Disrupt the Disruptors
For air cargo carriers, there are many factors converging to introduce new challenges to their logistical planning and operations. Changing customer expectations, new partnership definitions, and emerging competitors are all conspiring and requiring air cargo carriers to adapt to these new market dynamics. Mastering the so-called “disruptors” will require optimized strategies and processes both of which gain a significant boost from leading-edge optimization solutions. Understanding the disruptors and how best to address them will be the key for today’s air cargo carriers’ continued growth and ability to successfully compete.
Challenges and Performance Improvement Goals
There is no question that despite positive growth projections by leading airline industry groups, including the International Air Transport Association (IATA), air cargo carriers have hurdles to overcome. IATA’s forecasted rise in cargo carried to 62.5 million tons in 2018, a 4.5% increase over 2017 figures, and projected 8.6% increase in cargo revenues to $59.2 billion are confidence boosters. Still, air cargo carriers are not celebrating just yet. They realize that to achieve growth and profitability, they need to improve their value proposition by optimizing their processes and overall performance. This will require they get ahead of new challenges, while embracing new tools that facilitate better performance.
Among the key challenges air cargo carriers must address are:
- Those relating to the delivery of different cargo in accordance with the Service Level Agreement (SLA) for each cargo product, and recording time-stamps required for the audit trail;
- Optimal management of staff and equipment resources on the apron and in the cargo warehouse; and
- Maintaining optimum situational awareness and management by exception even in the most complex and confusing situations.
In addition to helping address these challenges, air cargo carriers also need solutions that will help them improve their performance of various tasks such as:
- Transporting of cargo between the aircraft and cargo center, as well as transports between different locations within the cargo center;
- On-time dolly availability at aircraft stands and holding areas;
- Preparation of dolly and trailer trains at aircraft and at outbound docks;
- Cargo build-up and breakdown in the warehouse;
- Loading/unloading of aircraft; and
- Loading/unloading of road feeder services.
When Amazon announced plans to launch its own delivery service, more than one carrier took note and stock of the implications. While its plans are to start accumulating a fleet of branded trucks, what is to say that the Amazon logo won’t soon appear on its own fleet of air cargo carriers? And, will Alibaba be far behind?
When a group of Japanese businesses operating in global trade announced their pilot program to evaluate the application of blockchain technology to streamline and improve cross-border trade operations, there was interest by air transporters as well as those in other modes of transportation. This group is not alone in exploring ways to leverage this digital database that uses linked blocks secured by cryptography to improve transactions and logistics. UPS, for one, has expressed interest in utilizing blockchain technology in its operations.
3. Big Data
Big Data is also causing a stir within the air cargo industry. Carriers realize that by harnessing the power of real time data, along with more flexible management of workforce and other resources, they can increase their overall efficiency. This is particularly true when it comes to better determining the number of planes needed for cargo transport during specific periods; efficiently scaling up or down accordingly.
4. Artificial Intelligence (AI)
Like Big Data, Artificial Intelligence (AI) is also getting a closer look by air cargo carriers. While some don’t expect AI to immediately impact the industry, there is a generally accepted viewpoint that it will ultimately help the carriers better forecast their facilities’ needs, improve cargo tracking, enhance revenue management, and optimize processes such as load planning, route planning, workforce management, and customer service. Among the top five air cargo carriers, at least two, FedEx and UPS, are known to be researching the implementation of AI. Consolidation services are also being looked upon by air cargo carriers as a way to mitigate challenges faced by organizations with lean supply chains and/or those that need to provide a Just in Time (JIT) service even for the smaller quantities.
All of these “disruptors” have changed customer expectations; the operative words here are faster, more flexible, more transparent, and lower prices. These expectations lead us to optimization software. It is already helping air cargo carriers optimize their processes so that they can effectively address challenges, best leverage the new technologies like AI and position themselves for the changing marketplace.
