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How does digitalization transform the air cargo industry?

by:VIPUTRANS     2020-07-20
Civil Aviation Resources Network June 23, 2018 News: According to Sia-partners, air freight plays an important role in cross-border trade, and air freight is even more important for express delivery and long-distance and efficient transportation of sensitive and critical items. Abnormally critical.
   For decades, air freight has not been growing, and it has only been on the growth track again because of the following driving factors: a large number of export orders, e-commerce that depends on the prosperity of express delivery, and cargo that is expected to be exclusively transported by plane.

  Digitalization is regarded as a key driving force for the development of new innovative services and solutions, and the latter two will increase the efficiency of the air cargo ecosystem and bring added value to the consignee.

  However, although digital projects have already appeared in the air cargo industry, digitalization is still on the edge. Next, we will conduct a comprehensive analysis of some digital projects released by large shipping companies and international air transport associations (IATA) and other traditional shipping agencies, and consider related projects from the perspective of the value chain transporter.

  The freight industry needs to use digital to reinvent itself

   The current ecosystem is this: The ecosystem of air cargo is very complex, and there are many stakeholders in the value chain, including shippers, carriers, customs, freight forwarders, integrators, airlines, and end customers.

   At present, there are two dominant modes of air freight: freight forwarding and integrated logistics agency. The shipper must either appoint a freight forwarder who subcontracts all freight processes, or a comprehensive logistics agent who has the strength to complete all freight processes by itself.

  The integrated logistics agent will arrange the storage and collection of goods, ground transportation to the airport, customs border conversion procedures, time difference issues and transportation to the final destination.

   In the freight forwarding model, subcontractors are responsible for each stage of the freight process. Both ground handling agents and airlines will be involved in transportation to the airport and subsequent transportation to foreign destinations, and insurance or customs brokers will provide professional assistance in specific events, so they may also be involved.

   Figure: Air cargo value chain

The digitalization of the air cargo industry has been slow: Although passenger airlines have begun to provide customers with various booking channels to achieve transparent product comparison and shopping experience, and all use electronic tickets, most air cargo companies still rely on Traditional channels such as customer service centers are used for promotions-which is not in line with the actual competition-and paper documents are widely used in shipping. Either way, digitalization is creating new value propositions in every industry, and passengers’ growing expectations for personalized on-demand mobile services have not been met, especially the lack of pricing transparency, transportation cargo positioning, and status has not kept up with current customers Expected speed.

More importantly, the freight industry still relies on paper processes to exchange transportation information on complex supply chains. This situation leads to lack of data integration and standardization, prone to low-quality data and errors, and limits end-to-end visibility And transportation process expectations, they will encounter unexpected events and make the supply chain inefficient.

  Another challenge facing the industry is to optimize the use of cargo capacity, which stems from structural excess capacity, asymmetric cargo flow and unpredictability of transportation.

  Air cargo is facing fierce competition from other modes of transportation (lower prices or considered more environmentally friendly), and has always been threatened by newly established companies. And large retailers such as Amazon, Alibaba, and Wal-Mart are at any time likely to subject traditional air cargo carriers to major earthquakes.

  Use digital opportunities to enhance communication and cooperation within the value chain

Move towards digital customer interaction and provide transparency: In response to the growing freight demand of customers, large cargo airlines have increased transparency by publishing online booking platforms, which also shows the arrival of new direct booking channels: not only quotations can be displayed immediately and in real time Updates, booking and payment processes are also more convenient, and customers can even get door-to-door services (including customs processing). For B2C (business-to-consumer) customers who want to send any personal items quickly and cost-effectively, air freight becomes an option because it may find the lowest price and confirm the item type and specific shipping requirements within a specific time period. This is what the Lufthansa Cargo Airlines myAirCargo portal can achieve.

  At the same time, the development of the online freight market has enabled shippers and transportation providers to initiate commercial transactions. Rookie company HangarA provides dynamic intelligent routes and quotations for the US domestic market based on departure and destination airports, transportation types, dimensions and weight, related shipping equipment options, and specific prices negotiated. Similar to online travel agents KAYAK and Expedia, these new digital platforms enable a clear comparison of providers' available time periods and prices. Other platforms such as Fleet or Cargobase simplifies the process of selecting freight forwarders because the shipper can submit shipping details online and then accept bids from freight forwarders. This method is easier to compare than the traditional process of calling each freight agent to communicate. Although still in the early stages of development, these Internet portals are regarded as reshufflers of traditional freight forwarders. However, these platforms are far from enough to challenge the role of freight forwarders. Booking facilitation and quotation comparison are very important for the supply chain, but customs clearance, document processing, short-term storage, final delivery and many other links still indicate that the freight forwarder's pillar position in the value chain is unshakable.

