cargo carriers to connect goods, people, data, and processes to transform their warehousing operations. Finnair Cargo has been one of the first carriers to test and deploy the Warehouse App as part of its efforts to transform its air cargo and ground handling operations,” explained Brendan McKittrick, chief technology officer at Mercator.

ECS Group, a prominent global general sales agent, has been quick to hop onto the technology bandwagon. “Technology helps us to reinvent ourselves to go beyond and be able to provide real innovative solutions to our principals. We are looking for the new changes. This challenges us every day. We must be ready to deliver to our customers a much wider range of integrated services than before. Being able to provide the performance of tomorrow encourages us to integrate and to provide new codes: Business Intelligence, deployment of digital tools, Revenue management, and transition to all the e-business… bringing more transparency to our airlines,” said Thominet.

The group recently went through a restructuring process. Now, Technologies is a specific and dedicated department within the group. “The idea is not only to follow our customers but to be able to be part of this transition. Hence we invested on an entirely new IT system which will allow our principals to get direct access to our business intelligence. By encompassing the management of all aspect of airlines freight and by being a complete IT tool, our IT services will bring a real support to our customers. And more than technologies, ECS Group’ teams are willing to be part of our success dynamic. We are more than ready to reinvent as a GSSA,” added Thominet.

Unisys, with its technological prowess, has been doling out innovative solutions for the air cargo industry. “Historically, many technological solutions have focused on one element in the cargo supply chain, and many of the existing systems within the supply chain do not communicate with each other. For example, freight forwarders would know when their cargo was sent out, but not have visibility into the route the cargo was taking, the conditions in which it is being transported, or if a shipment were to be tampered with. We saw this major unmet need for solutions that seamlessly span across business processes, functional applications and infrastructure. And we have focused on driving a shift towards software-driven, catalogue and a cloud-based architecture that can be easily integrated into existing systems, and better enable carriers to address their biggest challenges today,” shares Unisys’, Kohli.

Amsterdam Airport Schiphol (AMS) has also not been resting on its laurels. It has now made all cargo flights available on an API-platform, which makes data sets available for others in a public structure. In such data sets, all intelligence and communication are available to all users. Forwarders, carriers, and others are linked to the platform, and the possibilities of efficient data sharing such as this are endless.

“The compliance checker that we developed together with Cargonaut will be made available on this platform, and we hope that third parties will be able to develop their own services for the airfreight industry. We are very excited that we can work on this,” reveals Stekelenburg.

Digitalisation at snail’s pace
The pace at which the industry has been willing to adopt change has been rather slow, as a result of which a result the supply chain continues to be inefficient with a great deal of wasted cost and transit time. Legacy systems, inefficient use of data, and a lack of adequate mechanisms are to blame. Given all these variables, carriers typically aren’t sure where to start with their digitisation transformation.

“Recently, many large shippers, like Amazon, have taken things into their own hands and built their own supply chain chains because they fundamentally believe they can do it faster and cheaper than the industry they used to rely on. One of the big issues is that all of the major global freight forwarders were all founded years before the first Netscape browser was developed which makes it hard to be on the cutting edge of technology. Most large scale attempts to implement radically new systems have failed. As an industry one of the most pressing things that air cargo must focus on is the implementation of technology that helps to change the user experience,” observes Neel Jones Shah, SVP and global head of Airfreight, Flexport.

ECS Group’s Thominet believes that the each and every member of the supply chain has to play a proactive part in accepting change. “Our industry has been a bit late or slow regarding the necessity of changes today, and thus our core-business is now definitely embracing disruption. This radical change involves all the actors of the supply chain, and as an intermediary, we as GSSA, has a real role to play. We have to. The airlines have accomplished important revolution on the passenger side to provide innovative technology and embrace new business opportunities; the cargo industry will for sure do the same, and the new requirements of service that e-commerce or pharma is requesting, will create the need to achieve the implementation of new technologies.”

“I miss a burning platform and/or a shared idea that is felt by all stakeholders in the same way so that we can execute ideas. At Schiphol, we experience this regularly. For example, the compliance checker we developed: some parties such as AF/KLM and Swissport really appreciate this automated Customs compliance check, but others do not, and they will pursue other priorities, very often their pressing daily business,” said Stekelenburg.

Fraport's Schusdziara feels that a common standard needs to be developed for the proper exchange of information. “The industry is rather reluctant to change. We are talking about change and speeding up things but so far not much has happened. Just look at the development of the e-AWB penetration rate to see how difficult it is to adopt new ways of doing things. The industry is not really ready yet to cooperate, to push forward innovations. But to be successful as a transport mode, everyone has to be willing to exchange information, has to agree on common standards. We have to develop an ecosystem where every company works only for itself to an ecosystem where we all join forces. Our Air Cargo Community Frankfurt is a perfect example of how we should work together in future,” he said.

Picking up from peers
Online travel and accommodation portals have transformed how people book their trips and stay. Some of the biggest disruptors to the travel industry have of course been Airbnb, Skyscanner, Google Trips and Expedia, enabling more transparent, personalised and end-to-end travel experiences through open API platforms on which they build and deliver new products and services.

How can we apply these learnings to air cargo management? Mercator’s McKittrick explains, “The goal must be to meet customers’ expectations, which have been transformed by digital technology. That’s precisely why cargo carriers need an ecosystem approach to the supply chain which creates standardisation and enables collaboration by sharing data and information seamlessly and securely across a network of air cargo stakeholders. Higher customer satisfaction, driven by the improved service and faster delivery times that digitisation delivers, is itself a driver of profit.”

Digital disruption is unavoidable, and carriers need to react not only to ensure profitability but to get ahead of threats posed by non-traditional market entrants. We’ve seen the likes of Amazon and Alibaba disrupt the industry by playing by a different set of rules. While many carriers understand the value of speed and agility, the newcomers are built to change the model for how value is created significantly. Digitalisation is no longer a choice but an imperative.

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