AF KLM on a digital journey
20 / 11 / 2018
In just four years Air France KLM Cargo has ‘rightsized’ its freighter fleet from 15 aircraft to six, and reduced its unit costs by more than 40%, so now comes the easy part: digitisation of the air cargo supply chain.
After a tough few years of internal restructuring, the Franco-Dutch carrier is already some way along its "commercial digital journey" with the myCargo and What Counts customer platforms, and is scoring significant statistics in terms of online freight forwarder engagement.
MyCargo is aimed at any freight forwarder, while What Counts (also available through myCargo) is a specific service proposition aimed at the small and medium sized agents.
Marcel de Nooijer, executive vice president of AF KLM Cargo, is aware those are only the first steps in a long journey: “Digitisation will change the supply chains from the originating shippers towards their end-customers. But there is still a lot of work to do.”
De Nooijer, alongside the key members of the AF KLM Cargo team, have presented their vision of digitisation, which comes with “a high level ambition” to operate in a “transparent and easy to connect way, at a competitive price”.
He added: “The customer is completely informed, every step of the way, about what is happening with the shipment.
“It is about exchange of data, it is about knowing exactly what is happening. If you are an end consumer and you order a pizza at home, you can see that the driver is going to arrive at your home within ten minutes.
“So why on earth would you go for less in a business environment where you have shipments worth much more than the pizza?”
The first steps on the digital journey began when the airline partners made a “heavy investment” to bring their two legacy IT systems from the 1980s at Paris’s CDG and Amsterdam’s Schiphol airports into one new platform, with joint inventory and single booking systems, both boxes now ticked, with a joint carrier and handler system ongoing and due for completion by 2021.
Always equipped with an attention-grabbing phrase, de Nooijer described this tricky process as “open heart surgery” because “the shop is going to stay open and going to deliver according to the promise”.
Now out of operating theatre, the results are tangible, says de Nooijer: “We have already noticed the benefits after implementation.”
The level of “mixed itineraries” – a shipment run partly over AF and then on KLM - has doubled, and that combination “gives us much more opportunities towards customers”.
De Nooijer adds: “What is really exciting is that these moves are appreciated by the market.”
But digitisation is not everything, and the personal touch is still important to AF KLM Cargo.
Christophe Boucher, senior vice president sales and distribution at AF KLM Cargo, says: “Our ambition is to cover the entire end-to-end journey, from the quotation to the delivery and then to the after sales. We want to be easy to do business with.
“But it is also very important for us to balance the digital and the human side. Digital is being anytime anywhere, 24/7availability and transparency, with real time updates.
“On the human side, the personal attention is still very important and because some of the topics are so complex, only our experts can deliver. Local knowledge is very important and we are present with our own staff at 130 stations and we still believe that proactive action makes a difference, building the trust and relationships is still very important.”
October 2018’s monthly statistics for the airline's digital portfolio are impressive: 41% of the airline’s customers are active with a myCargo account, and it had 200,000 visits, while the website had 790,000 visits. There were 460,000 track and trace visits and 28% of air waybills were booked online.
The myCargo channel, launched in mid-2017, now accounts for 15% of all turnover.
MyCargo’s “one-stop-shop” dashboard offers a large number of cargo tools, including rate quotes, bookings and track and trace. Boucher says that it can be adjusted and calibrated to meet differing customer needs, with extra functionality being added all the time.
Adds Boucher: “Normally when you get a quote, you get a rate, but here you get much more than a rate. What you see are rates for different days of the week, but you are also offered different possibilities, maybe Air France, KLM or Delta out of Paris and Amsterdam.”
The freight rates, created by “a lot of smart tools using historic data”, are able to come up with “the best available rate”. A forwarder may still call customer service “but you won’t get a better rate”, says Boucher.
Forwarders can either book instantly, or save their quote for ten days. There is no guarantee that the space will still be available on the chosen flight, but if it is then the forwarder can still access the original rate.
Customers can also set up their own shipment alerts.
An airline staff equivalent, called ourCargo, will soon be available throughout the network.
What Counts, aimed a the smaller forwarder, also has a rewards system based on bookings, similar to that for the passenger side of the business.
It looks as if the forwarder community is keen to go digital. De Nooijer, drawing comparisons with the early digital days on the passenger side of the business, states: “When the passenger side was changing into an online world, the growth was in the neighbourhood of 2% to 3%.
“We have immediately jumped to levels of 10% to 15%, which is a clear signal that the market is ready to embrace it. That is how quickly things are going.”
The Air France KLM Cargo boss sees openness as an essential ingredient of making digitisation work across the industry.
“What is important is that you don't do it completely on your own. We live in a complex world and digitisation is not about the outside world developing certain things and then we think: how are we going to make use of that.
“Nor should we look at every process from an internal aspect and start to develop IT in our own silo. Digital is the most beneficial when the outside world is combined with the inside world.”
De Nooijer continues: “In the early days there was a two-dimensional approach towards partnerships: you were either a partner or a competitor. That is going to change, you will have entities working together who will fierce competitors on certain aspects but could be partners on specific items which are relevant and which will strengthen the performance of each individual entity.”
That co-operation will be made easier by using application programming interface (API), which allows data to flow between different apps. If you consider data to be like electricity, then an API is – in simple terms – like an adaptor plug can you can use anywhere in the world to run your electrical devices.
Which means that AF KLM Cargo can link myCargo with third party portals, such as CargoWEB and Cargoguide, or it can feed myCargo directly into a freight forwarder who may also want to see it displayed alongside a competitor carrier.
De Nooijer recognises that air cargo is highly competitive and a fast-moving market which needs to be reflected not just in the digital space but in an evolving product portfolio.
He speaks of “seven strategic levers”, on which it is reviewing the carrier’s product portfolio, to respond to “step changes” with a “new type of customer” with different settings in the value chain which include robotics, predictive forecasting tools and changes in the production processes.
E-commerce is an obvious example, currently 10% of the carrier’s business, and growing, which has seen new e-commerce facilities and sorter systems installed at CDG and Schiphol.
The cool chain, always demanding in terms of shipment monitoring, was quickly incorporated into the myCargo dashboard.
Apart from “proximity to the customer”, the carrier is also looking to recruit young and talented talent with the right mindset.
Says de Nooijer: “We need to increase our pace of innovation, we need to get our speed level higher and that is not something you can do as an entity on our own, that is through co-operation and openness, that is essential.”
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