‘Unresponsive and too slow’

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Air cargo remains too slow, unresponsive, and lacking in visibility, according to shipper representatives speaking at the IATA World Cargo Symposium (WCS) in Shanghai. Some of their views were, in part, also reflected in a new IATA Shipper Survey unveiled at the event, although the average satisfaction rating expressed by the more than 300 shippers responding to the 2015 survey was somewhat higher than the ratings given by the three panellists offering their forthright opinions on the WCS stage

Robert Mellin, head of distribution logistics for telecommunications firm Ericsson, gave air freight a satisfaction rating of just 5 out of 10, saying that although Ericsson spent almost US$200 million a year on air freight, it only did so where it had to – in order to avert delays that were unacceptable to its customers. He said air freight was 10 times the price of surface transport, but not 10 times as fast.

“We are keen to have a better service, but we have not seen much happening in air freight – apart from the e-air waybill, but that has not really been moving forward,” he claimed. Mellin said that surface transport, particularly in Europe, had in the meantime made progress and shown itself to be more responsive to customers’ needs – particularly the need for visibility throughout the transport chain. “We are more connected and have implemented tools that allow us to be more connected to the [surface] transport process,” he said. “But in air transport, we are more disconnected; the information sharing is not there.”

Alex Xu, associate supply chain director for Lilly Suzhou Pharmaceutical Co., also complained about a lack of proactive information from the air cargo chain, claiming that he often only found out about deviations when the shipment arrived or when he actively asked for information. “We don’t know what is happening during the shipment; everything goes blank,” he said.

Xu gave air freight a rating of “6 or 7”, saying that two years ago he would have rated it at 8 out of 10. He said air freight had not got worse per se, but what had changed was that pharma’s regulatory requirements had increased and the air freight sector had not responded well enough to the new demands.

Pharma shippers like Lilly wanted not just better information about the shipment’s progress, but also for someone to intervene proactively if the shipment, for example, suffered a temperature deviation. Although pharma companies like his were currently facing cost pressures as products move out of patent protections, he said they would be “willing to share the pain and the benefits” of investments in order to improve service quality, accepting higher pricing for a better service.

Chris Welsh, secretary general of the Global Shippers’ Forum, said that after consulting with member companies, he would give air freight a rating of just 6 out of 10. While some only used air freight as a “distressed purchase” when they had to, he said it was the customers that were dependent on air freight as a distribution channel – such as companies in the hi-tech or pharma sectors – that were most frustrated that “it just can’t get its act together quickly enough”, complaining that it had gaps in its visibility chain and was simply not fast enough to justify its costs.

Of the 336 shippers responding to the 2015 IATA Shipper Survey, the 94% that shipped some products by air gave air cargo a rating averaging 7.08 on a scale of zero to ten, with ten representing ‘very satisfied’ and a score of zero representing ‘very unsatisfied’. Around 7% were said to be ‘very unsatisfied’, which was a cause for concern, said Tom Windmuller, IATA SVP for Airports, Passenger, Cargo and Security. That was around US$4 billion of air cargo spend where the customer is unhappy and where the business is, therefore, under threat, he observed.

Joost van Doesburg, air freight policy manager at the European Shippers’ Council, claimed that the 7.08 rating flattered air cargo, “because the survey referred to shipments by air, which includes the integrators. And they are very happy with the service provided by the integrators,” he said.

Respondents said the top three reasons they used air freight were time or speed (90%); customer requirements (40%); and reliability (30%). Asked ‘What is wrong with air freight?’, they listed a variety of complaints, including that it was “too complex”; “inefficient”; and “lacking in transparency, quality, and real-time information”. Others complained about cargo not flying as booked; offloads; too much repetitive data entry; long lead times compared to cost; replies to enquiries taking days; and a lack of ability to control the air freight process themselves.

Mellin called for the creation “in the next 12 months, of a big data hub, where everyone is connected, and we have faster execution and accuracy, and the lead time goes down by 40%”. He said the sharing of accurate information would generate performance improvements, arguing that it wasn’t necessarily a case of needing to pay more for better services. “I don’t see this transformation and innovation as driving cost up, but down,” he said.

