Hellmann: How to fight back
20 / 03 / 2015
There is a lot of talk these days about mode shift from air to seafreight, so it is good to hear a forwarder talking about double digit increases in airfreight volumes.
This is the story for Hellmann Worldwide Logistics in Europe, where Jens Tarnowski, chief executive region Europe (air and sea freight) reports a 10 per cent rise in fashion volumes by air last year and similarly robust rises for perishables.
Fashion, a traditional strength of Hellmann, has been “pretty consistent on airfreight usage,” he says, with the market now seeing not just four seasons a year but twelve or even 20. Meanwhile, the company did particularly well on perishables in the Netherlands and saw increasing demand from tourism-related customers in the Middle East.
In both sectors it was not just multinationals but also mid-sized companies who were increasing their use of airfreight, Tarnowski reports. “I don’t think in either case it was the market growing. I just think we are working with successful customers.”
Tempering this good news is that he has seen a definite change towards sea freight in some other sectors, as customers have got smarter at organising their supply chains. Ironically the driver for this has been the same trends – the removal of buffer stock, just in time manufacturing and delivery, the need to manage flows in a time-critical way – that once was the driver for airfreight growth.
“Sea freight in the last few years has made a big step forward. It has reduced its sailing times and introduced bigger ships, and customers have optimised their supply chain to make better use of them,” says Tarnowski. “With more capacity it is easier to get the sailing times that you want, and sea freight has become more reliable.”
Seafreight also has the advantage that forwarders can negotiate at head office level with shipping lines to get deals on pricing. “It is more centrally-steered, and that in turn means you can plan much further ahead,” Tarnowski says. “In airfreight the price is still usually negotiated at origin. It is hard to get deals in Europe on airfreight starting in Asia, even though it is the importer in Europe that is paying for it.
“Of course there are block space agreements in airfreight, but airfreight still has more day to day pricing dependent on capacity. I think that airlines could do a bit more commercially to help their customers and focus on importers as well as on exporters.”
Pricing is always a somewhat controversial topic in airfreight, of course. During the recent downturn, airlines accused forwarders of ripping up block space agreements and chasing lower rates. Airlines also frequently complain that forwarders are not prepared to pay prices that justify the operation of freighters.
That is a point of view that Tarnowski has some sympathy with. He makes the perhaps surprising comment for a forwarder that “air cargo pricing is not where it should be: rates are too low to maintain such a sophisticated, fast-moving product.”
He also recognises that airlines can operate freighters only if they make an economic return.
But he implies that it is airline price policy that undermines rates. “It might be better for carriers not to fill up their belly space at prices that ruin the market,” he says. “We have to find the best solution for our customers and if there is a better price out there, we will go for it. If there was not a better price, then it would leave us no choice.”
He is worried by the loss of freighter capacity, describing it as “not good news” and saying the increase in belly capacity is not always enough for make up for it.
“In general terms, freighters are more flexible and they fly to destinations where passenger capacity is not so high – for examples new areas under development on the African continent or somewhere else.
If you are building up manufacturing sites in China, then there are not so many direct flights, and every transit is a risk and costs more time.”
One way that carriers try to increase rates is by offering express products with guaranteed transit times, as well as specialist services for different industry sectors.
Tarnowski approves of this trend. “Carriers did well a couple of years ago to implement different service levels – that was a good idea.
“They are doing well on premium services. That, by the way, is a difference between air and sea freight.
In sea freight there is no difference in transit times and no special handling. A container is a container and they are all treated the same way.”
He also approves of the increasing range of pharmaceutical services and others aimed at specific types of customer. “There has been the same trend on the forwarding side: everyone now has specialist teams in place for all the industry sectors,” he says. “Clients now won’t put up with sales talk, but want specialists to advise them.
“They know how to organise their supply chains, but want partners who can do the job, not just moving cargo from A to B, but being on eye level with them. They need people who can offer real expertise – not just someone with a name tag, but someone who knows the industry and can talk the talk. To take a general cargo approach to sales works less and less, and it is similar at airlines.”
That said, he stresses that not all shipments need a premium product. “The question is what the customer needs. If they need a high quality service we will pay for it, but, for example, boxes of T-shirts need no special handling.”
One aspect of the business where airfreight compares reasonably well with sea freight is the replacement of paper and manual processes with electronic ways of working. In both modes the picture is somewhat patchy, with some carriers well advanced in this area and others not making such rapid progress.
Tarnowski says a big advantage for airfreight is that it has IATA steering e-freight, whereas for sea freight there is no overall body in charge of the change.
Hellmann uses the GT Nexus and Inttra platforms to send electronic instructions to shipping lines, and receives tracking data back from them. “But what is missing is an umbrella organisation like IATA driving this kind of initiative in a coordinated way.”
For its part, Hellmann regards itself as something of a leader in e-freight, with 36 per cent of its air waybills globally now electronic.
That already exceeds the 22 per cent target IATA has set for 2014 and puts the forwarder on track to meet the 45 per cent that the organisation has set for next year.
Tarnowski says the forwarder prefers to send electronic data direct from its system to the carrier, because using internet applications involves re-keying data, a wasteful duplication of effort. “To do this we have to set up infrastructure with each carrier, but we are creating more and more of these with our airline partners.
“This takes time, and not every carrier is ready, and to be fair we are not ready everywhere in the world either. But e-freight is a big topic for Hellmann, and we have more than doubled our e-air waybill percentage this year, and we are pretty happy with that.”
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