How air freight is pulling out its digital armour to change global trade forever
The global air cargo industry is digitally lagging behind its counterparts in other modes of transport and to even the passenger business of aviation. However, Covid-19 has changed the rules for good and is pushing the industry towards a future that will utilise the full potential of technologies like AI, IoT, cryptocurrency and predictive analysis. The world is yet to see the full capacity of air cargo to transform the world economy particularly with the digital transformation they are delving into right now. Wait till the numbers are back pre-Covid-19 levels, experts say.
The total digitalisation of the air cargo industry is a long pending project but had been lagging for a long time as well due to the segregated nature of the industry and existence of stakeholders with different motives. However, Covid-19 has put forth some existential challenges in front of the industry, pushing it towards new methods to tackle the problems. Digitalisation emerged as a crucial facilitator and the platform developers believe that this has started a new wave of digitalisation and it is here to continue.
The International Air Transport Association (IATA) described 2020 as the worst year for air cargo demand since it startedto monitor cargo performance in 1990. On the contrary, digital technology developers for the air cargo industry was busy serving their new clients, who flocked for their digital solutions and received bulks of new investments as well.
Guillaume Halleux, chief officer cargo, Qatar Airways, in a recent interview to the STAT Media Group, said “For us, the digital implementation consists of several initiatives, most of them are unseen from the outside. That would be back-office activities, automation, customer management, operations and the optimisation of resources in warehouses. What is very visible is the distribution channel path. This is only one element in our digitalisation programme. We are rolling it out for the digital distribution of capacity and price with WebCargo. For example, dynamic pricing is an idea to use technology to have the most refined price to increase the chances of conversion.”
Dangers of digitally lagging
One of the greatest blame put on the air cargo industry is that it is too slow in adopting digital solutions compared to other modes of transport, say ocean freight, or to even the passenger side of aviation. The industry experts point to the segregated nature of this industry and the stakeholders who remain stick to the old ways of doing business as the reasons. However, the continuation of this lag would also mean that air cargo will lose some of its cargo and clients, particularly from the growing e-commerce sector.
When asked about whether he thinks there is a lag in air cargo industry to adopt digital solutions, Amar More, chief executive officer, Kale Logistics Solutions, said, “We still have 100+ copies of paper accompanying each air cargo shipment, an average time to move an international air cargo shipment still not changed much for the last 30 years from the 6.3 days in the 1970s and cargo still spending 85 percent of the time on the ground are all the facts that point out that digitization is not as good as it should have been by now in air cargo.”
Henk Mulder, head of digital cargo for IATA, noted, “To get a sense of the lag in digital transformation, we can compare this with passenger air transport. Nearly every aspect of the passenger journey can be done on a smartphone. In the case of air cargo, most of the processes do not have a digital experience and across the board, there is a lack of full digital visibility of the end-to-end freight transport process.”
“The consequence of this lack of digital maturity is a lack of competitiveness. For decades, only the integrators have been able to provide such an integrated digital experience. Fortunately, to some extent, the forwarders have filled the gap and are responsible for the shipper’s experience of air transport. The increasing role of e-commerce is now putting new pressure on the logistics industry with new customer expectations, that are both fast and fully digital,” he added.
Moritz Claussen, co-founder and managing director at cargo.one, said, “I see two distinct problems when it comes to the digital and synchronous exchange of information in air cargo. One, until today much of the industry relies on EDI, a technology that was invented in the 1960s. While EDI allows for the electronic and standardized transmission of data, it does not allow for a synchronous exchange of the same. And t wo, most core cargo and transport management systems were designed to work in enclosed and on-premise environments, that often did not allow for outside or third-party connectivity.”
Ashok Rajan, senior vice president - global business head - cargo & logistics solutions at IBS Software, said, “Very antiquated communication channels and protocols still in use is at the centre of this issue. This has a direct bearing on both service quality and efficiency - whether it is owing to limited communication from airlines to outsourced partners like GHAs leading to cargo spending much longer on the ground or even shelling out unduly high communication costs to legacy providers and still not relying on the internet for fast and cost-effective communication.”
Laurent Jossa, head of sales - distribution services, CHAMP Cargosystems, said, “Some deficiencies in the supply chain are still hard to shake off. Some include authorities who still persist on receiving original paper documents, or stakeholders still operating on legacy systems with no digital capabilities or any other way of exchanging data. Players who fail to on-board these services will find themselves left out in the world that will emerge post-pandemic.”