Chris Welsh, secretary general of the Global Shippers’ Forum, said he had published a paper in 1995 saying that the scope for EDI within air freight was limited “due to the lack of integration and the absence of anyone to lead the process”, observing that it took until 2010 to for such a structure to be put in place. He said there had still been little progress since then, but offered to “give it another go” by helping to lead modernisation initiatives from the E-Commerce Task Force set up by the multidisciplinary body GACAG (Global Air Cargo Advisory Group). “If there is a willing commitment by the industry, I am prepared to put the effort into the E-Commerce Task Force and would like to invite Robert to join that,” Welsh offered.

“But I think we need to give it a new focus. We have technology people within that, but maybe we need people to come from the outside to look at how information can, for example, be stored in the Cloud and find ways to improve things.” But he said the task force had to be “a coalition of the willing; people that are really willing to get there”.

Asked for one single action to improve the performance of air freight for shippers, Welsh said: “I want progress on e-commerce, as I think that will deal with a lot of the frustrations. So I want a timed project within the E-Commerce Task Force at GACAG to blitz that, and come out of that with a clear case study that shows the industry ‘That is how you do it’, so that the industry has got something that it can implement.”

IATA’s global head of cargo, Glyn Hughes, responded: “We are going to capture all of that very important feedback and play it back next year [at the 2016 WCS], to look at not just did we listen, but what did we do?”

However, at a later workshop session on shippers’ needs, several air freight executives defended the sector following the criticisms by Mellin and his fellow shipper representatives, arguing that suboptimal visibility, communications, and transit times apparently experienced by some cargo owners most likely represented a failure by the shipper to adequately engage with their air logistics suppliers.

Responding in particular to the highly critical presentation by Mellin, DB Schenker’s director of air freight security standardisation, Lothar Moehle, pointed out that freight forwarders generally offered different levels of service according to their customers’ needs, ranging from premium express and time-definite services to deferred consolidation-based services. He said different levels of communication were also provided to customers about the shipment’s progress depending on whether they had requested proactive alerts or exceptions updates, while some customers did not request any information at all about their shipments’ progress.

Mellin responded that if he had to pay the higher rates required for express and higher-level services, the cost of using air freight would become unsustainable and take up even more than the 71% of his US$260 million distribution budget that it did currently, making it unaffordable. He argued that with air freight already costing 10 times more than surface transport, fast transit times and shipment visibility should come as standard.

A Swiss delegate within the working group responded that she had checked her company’s transit time performance and it was typically around 24 hours for long-haul shipments, rather than the 10 days cited by Mellin. Questioned by Mellin, she acknowledged that this was airport-to-airport rather than door-to-door transit time, and Mellin responded that 24-hour transit times were not his experience of the typical airport-to-airport experience.

However, another delegate questioned Mellin on whether he had ever engaged in tripartite discussions, including both his freight forwarding and airline suppliers, about issues such as transit times, visibility and his logistics needs, and whether he had visited airport cargo facilities in order to get a better understanding of the various processes and stages involved. Mellin admitted that he had only finally participated in such a visit the previous week, and said forwarders had not encouraged – and even resisted – tripartite discussions.

“I think we have been isolated by the 3PLs; they have not been happy for us to have access [to carriers],” he said. “The 3PLs don’t like us to know too much, because information is power. So, we are talking about placing the information where we can all see it. But things have to change.”

Ben Radstaak, managing director of Amsterdam-based association Air Cargo Netherlands, later observed that if a shipper experienced significant and repeated difficulties with the air logistics services they were receiving, generally it was a sign that they needed to use a different freight forwarder. But in Mellin’s defence, the ESC’s van Doesburg said Ericsson already used five or six freight forwarders.

And on the question of whether some shippers were unrealistic in terms of the levels of service they expected in return for the price that air freight charged, van Doesburg pointed out that shippers were willing to pay even higher prices for the services of integrators where they needed express, time-definite services, observing that he had never experienced shippers complaining about the cost or value-for-money provided by those integrator services. This demonstrated that they were willing to accept higher prices for genuinely premium services, he argued.