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How does digital change the air cargo industry?

2018-06-29 16:33:03 LEADER CARRY Highlight Read



Civil Aviation Resource Network June 23, 2018 News: According to Sia-partners, air cargo plays an important role in cross-border trade, and for express and sensitive, long-distance efficient transportation of key items, air cargo is more Abnormal key.

Air cargo has been a non-growth trend for decades, and it has only now entered the growth track again because of the following drivers: a large number of export orders, e-commerce that relies on the prosperity of express delivery, and goods that are expected to be transported exclusively by aircraft.

Digitalization is seen as a key enabler for the development of new innovative services and solutions, while the latter two will increase the efficiency of the air cargo ecosystem and bring added value to consignees.

However, although digital projects have already appeared in the air cargo industry, digitization is still on the fringe. In the following, we will conduct a comprehensive analysis of some digital projects issued by large airlines and IATA and other traditional shipping agencies, and consider relevant projects from the perspective of value chain transporters.

The freight industry needs to use digital to reshape itself

The current ecosystem is like 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 for air cargo: freight forwarders and integrated logistics agents. The shipper entrusts either a freight forwarder that subcontracts all freight processes or an integrated logistics agency that has the ability to complete the entire freight flow.

The integrated logistics agent will arrange for the storage and collection of goods, ground transportation to the airport, conversion procedures at customs borders, jet lag issues and transportation to the final destination.

In the freight forwarder model, each stage of the freight flow process is the responsibility of the subcontracted contractor. Ground handling agents and airlines are involved in the transportation to the airport and subsequent to foreign destinations, and insurance or customs brokers may be involved in specific events and may therefore be involved.



Figure: Value chain of air cargo

The pace of digitization in the air cargo industry has been slow: although the passenger shipping division has begun to provide customers with various booking channels, 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 promote promotions – which are inconsistent with real-world competition – and use paper documents extensively in shipping. In any case, digital is creating new value propositions in every industry, and passengers’ growing expectations for personalized on-demand mobile services are not being met, especially pricing transparency, transportation cargo positioning and lack of status have not kept up with current customers. The 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, and is prone to low-quality data and error errors, limiting end-to-end visibility. And the expectations of the transportation process, so there will be unexpected events and inefficiencies in the supply chain.

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

Air cargo faces fierce competition from other modes of transportation (lower prices or considered more environmentally friendly) and has been threatened by new companies. Large retailers such as Amazon, Alibaba and Wal-Mart are likely to cause major air traffickers to experience major earthquakes at any time.

Enhance communication and cooperation in the value chain by means of digitization

Moving towards digital customer interaction and transparency: In response to the growing cargo demand of customers, large cargo airlines have increased transparency by launching an online booking platform, which also indicates the arrival of new direct booking channels: not only can quotes be displayed immediately and in real time Updates, bookings and payment processes are also more convenient, and customers can even get door-to-door services (including customs procedures). For B2C (business-to-consumer) customers who want to send any personal items quickly and cost-effectively, airfreight becomes an option as it is possible to find the lowest price and confirm the item type and specific shipping requirements within a certain time period. This is the effect that Lufthansa Cargo's myAirCargo portal can achieve.

At the same time, the development of the online freight market allows shippers and transport providers to initiate commercial transactions. The rookie company HangarA provides dynamic smart routes and quotes for the US domestic market based on departure and destination airports, type of transport, dimensions and weight, associated shipping equipment options, and negotiated specific prices. Similar to online travel agents, Keya and Expedia, these new digital platforms enable a clear contrast between the available time of the provider and the price. Other platforms such as Fleet or Cargobase simplify the process of selecting a freight forwarder because the shipper can submit shipping details online and then accept the bidding of the freight forwarder. This is easier to compare than the traditional process of calling individual freight forwarders. Although still in the early stages of development, these Internet portals are seen as reshufflers of traditional freight forwarders. However, these platforms are far from enough to challenge the role of freight forwarders. Booking facilitation and quotation comparisons are important for the supply chain, but customs clearance, paper processing, short-term storage, final shipping and many other links still indicate that freight forwarders are unpredictable in the value chain.











Figure: Paperless freight

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

There are many opportunities to discover the full potential of digitalization.

Jointly improve operational efficiency and achieve quality service: New technologies should be the driving force for changing the status of the air cargo industry. The Internet of Things and advanced analysis are new technologies that are entering the industry. The Internet of Things can speed up cargo handling, improve accuracy and help locate when goods are lost. Other examples of use include predictive maintenance, route selection and asset management optimization or temperature monitoring of sensitive health care 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 shipments to enhance customer experience while helping to maintain compliance with regulatory changes. On the other hand, IATA is using the Interactive Cargo project to modernize air cargo. The interactive freight project aims to further utilize new technologies to track and monitor the goods. The project promotes the use of intelligent systems, uses intelligent systems for self-checking, sends real-time alerts, responds to deviations to meet customer expectations, and the process of reporting shipments helps bring about data-driven enhancements.

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

Optimize Capacity Utilization and Revenue Management with Business Intelligence Solutions

The cargo capacity corresponds to the space that Airways can sell, and therefore is directly related to the revenue from freight. However, compared to passenger transport, freight forwarding prediction is much more complicated because of the following: large fluctuations in demand, uncertainty in belly fatality (depending on the runway, weather, number of cabins, fuel loaded), and many dimensions (depending on flow, weight, containers) Configuration), multiple route plans, asymmetric traffic flow, very short reservation times, etc.

If this complexity is handled manually, a strong data analysis solution is needed to make optimal decisions. Advanced analysis provides available capacity forecasts and demand forecasts based on past behavior and recent trends, along with a market price segmentation and related bids to provide acceptable minimum prices for some transportation densities.

Some cargo carriers have implemented a business intelligence solution similar to CargoRM's revenue management system to optimize cargo utilization and revenue management, but cargo is still lagging behind the air passenger service process.

in conclusion

Faced with the need for self-rebuilding, the air cargo industry has gradually adopted digitalization with different degrees of maturity. Although IATA’s electronic air bill of lading standard, business intelligence tools, and booking sites for connecting end-users are being gradually adopted, the Internet of Things and big data are still at the edge of air cargo, and development is very difficult.

The potential behind the potential of these digital opportunities is enormous. The specific digital roadmap will be very different based on the positioning of the parties in the value chain and their respective strategies.


Figure: Overview of digital opportunities for air cargo

All in all, regardless of the specific objectives, all air cargo stakeholders should follow a goal: to reconsider the competition that other freight alternatives bring to air cargo, which are becoming more advanced in their digital transformation. (Li Xiaoyan / compiled)

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