Camilo Garcia Cervera, global VP business development at Webcargo by Freightos, opined, “Airfreight is all about connecting the world, supplying lifesaving medicines, transporting cutting-edge technology, fast fashion goods, perishables, and automotive components. Are we really going to settle for moving these around the world while our communication methods are still from the '70s and ’80s? (Nothing against those great decades, but seriously) It's inefficient, expensive, difficult to replicate, and slow - everything that is opposed to what digitisation can offer.”
Covid-19 as an accelerator
Some of the main challenges posed by the pandemic include the volatility of freight rates due to demand-supply mismatch and the absence of capacity to move cargo due to a drop in belly capacity caused by passenger aircraft groundings. Since the industry hates surprises of that sort, most of the airlines and freight forwarders tried to tie up with digital solutions for help. CargoAi is an artificial intelligence-enabled airfreight platform that connects freight forwarders and airlines and helps them with live search, e-purchasing, e-booking and track and trace feature. From May to October 2020, the company had doubled the size of the team to absorb the growing demand.
Many other digital solutions providers also reported a growing number of requests, installations of platforms in record time and investments into arenas of solutions, all due to the challenges of Covid-19 pandemic.
Matthieu Petot, chief executive officer, CargoAi, said, “We noticed a massive shift between early 2020 and end of 2020 from airlines and freight forwarders in term of readiness to be digital. All the major airlines have now completed or are finalizing their APIs to improve their sales through the online e-booking platform. I believe this trend was already engaged before but Covid-19 has accelerated this.”
In 2020 alone, bookings on cargo.one have increased by more than 600 per cent and our user base has increased by 300 per cent to more than 2,000 freight forwarding offices now using the platform. Claussen noted, “At cargo.one, we see that the need and demand for digital distribution and booking of air cargo has grown substantially with Covid-19 hitting the market. Tight capacity has been a characteristic of the air freight market in 2020. With rates and available freight capacity being more volatile than ever, airlines, as well as freight forwarders, turn to digital solutions such as cargo.one to get their job done more effectively and successfully.”
Due to the sudden restrictions across the globe impacting traditional forms of payment, demand for a reliable online contactless freight payment platform solution such as PayCargo soared. Lionel van der Walt, president and CEO Americas, PayCargo, said, “From PayCargo’s perspective, our platform has become even more relevant as the air cargo industry has had to adapt the way business is conducted.
While the pandemic wreaks havoc one of its rare positive side effects has been the realization across board-rooms on the true value of digitalization. Rajan said, “There have been more projects around digitalization that have been flagged off at large air cargo carriers during the pandemic than in a couple of years before. This has been seen in a number of areas – whether it is to do with digital sales channels picking up pace or warehouse investing into contactless operations programs. This has also meant that we at IBS Software we have almost doubled our investments into R&D for new platforms that are focussed on digital interactions and also in building partnerships with other players to make adoption of these technologies that much easier for customers.”
Kale Logistics Solutions saw the adoption of some of their platforms go 8-9 times. It is now engaged with several airports across North America, South America, Europe, Middle East, Africa and the Asia Pacific for creating cloud-based digital communities. More noted, “The cargo community now realizes that community platforms are the future, these will help them operate more efficiently and in a secured fashion. Global demand for our community platforms just surged and we have built the best over the pipeline of projects in our entire history during this year.”
During this time, CHAMP Cargosystems worked with airlines, which converted passenger aircraft into preighters, to develop new methods of load planning with their weight & balance solution to maximize capacity, maintain safety and automate the process. Jossa, noted, “We have seen customers who have been keen to use this moment to modernize their cargo data exchange systems, to offer better services like tracking, and automating their regulatory compliance systems for when business picks up. Customers are moving from the outdated CargoIMP format to CargoXML or cargoJSON and a pilot for IATA ONE Record has been set up with Agility and Qatar. We do also see a lot of handling agents looking for our Cargospot Mobile solution which allows operating the system from a smartphone or tablet.”
Mulder, informed, “It is hard to get data on the impact of Covid-19 on the digitalization challenge, but certainly it has underscored the absence of digitalization when it was really needed. The re-prioritization of limited freight capacity, the short-term economic opportunity and more recently the need for the secure and safe transport of Covid-19 vaccines globally have pushed the need for fast and transparent access to data to the foreground.”
