Air cargo innovation: Looking into the future

Air cargo innovation: Looking into the future

16 Jan 2017

How does the traditional air cargo industry handle digitisation of the supply chain and also compete with start-up logistics companies offering shippers an app-based business-to-consumer service

Those were two of the questions posed at the ‘What’s next in logistics innovation?’ panel session at the Frankfurt Air Cargo Innovation Lab conference, hosted by airport operator, Fraport.

Panellist Dr Pilar Fresnillo, head of offer innovation at Lufthansa Cargo, commented: “In the near future there won’t be supply chains any more but supply networks. The air cargo industry needs to cooperate and we need integrate our data and material flows. This will lead to transparency, speed and customer satisfaction.”

Dr Pilar added that those companies with the willingness to open up their own systems and to cooperate with others “in a very customer-centric approach” will stay ahead of the competition.

Erik Wirsing, head of innovation at German-based forwarder, Schenker, said that finding the right business partner in a digitising world is a “major topic” for his company.

He added: “Go back five years and the thinking was that we were the masters of everything and the market would follow us. But now digitalisation, the speed of change, is so dramatic that you have to be aware about finding the right partners, with whom you are willing to collaborate.”

Dirk Schusdziara, senior vice president cargo at Fraport, observed: “Our air cargo industry has a very fragmented process, with a lot of parties involved: the trucker, ground handler, airline, freight forwarder and not to forget the shipper who plays a very important part in the supply chain.

“Collaboration and digitalisation will drive the future of the air cargo logistics chain, and how do we move from an ego-system into an eco-system? Whom do we partner, how do we partner and how do we ensure that the physical transport will go on its seamless way?”

There was general agreement among the panellists and audience – albeit with the occasional dissenting voice – that collaboration was the path towards progress, with the end-customer providing the pressure for change.

Fresnillo said that logistics has a new, digital, business model and that web platform-based competitors are making shippers eager for a business to consumer (B2C) experience in their daily work life: “In our B2C environment we have achieved a stage of development that we are starting to transfer to our business world.

“In our private environment we are used to getting everything very, very quickly, with a speed of delivery, convenience and level of service that we now expect to receive in our business to business (B2B) environment. We become frustrated when it does not happen.”

Asked about the role of “disruptors”, companies such as internet retailer Amazon that will operate a fleet of leased freighter aircraft, Fresnillo said that the distinction would be drawn between those owning the physical transportation assets and platform-based companies with “the new gold, which is data” connecting asset-free transport.

Wirsing described the logistics IT platform topic as “huge”, adding: “The question is always, who will be known from the customer’s perspective when they think about logistics? Will they still think about Schenker or about booking with .com logistics?”

He added that start-up companies with a network and a “fancy app” were “really hurting” the air cargo industry: “They are not big at the moment but the pressure is getting higher.” Forwarders said Wirsing, could choose to collaborate with, or buy, the start-ups.

He continued: “Our main focus is to digitalise our own processes, because our customers are not willing to pay for manual ones, and if we not able to do it on our own then we have to find the right partner who can fulfil the job. 

“That is the new challenge, to be able to give your data in the right interfaces and to be open-minded with other companies.”

In the question and answer session, Celine Hourcade, IATA’s head of cargo transformation, said that Amazon’s entry into airfreight was not collaborative but an example of disruption, stating: “I think this is the way that innovation will have to enter our business, through disruptive means, it is not about all the companies discussing and agreeing and collaborating or finding new ways to do business.”

The air cargo industry needed to be “its own disruptor” by collaborating on new harmonised standards, said Hourcade: “Amazon is not a wake-up call any more for anybody in this room. For me this is the last call for boarding.”

Marcel Fujike, senior vice president for products and services, global air logistics at Kuehne + Nagel, asked from the floor: “Why are you afraid? We welcome all these platforms but in the end they still need to deliver. And what we need to understand and accept is that we have a global reach and we know how to do this business and how to move goods from A to B.”

Referencing an internet-based logistics player, Fujike said that he would like to see how they would deal with a shipper that has a shipment stuck somewhere in the world.

“Let us see what happens then. What we cannot deliver at the moment is the ease of doing business, but it is all up to us. We have it in our hands to be successful and to get rid of all these start-ups.

“We at K+N, we see them and realise that they are there and we follow them but we are not afraid of them.”

On the broader point of collaboration between freight forwarders, Fujike observed with humour: “We did this before and learned our lesson, I think.”

He went on to challenge the panel on collaboration: “As a forwarder we make our money because the chain is so disruptive, we have so many parties involved that are not linked to each other. Most forwarders do not have an interest in collaborating but to more or less defend the current scenario.
“I don’t believe in collaboration because, if you look at our industry, the best-used example for 19 years is Cargo2000 and Cargo iQ, cooperation par excellence, and the result is more or less zero.

“We are open to collaboration but we drive it. We are partners, fine, but you play our game. If you have a good idea you come to us and if we like it, we go together.” 

Start-ups can be a catalyst for positive change, said Fresnillo: “The difference is between being afraid and taking them seriously, monitoring them and even identifying ones who could be a collaboration partner for us.”

Fresnillo had earlier observed that Lufthansa Cargo, while a “traditional” company, is focused on innovation and digitisation issues: “Innovation is not necessarily in our DNA, we have to learn it.”

She added: “We know that we are not as fast as we should be. If we try to build up internally, it will take years. Collaborating and opening our doors and contacting other companies that are even more innovative than we are, that is one way to speed up our internal processes.”

Shipper Robert Mellin, strategy development manager with Ericsson, commenting on the time it has taken for the industry to effect change, said: “I feel like we are just walking in circles.”

But there was hope. Mellin continued: “We should segregate such things as filing rates on a platform, and the execution of the operation. If we can fix the operational execution, increase and improve that first, we would have done a great job in reducing lead times and removing steps from the whole chain of docs, removing risk and improving quality.

“We have a lot of work to do. We need to cooperate and collaborate, we are all on the same page. It is just a matter of doing it now. If we can get the big five freight forwarders on board we can do quite a lot of good things.

“The technology is there, trust me.”



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