The e-freight conundrum
Even as IATA’s e-freight mission has been gathering steam, government regulations, barriers in information and communications technology, and the failure to achieve a critical mass of users to achieve network-effect benefits have prevented the e-freight initiative from being universally adopted.
Implementing e-freight is not an easy process. Getting all parties in the air cargo transport supply chain onto the same digital page presents a classic game theory dilemma. Traditional air cargo documentation requires 30 pieces of paper for every single shipment. This can be equated to around 7,800 tonnes of paper created every year or 80 B747 freighter-loads of paper! These include customs forms; transportation docs, like airway bills and flight manifests, as well as commercial documents such as invoices, packing lists and certificates of origin. That blizzard of forms, moreover, passes through the hands of up to seven distinct parties, including shippers, freight forwarders, ground-handling agents, airlines, customs brokers, customs agents and other government authorities. With each step in the shipment’s chain of custody, the volume and complexity of paper expands, along with its cost and susceptibility to human error. Forward thinking IT companies have been busy tackling this complexity and are of the opinion that while the momentum required to implement IT programs in logistics is imposing, once they succeed, IT innovation can provide competitive advantages that you won’t find anywhere else. But in moving towards an e-freight environment, the air cargo industry increasingly needs to understand the need for alignment and cooperation. There is also a pressing need to advocate the mission with one united voice. “While many of the work practices seem outmoded, change is slowly coming. Strategies seem to be based on the assumption that the future will be more or less like the present. But the introduction of mobile devices, 3D print manufacturing and similar innovations tell a different story. We need a radical re-examination of the air cargo business, a total re-think of how things are done along the supply chain based on a strategy which should be subversive rather than extrapolative,” said Steve Hill, principal consultant at Champ Cargosystems. E-freight has become an industry-wide initiative involving carriers, freight forwarders, ground handlers, shippers and customs authorities. However, a large percentage of these stakeholders belong to an unorganized segment, which are either using manual processes or using legacy systems to address process and regulation requirements. According to Lufthansa Cargo, one of the pioneers in the implementing of efreight in the industry, there are five key issues in “unfreezing” the industry: a) Create lighthouse rollout projects to create trust and tangible examples in the new process b)Overcome the “Chicken-And-Egg” problem: take a leap of faith and start without waiting for others c)Move to modern technologies: support the new XML-based messaging and improve your in-house IT to support the eFreight process flawlessly d)Move to a truly paperless process: strive for a real eAWB process, and remove the AWB reliably from the transport chain. Make electronic data quality your key concern e)Support standard processes: make sure once investments into digitization have been made, they are protected by adhering to standards across the industry. Explains Thorsten Friedrich, head of the eAWB Global Rollout project at Lufthansa Cargo, “We have implemented a very cooperative way in rolling out e-AWB across its station network. A large rollout team is supporting both our own and our partners staff in understanding the process and truly realize a paperless process. In 2015 our focus will continue to be put on rolling out the single process and organizing a series of workshops to support partners in implementing eFreight. A large focus will remain improving data quality between partners.“ For successful implementation of e-freight, it is needless to say that all entities have to work together. The only way this would happen is if the entities involved would believe in common goals, believe in the benefits of the initiative and evolve a structure or framework of co-operation. “I think there has to be e-freight champions within the airline at regional levels as well. These champions shall work with the forwarder associations and service providers to get the adoption going. As long as carriers are not ready, most forwarders see no point to move ahead of them. It’s a classic chicken and egg situation and the industry needs to move beyond this impasse,” said Amar More, senior vice president, Kale Logistics. The biggest challenge in implementing e-freight is that it has to be implemented across the globe, by all stakeholders of the supply chain. Successfully implementing e-freight initiative for one part of the process does not provide expected benefits if other part of the process is still working in traditional manner. For example, countries that are leading in e-freight initiatives represent only one-third of the global air cargo by volume. “The greatest barrier in adoption of e-freight is changing the mind-set of the stakeholders. The change in the mind-set has to be done by stakeholders themselves. Each stakeholder has to understand the benefits of e-freight implementation in terms of seamless data sharing, reduced errors, increased process efficiency and savings for all stakeholders of the industry,“ explains Vinod Pisharoti, Head-Travel, Transport & Logistics, NIIT Technologies. According to the World Economic Forum’s (WEF) estimates, based on pilot schemes, there is 60 percent to 80 percent increase in cross-border sales by reducing trade barriers – in air freight it estimates a 1 percent increase in international trade as a consequence of moving from paper to electronic procedures, which is a significant number in itself. WEF and IATA research estimates that e-freight cutting a day from transit times would save shippers $4.2billion – $2.8billion from lower inventory stock requirements and $1.4billion from a lower cost of capital. They would also enjoy the 1 billion increase in trade, adding approximately $5.2 billion to their bottom lines. And it is not just shippers. Carriers would enjoy 40 percent of $1.7 billion in savings, while forwarders would benefit from the remaining 60 percent – and both would gain from the consequent $1.8 billion increase in trade. Since the beginning of 2014, the adoption of e-AWB has been steadily on the rise. According to the latest figures available on IATA’s website, October 2014 witnessed 20.7 percent penetration; which translates to 0.8 percent change from the previous month. Adoption speed is now four times that of the