“There is some indication that airlines have accelerated their push for eAWB usage in their networks, but this has been done at the expense of some of the next-generation standards like ONE Record. In that sense, the Covid-19 message was: If only we had implemented eAWB faster, then we could now get on with the more urgent digitalization work,” he added. Mark Chavez, digital aviation expert, Siemens Logistics, said, “The Covid-19 pandemic has emphasized the importance of digitalization in general, and also the necessity of the cargo industry to adapt to digital solutions. The airfreight industry is under pressure to deliver at high accuracy and satisfy evolving customer expectations. At the same time capacities are scarce due to missing belly cargo, postponed investments and limited on-premise staff availability.”
During this period, Webcargo of Freightos has seen a growth in our customer base while transactions grew by 10x. Cervera, noted, “Those who already were aboard were able to offer quotes to their customers faster and with real-time accurate information on rates and capacity. E-booking activity saw huge growth in 2020. Our growth in Europe was mirrored by our performance in the Americas and Asia.”
Vision of a totally digitalized air cargo industry
The airfreight ecosystem is extremely complex with many stakeholders involved in the supply chain: shippers, carriers, customs, freight forwarders, integrators, airlines, the end customer and more. The necessary document transitions for each step of the supply chain sometimes result in inaccuracies, losses and misunderstandings at transcription.
Now, with a more energised environment, both air cargo industries as well as digital technology companies are looking forward to a future with total digitalisation of the air cargo industry. Here is how they visualise it. Halleux said, who can tell us today which technology will prevail tomorrow. No one. We all have opinions but no one knows. Very strongly I believe that the future of air cargo is digital. It is the trend and it is what happens in the world. Covid-19 has only accelerated the digitalisation wave. Air cargo will not escape it. Air cargo was late because it is a fragmented industry with different interests from various players in the industry. ”
Rajan said, “The world of digital air cargo that we envision would see an ecosystem where carriers are digitally connected to all stakeholders from partners to customers to authorities. They have the ability to operate without physically owning all assets and operate seamlessly with outsourced providers and the ability to envision and create offerings digitally and be able to have all of its transactions paid for digitally.”
Upon asking his vision of digitalised air cargo, More gave us a list of 14 things he wants to go right. This included filter based on criteria like transport and rate options for an origin & destination pair, data cloud trading platforms, customs declarations filed on cloud, uber-like app to choose the trucks, certificate of origin generated using the blockchain, intelligent tags that communicate via 7G IoT network, augmented reality glasses for picking/dispatch, truck manifest with advance information for airports, cryptocurrency for terminal charges, electronic token for trucks, high-speed high-resolution scanning technology and volume/weight measuring machines, collapsible containers or pallets with in-built identification tokens, electronic seals and APIs showing the movement of cargo in the air.
Jossa, said, “The dream, of course, would have to be totally paper-free and being able to run the business from connected mobile devices. It could be some time until passenger travel levels go back anywhere near pre-pandemic figures. Until then, it is difficult to realize the full potential of the building blocks set in place today.” Walt, noted, “The use of AI is going to be an industry game-changer and fits into the drive to digitise our industry to make it more transparent and efficient. This is also true for other blockchain-based innovations which will bring shipping and insurance companies together as digital players into an ecosystem that will become a big part in the future of the industry.”
“The use of APIs is also expected to lead to the creation of new products and services for customers within that ecosystem. Anticipatory logistics, which uses AI and is powered by big data predictive algorithms, is another interesting concept, taking predictive analytics a step further,” he added.
Mulder, said, “The facility of digital business will do to (air) cargo and logistics what it did to passenger transport at the turn of the millennium: development of new and lucrative business models, failure of change-resistant companies and the emergence of new global actors.”
Chavez informed, “IoT and advanced analytics are the technologies making their way up through the industry. IoT can speed up cargo handling, improve accuracy, and help to locate any missing items facing the issue of lost, missing or underutilized ULDs. Other use cases encompass predictive maintenance, routing and asset management optimization, or temperature monitoring for special-care goods.”
Cervera, said, “We might be decades behind our colleagues in passenger travel, but it will only take us a few years to catch up. Airfreight will no longer be an isolated segment of the global economy; it will be at the forefront of global trade and an example for others to follow, as the fastest transportation mode should be.”
Certainly, there are dangers in not accept- ing the digital transformation and benefits in fully embracing it. With the innovations in AI, IoT, blockchain, cryptocurrency and predictive analysis we are definitely looking at a future of fully digitalised air cargo utilising to its fullest potential.