Why Integration is key for an Effective Air Freight Future
Author(s): Christian Gessner, Posted on November 16th, 2016
Compared to many other sectors, transport and cargo has what could charitably be called a conservative approach to technology investment. It can certainly be said that the industry is several steps behind many others in terms of using technology to increase efficiencies and reduce costs.
And now, it is beginning to show. Respondents to Accenture’s 2015 Air Cargo survey stated that process inefficiencies are leading to a widespread inability to optimise revenues. Three out of four (75%) of air cargo executives said that this has contributed to revenue leakage and over 50% believe it has led to problems with pricing integrity and consistency.
In an increasingly complex economic landscape and highly competitive global marketplace, the air freight industry must reassess how it can use technology to create more innovative and adaptive business models. Not only that, it must abandon a previously conservative approach to IT investment.
Inefficiencies in the industry
Lengthy transits and cumbersome paperwork are inexcusable when technology solutions for these issues are readily available. IATA has been spearheading the “e-freight” campaign to bring the air cargo industry into a paperless era. The e-Air Waybill (e-AWB) has been introduced so all documentation can be shared instantly and digitally between all links in the supply chain. This eliminates paper handling, transporting and processing costs, and reduces revenue-sapping freight wait time by providing real time visibility of cargo across the supply chain.
While current e-AWB penetration is on track to hit the 2016 year-end target of 56% set by IATA, it is only the first step towards a more technologically-integrated future for air cargo. There are a multitude of other technological innovations that the industry has so far only briefly flirted with.
Playing by the rules
In June 2016, the Federal Aviation Administration in the U.S.A. proposed fining Amazon.com Inc. $350,000 for allegedly mishandling corrosive chemicals in an air shipment. The FAA stated that the shipment was not properly packaged or accompanied with the proper declaration stating the hazardous nature of its contents. Furthermore, it is alleged that Amazon did not provide the correct training to employees handling the shipment.
This story is perhaps a lesson in the penalties air freight carriers can face when incorrectly handling such materials. It is also a reminder that there are a multitude of rules and regulations governing how different goods – animals, chemicals, food, and so on – must be packaged, handled and labelled.
This is another area in which technological automation could drastically improve both efficiency and compliance. For the majority of the cargo industry, adhering to these regulations relies upon human expertise or for the handler to manually look up the rules. An automated system that classifies cargo as soon as shipment data is available would improve compliance, shorten the time taken to process various types of freight and also ensure that it receives the proper documentation, packaging and labelling.
The IATA is making significant steps to digitise its Air Cargo Tariff and Rules (TACT) to give carriers rapid access to all rates and rules. There are also technology and software solutions that can very simply integrate the TACT database with carrier’s systems so all rules, regulations, rates, charges and surcharges across hundreds of carriers and countries can be utilised.
The price is right
Inaccurate and varying pricing is one of the main reasons why price integrity is a major problem across the air cargo industry. For many carriers this issue stems from the inadequacy of their pricing systems to provide full visibility of important information integral to managing rates and charges. Similarly, a lack of pricing flexibility can lead to inconsistent rate calculation, which frustrates customers and causes further revenue leakage.
An integrated cargo pricing system could provide a relatively simple solution. Current pricing technology allows for the simplification of pricing mechanisms, ensuring that rates can be more consistently applied. These solutions can also plug into the IATA TACT database to guarantee that all worldwide rates and charges are integrated into a carrier’s pricing structures.
Time to change
These are just a few examples of how the transportation and cargo industry can benefit from more tech-enabled processes. To remain competitive, the industry needs a shakeup, to embrace new technologies and their power to boost efficiency, save money and create new business opportunities.