Global Shippers Forum: Change or lose market share, shippers warn
20 / 03 / 2015
THERE is bad news and good news for the airfreight industry from Chris Welsh, secretary general of the Global Shippers Forum (GSF). The bad news is that its share of the freight market is under sustained attack from sea and land freight. The good news is that solutions are in place – if the industry can only grasp and implement them.
It was not so long ago that shippers were considered a rather exotic beast to many in the air cargo industry. Airlines were not supposed to talk to them, and if they were included in industry debates it was mainly to criticise from the sidelines.
That changed in 2010 with the creation of GACAG – the Global Air Cargo Advisory Group. That saw the GSF sitting down alongside TIACA, IATA and FIATA to tackle issues such as e-freight and security. Welsh says that this has resulted in much better collaboration on a broad range of issues. “I don’t think the relationship could be any better in terms of building a common agenda,” he says.
Getting that agenda implemented is another matter. Welsh says e-freight is critical to “bringing the industry into the 21st century”, but it will come as no surprise to anyone that he thinks progress over the past decade has been “very slow”.
One problem, he reckons – and one contribution shippers have made to the debate – is that air cargo has been “over-contemplating” e-freight. “There has been a tendency to want to do studies and projects and pilots. For me there has been enough evidence on the ground as to how this can be done, and in particular through the work of IATA in the Far East, Europe and the USA we now have enough information. Now we need to get on with implementation.”
That being said, he reckons that there have been encouraging signs in the past six months. “Part of the industry has been embarrassed into questioning why they can’t move faster on this issue, and I think air cargo has finally realised it has to improve the quality of service to regain some of the ground it has lost to other modes.”
That lost ground seems to be fairly extensive, with Welsh listing sectors such as food, automotive, high-end engineering, retailers and even cut-flower exporters who have all been looking at ways to reduce their use of airfreight.
“This is not a short-term trend due to the financial crisis, but a fundamental look by many shippers at the role airfreight plays in their supply chains,” he says, adding that the 2010 volcanic eruption in Iceland, the ash cloud from which that subsequently grounded many flights over Europe, was both a blessing and a problem in this respect.
“It illustrated that without air-freight many supply chains were vulnerable, but it was also a bit of a wake-up call for some industries, in that it made them think about how they could reduce their dependency on airfreight.”
The good news for airfreight is that it still has a good chance of competing – if it can raise its game and be as competitive as possible on price. Welsh says climate change and sustainability worries are one factor behind the shift to sea or rail transport – “but the reality is that while companies will do stuff for sustainability reasons, they won’t pay extra for it, so it has to stack up economically and commercially.”
Another sign of hope is that the sea freight industry is not as advanced as it might be on electronic documents. “They are upping their game, but they are not exactly motoring ahead,” is Welsh’s analysis.
One area that air cargo could definitely score is if e-freight could reduce transit times. “Eight years ago IATA produced a report that said e-freight could take a day out of air cargo journey times. That would be huge, and would bring all sorts of other benefits to shippers, including lower insurance costs, reduced pilferage and a r duction in inventory holdings,” he says.
Welsh also notes that the reduction in delays caused by the re-keying of data and the unecessary errors this activity produces would bring major benefits. “Eradicating errors would also bring considerable efficiency and reduce transit times as well, and the airfreight industry would then be more competitive against other modes.”
When it comes to the nuts and bolts of e-freight, Welsh is clear that the key plank to put in place is digitising the e-airwaybills and other documents on the forwarder-airline-airport interface. The so-called shipper documents – certificates of origin, letters of credit and so on – will need more work, because many of these involve other bodies, such as banks, Customs and chambers of commerce, he points out.
“They are not all electronic now, and some will be a long-term effort to change. But first we have to get all the transport documents done, and then regular shippers who want to do all documents electronically will align their systems to that. There is no point in them investing in systems that might turn out not to be compatible with what the airfreight industry puts in place.”
Important though e-freight is, it is not the only way that airfreight could be more competitive with other modes. Welsh also highlights the threat to coolchain business from sea and road. “Business is being lost because shippers can’t ensure that the whole supply chain is cool. Air cargo says it can do this, but in reality it can’t. Shipping lines and trucking companies can make that promise and so air cargo is falling behind. It needs to continue to invest in facilities, equipment and technology.”
As well as e-freight, GACAG also tackles security, Customs and documentation, and sustainability, and Welsh is pleased with progress in all three areas. In the first two, it has been a major benefit to have one unified body to talk to regulators and government authorities.
“It is helping us [and the authorities] to work together, as opposed to measures being imposed on the industry by surprise in response to incidents, albeit that some of the incidents were very serious ones.
“Gradually the industry is impressing on the regulators what can be done and what cannot be done in a way that was not possible a few years ago.”
E-freight inevitably has a part to play here. “The benefit of e-commerce to security and Customs authorities is that they can get information quicker and do profiling earlier. The earlier the information is input and submitted electronically, the faster the whole system for all parties.”
On sustainability and climate change, Welsh stresses the importance of having a commonly-agreed measure of the carbon emissions produced by each air cargo journey, pointing out that leading ocean freight carriers in the Clean Cargo Group already have such a reporting system in place.
“Shippers need to be confident that they have an accurate measure – not just an average or a guestimate,” he says.
However, at press time, he was feeling rather confident about a new IATA proposal on this front. “I think it [IATA] has cracked it, but I need to look at the details. It comes down to having accurate fuel-burn figures and how you allocate that between belly and passenger. Shippers just need to know the number.
“Otherwise, logistics managers may not choose air when making a mode choice, just because we do have the number for sea and road.”