same period last year, and this acceleration is felt across the board, with strong recent growth in Africa, Americas, Europe and North Asia. Over 20 airlines have achieved over 20 percent e-AWB penetration with Emirates, Cathay Pacific and Singapore Airlines Cargo leading the way. Airports such as Hong-Kong, Singapore, Doha, Addis Ababa and Dubai, e-AWB penetration (all airlines combined) now exceeds the 50 percent mark. And many other airports show penetrations in the 30s and 40s. Contributing to this acceleration are joint industry initiatives launched in the Nordics, India, USA, Germany and others. More than ever, industry collaboration is a key component of success. And with more than 77 airlines and 1300 freight forwarders signing up, the multilateral e-AWB agreement has also been a significant catalyst making it easy for forwarders large and small to implement e-AWB with all their airline partners. The Europe, Middle East, and Africa region has traditionally been a key area for many IT providers. Many IT companies are coming forward to provide tailor-made, on-site, easy to implement, cost effective solutions to all players in the cargo transport chain. CHAMP Cargosystems has made strong inroads into the global air cargo market and are seeing a lot of potential for their Cargospot and Traxon solutions. In October, CHAMP announced the Logitude software as a Service (SaaS) platform focused on the small and medium size forwarder community. The Logitude platform is already fully integrated with CHAMP’s leading information and message distribution platform – Traxon CargoHUB. Said James Fernandez, vice president for global commercial operations, “Our focus is to provide SME forwarders with a readily accessible IT service, capable to manage key business processes easily and supporting the easy sharing of information between partners and customers. Our new offering further extends our significant portfolio of IT solutions and reaffirms our commitment to facilitate the industry drive for greater end to end process effectiveness and information exchange.” Solutions such as Cargospot Airline, Cargospot Handling and Cargospot Revenue allow airlines to standardise processes, conduct business electronically, instantly, and more efficiently without sacrificing the important element of human interaction. The applications enable carriers to speed up billing and thus improve cash flows that are vital in the current economic climate. They also help to improve services to customers. NIIT’s product offering COSYS is an ergonomically designed system that addresses business and technological requirements of cargo handling agents, airports and airlines’ cargo andling departments.This product has been developed in strategic partnership with SATS. COSYS automates and simplifies cargo ground handling operations;thereby reducing cost, improving service quality and increasing profitability. A web-based e-Freight compliant platform, this offering is capable of providing real-time flight and shipment tracking information. It can be seamlessly integrated with local processes and regulations to enable greater transparency and accuracy of the cargo handled throughout the value chain.The product is currently active in a number of airports around the globe including Singapore, Taiwan, Vietnam, Hong Kong, Beijing, Indonesia, Delhi, Brazil, Bangalore and Mumbai. Another important player with its product offerings for the air cargo industry is Thai-based Worldwide Information Network (WIN). Earlier this year, the world’s first cloud-based offering for independent freight forwarders was developed WIN to crack the e-AirWayBill (e-AWB) challenge. Compliant with IATA’s e-Freight and Cargo 2000 requirements, WIN’s solution for the air cargo industry functions as an enhancement to existing tools, using the cloud-based technology. This solution connects forwarding agents with each other and with the world’s main air and ocean carriers, brokers, and other logistics service providers giving independent freight forwarders with end-to-end visibility throughout the entire shipment lifecycle.“Our mission is to provide independent forwarders with a cost-effective global connectivity solution. With our easy to use e-AWB solution, we are proud to be doing our part to advance air cargo’s e-Freight initiative and assist airlines by increasing their e-AWB penetration with independent agents,” said John DeBenedette, managing director of WIN. Accenture’s freight and logistics software processes over 17 million booking transactions annually and manages in excess of 2.9 million active contract lines. With customers including 3 of the top 10 air cargo carriers, Accenture also is a a trusted partner for cargo management solutions.
Driving change Technology is the key to growth and will be the main component for growth in the years ahead. Apart from growth, technology brings in efficiency and reduces human errors as data is transferred electronically. It is vital for the industry stakeholders to work together with its IT partners in order to deliver the desired projects that reduce cost and improve services. IT has a very important function to play across the industry, including safety, security, environment, back office, people management and the like. Evolving technologies, changing customer behaviour, a highly dynamic and competitive landscape, has forced enterprises today to transform their business strategy. As we move into an era of the hyper connected world, businesses can no longer see technology in isolation. The introduction of a new e-AWB standard could be an uphill struggle. The AWB is part of air cargo’s DNA having many legal, contractual, operational and financial interdependencies. But the world is moving on and e-Business/-Commerce are becoming the global norms. Every day ‘revolutionaries’ are resetting consumer expectations about accessibility. I can buy made to measure jeans or bulky furniture in another continent with a finger tap. Yet tracking a shipment electronically for security purposes is still a problem in many parts of the world. And air cargo is still weighed down by the need to travel with numerous paper documents in too many places. “The air cargo industry needs to transform itself and modernize. Technologies are available but the question remains how they can be used so that airline customers and partners benefit from a better product or service? Air cargo needs a revolutionary strategy. The bottleneck is always at the top of the bottle so the industry must liberate its revolutionary spirit. Revolutionaries exist in every company and their voices should be invited and heard by industry captains and bodies such as IATA and TIACA, and those responsible for legal and regulatory compliance,” says CHAMP Cargosystems’ Steve Hill.