   Picture: The new digital freight picture

   Promotion of communication and integration in the current value chain

Because the massive documents involved in the value chain sometimes cause inaccurate information, loss, and transcription errors, IATA initiated two major projects to streamline the communication process: the electronic air waybill project (E-AWB) and the electronic freight project (E -Freight).

   Air waybill is a contract of carriage between the shipper (direct shipper or freight forwarder) and the airline company, one of which will be attached to the consignment. The electronic air waybill project aims to standardize the air waybill electronically. The expected benefits of these projects are many, including improving the accuracy, quality and reliability of data exchange between airlines and transporters/agents, while reducing process processing costs. This project will also reduce delays in cargo handling, reduce the number of shipments in the customs system, and improve customer service. IATA is closely monitoring the monthly performance of electronic air waybill projects for airports, airlines and freight forwarders, and aims to achieve a 68% penetration rate of electronic air waybills by December 2018.

  The goal of the electronic freight project is more extensive, because it exists in the development and implementation of the end-to-end paperless transportation process of air freight, involving all stakeholders in the value chain. Because IATA has established a regulatory framework, coupled with modern electronic information technology and high-quality data, this project is only possible. Specifically, the goal of the electronic air cargo project is to eliminate the documents required for customs, transportation, commerce, and special air cargo.


   Picture: Paperless freight

  To support the above two projects, IATA developed the cargo-XML information standard to achieve electronic communication between airlines and other interested parties. There are currently 12 information standards covering 20 documents.

  There are many opportunities to explore the full potential of digitalization

  Jointly improve operational efficiency to achieve high-quality services: New technologies should become the driving force to change the status of the air cargo industry. The Internet of Things and advanced analysis are new technologies that are entering this industry. The Internet of Things can speed up cargo handling, improve accuracy and help locate when cargo is lost. Other examples of use include predictive maintenance, route selection and asset management optimization, or temperature monitoring of sensitive healthcare items and animals.

   Some airlines have already carried out related projects in these areas. For example, Air Canada is installing radio frequency identification sensors (temperature and humidity sensors) for cargo to enhance the customer experience, and at the same time help to maintain compliance in the event of changes in regulations. On the other hand, IATA is using the Interactive Cargo project to promote the modernization of air cargo. The interactive freight project aims to further utilize new technologies to track and monitor goods. This project promotes the use of intelligent systems, using intelligent systems to implement self-service detection, send real-time alerts, respond to deviations to meet customer expectations, and report the process of shipping to help bring data-driven improvements.

  Although the number of such projects is growing and the opportunities are numerous, the actual deployment is still limited.

  Optimize capacity utilization and revenue management through business intelligence solutions

  Cargo capacity corresponds to the space available for sale by the airline company, so it is directly related to freight revenue. However, compared to passenger transportation, freight forecasting is much more complicated for these reasons: fluctuating demand, uncertain belly capacity (depending on runway, weather, number of passengers, fuel oil loaded), multiple dimensions (depending on flow, weight, container Configuration), many optional route plans, asymmetric transport flow, very short booking period, etc.

  If you deal with this complexity manually, you need the support of powerful data analysis solutions to make optimization decisions. Advanced analysis provides usable capacity forecasts and demand forecasts based on past behaviors and recent trends, as well as a market price segmentation and related bidding to provide the lowest acceptable price for some transportation densities.

   Some cargo airlines have implemented business intelligence solutions similar to the CargoRM revenue management system to optimize cargo capacity utilization and revenue management, but compared to air passenger transportation service processes, cargo is still very backward.

in conclusion

  Facing the need for self-reconstruction, the air cargo industry has gradually adopted digitalization with different maturities. Although IATA's electronic air freight bill of lading standards, business intelligence tools, and booking websites that connect with end customers are gradually being adopted, the Internet of Things and big data are still marginalized in air cargo and it is very difficult to develop.

  The potential behind these digital opportunities can be huge. The specific digital roadmap will be very different according to the position of the relevant parties in the value chain and their respective strategies.

   Figure: Overview of digital opportunities for air cargo

  All in all, no matter what the specific goals are, all air cargo stakeholders should follow a goal: re-recognize the competition brought by other alternative cargo modes to air cargo, these models have become more advanced in their digital transformation.
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