Optimization Software Helping Carriers Retain Their Competitive Edge
Regardless of the challenges, air cargo carriers still have a distinct advantage over other modes of transport; specifically, they are faster and more reliable. Cargo IQ data indicates that air cargo shipments, on average, take 140 hours to go from shipper to the consignee. The reliability of air cargo carriers is another notable differentiator. That is, however, not to say that air cargo carriers don’t benefit from improved processes. Optimization software is intended to take their operations to a whole new level and enable them to retain their competitive edge.
There are advanced solutions that optimize a wide range of carrier processes, from ground handling and airport operations to turnaround management and aircraft maintenance. These solutions have demonstrated a direct impact on the carriers’ productivity, costs of operation, performance levels, communications, and resource management. They enable an air cargo carrier to achieve best practices and process transparency which help them perform with the consistent speed and reliability they tout over other modes of transportation. Let us look at how some of the challenges faced by air cargo carriers are being effectively addressed by applying optimization software.
A key operational challenge faced by air cargo carriers is that different cargo products have different Service Level Agreement (SLA) limits relating to when the cargo must be delivered to the aircraft. This requires carriers to establish and allocate the necessary resources (e.g., dolly trains) in an optimized manner and in adherence to the SLA. There also is another requirement for time-stamps to be recorded as proof and for subsequent auditing purposes. Optimization software addresses this challenge by automatically taking SLA limits into consideration when allocating tasks to resources. Additionally, each action is connected to a time-stamp so that a detailed recording of activities performed can be guaranteed.
Air cargo carriers are further challenged by today’s highly competitive industry and the demand for optimal management of staff and equipment. By applying state-of-the-art algorithms to automatically allocate tasks to staff and equipment in accordance with various parameters (e.g., availability, functional requirements, legal considerations, etc.), optimization software helps carriers achieve optimal asset management and remain competitive.
Given the many operational complexities and typical infrastructure limitations air cargo carriers must contend with, maintaining sharp situational awareness, even under the most stressful and/or chaotic conditions, is vital. Built-in optimizers in today’s most advanced software solutions alleviate much of the confusion enabling staff to fully focus on critical tasks, thereby facilitating management-by-exception.
Real Benefits Derived
Optimization software is delivering real benefits to carriers. INFORM’s GroundStar optimization software suite has made a significant difference on behalf of various cargo customers. For example, by applying the software to allocate and manage its employees, one customer is now able to turn around 350,000 express freight shipments, on average, per night. Having to cater to an estimated 65 cargo flights per night within a short window of just four hours, situational awareness and pro-active decision-making is crucial. The GroundStar solution elevates situational awareness to the highest level to facilitate optimum decision-making. On a typical day, approximately 250 loading staff and drivers are allocated in parallel for efficient workforce management. During the peak holiday season, the strength of the implemented solution is especially evident as more than 500,000 parcels must be efficiently handled per night.
INFORM’s GroundStar also is helping air cargo carriers meet the demands posed by the 5% annual increase in the number of express shipments. It is enabling these carriers to effectively manage expansion by supporting them with advanced automation and optimized and focused decision-making which, in turn, is helping them increase productivity without adding staff.
Another example of how INFORM software is benefiting its cargo customers relates to their estimated 20% increase in dolly train utilization. Prior to their application of GroundStar, the carriers’ loading and cargo transport supervisors were not always able to utilize the full capacity of a tug and its dollies to meet SLAs and other timelines. After the implementation of GroundStar, the information regarding a tug’s status (i.e., whether a tug driver has enough time to wait for another unit load device (ULD) to be collected or to leave the stand with only three ULDs instead of four) is a strategic decision automatically handled by the INFORM software.
The Way Forward
The future for air cargo carriers and their continued process optimization will include further leverage of data – small and Big Data – to extract new insights and empower all staff levels from management to technicians. In turn, air cargo carriers will be able to gain even greater clarity to support their optimum decisions on matters ranging from dynamic disruption management and efficient aircraft turnaround, to aircraft maintenance, workforce management, and supply chain management.
This blog was originally posted in Global Trade Magazine.