Compared to many other sectors, transport and cargo has what could charitably be called a conservative approach to technology investment. Th e industry is several steps behind many others in terms of using technology to increase effi ciencies and reduce costs.
At the recent World Cargo Symposium the International Air Transport Association (IATA) called on the air cargo industry to accelerate modernization and focus on delivering high quality service.
Th ere are innovative carriers that are data-driven businesses that respond dynamically to market changes using cloud, sensors, analytics, and digital business. But there is a gap between these leaders and the bulk of the global industry. Th e good news is that they have laid a clear trail to follow. But to delay is to be left behind.
And it is beginning to show. A 2015 air cargo survey provided by Accenture found that process ineffi ciencies are leading to a widespread inability to optimize revenues. Th ree out of four air cargo executives said that this has contributed to revenue leakage and over half surveyed believe it has led to problems with pricing integrity and consistency.
In an increasingly complex economic landscape and highly competitive global marketplace, the air freight industry must reassess how it uses technology to create more innovative and adaptive business models.
With Asia Pacifi c accounting for the largest share (37.5%) of the global cargo industry, this region is well placed to drive the transformation of the industry globally.
Industry Inefficiencies
Lengthy transits and cumbersome paperwork are inexcusable when technology solutions for these issues are readily available. IATA has been spearheading the “e-freight” campaign to bring the air cargo industry into a paperless era. The e-Air Waybill (e-AWB) was introduced to enable documentation to be shared instantly and digitally between all links in the supply chain. This eliminates paper handling, transporting and processing costs, and reduces revenuesapping freight wait time by providing real-time visibility of cargo across the supply chain. Despite narrowly missing the penetration target for the past 2 years, optimism is high about reaching the forecasted 62% by the end of 2017.
Nonetheless, the E-AWB is only the fi rst step towards a more technologicallyintegrated future for air cargo. Th ere are a multitude of other technological innovations that the industry has so far only briefl y fl irted with.
Playing by the Rules
In June 2016, the Federal Aviation Administration (FAA) proposed fi ning Amazon $350,000 for allegedly mishandling corrosive chemicals in an air shipment. Th e FAA stated that the shipment was not properly packaged or accompanied with the proper declaration stating the hazardous nature of its contents. Furthermore, it is alleged that Amazon did not provide the correct training to employees handling the shipment.
Th is story illustrates how the impact of incorrect or inefficient processes on a cargo business’ bottom line can be further exacerbated by penalties imposed on air freight carriers when incorrectly handling sensitive materials.
Th ere are a multitude of rules and regulations governing how different goods – animals, chemicals, food, and so on – must be packaged, handled and labelled. Th is is another area in which technological automation could drastically improve both effi ciency and compliance. For the majority of the cargo industry, adhering to these regulations relies upon human expertise, or for the handler to manually look up the rules. An automated system that classifi es cargo as soon as shipment data is available would improve compliance, shorten the time needed to process various types of freight and also ensure that it receives the proper documentation, packaging and labelling.
IATA is making signifi cant steps to digitize its Air Cargo Tariff and Rules (TACT) to give carriers rapid access to all rates and rules. Th ere are also technology and software solutions that can very simply integrate the TACT database with carrier’s systems so all rules, regulations, rates, charges and surcharges across hundreds of carriers and countries can be streamlined and utilized.
Smarter Cargo via IoT
Airlines often transport temperaturesensitive cargo, such as pharmaceutical products and fresh produce, in containers that monitor key metrics such as temperature and dry ice levels. Such goods must be kept within a specifi c range of environmental conditions throughout the transport lifecycle from when the cargo company accepts the goods until they are delivered.
Airlines must keep accurate records to show that these conditions have been maintained.
Typically this critical data is displayed on an LCD screen on the container and recorded manually in a paperbased system. However human-base manual processes are open to error – both intentional and accidental. By automatically capturing and storing this critical data a full audit trail is available on demand.
The move from Proactive to Reactive
Technology can also help make smarter decisions – particularly when shipping valuable or fragile cargo. Th e successful movement of such freight, which may include pharmaceuticals, food or other perishable items, can impact the lives of everyday people.
In addition, IATA’s Cargo IQ program monitors the performance of air cargo carriers by measuring their ability to deliver shipments as promised to their destinations. However this metric is used reactively to track customer service and performance quality.
Industry players increasingly want to use analytics to transform business models, to allow them to make better informed decisions, and take action more quickly. Predictive analytics uses data proactively to make informed decisions for route planning that take into account current weather, political unrest, route congestion to name a few, to improve delivery performance and enhance customer service. Such predictive analytics allow carriers to determine which routes and carriers are most likely to be able to deliver the shipment to the right destination, on time and in satisfactory condition.
The Price is Right
Inaccurate and varying pricing is one of the main reasons why price integrity is a major problem across the air cargo industry. For many carriers this issue stems from the inadequacy of their pricing systems to provide full visibility of important information integral to managing rates and charges. Similarly, a lack of pricing fl exibility can lead to inconsistent rate calculation, which frustrates customers and causes further revenue leakage.
Meanwhile, carriers are seeking ways to more quickly respond to market changes in order to drive maximum capacity utilization. Th ey want the same fl exibility that passenger carriers get by being able to off er dynamic pricing based on date, service, fl ight or route. solution. Current pricing technology allows for the simplifi cation of pricing mechanisms, ensuring that rates can be more consistently applied. These solutions can also plug into IATA’s TACT database to guarantee that all worldwide rates and charges are integrated into a carrier’s pricing structures.
Increased Demands on Security
While cyber security is a hot issue in all industries, the cargo industry must also manage physical security – and technology is the key to both. The large supply chain presents many points of weakness around data security and access management.
Radio-frequency identification (RFID) uses electromagnetic fields to automatically identify and track tags attached to objects. RFID sensors placed on items within a shipment can quickly identify if part of a shipment is missing, exactly what is missing, and where it is likely to be. Data from sensors on containers carrying sensitive air cargo such as pharmaceutical and perishable products can automatically send key metrics of environmental conditions throughout the transport lifecycle to a logistics management system so that a full audit trail is available on demand. Such ready access to up-to-date data throughout the supply chain provides air cargo carriers with insights to help ensure that customer promises are fulfilled even when there is disruption along the route.
At every step of the supply chain, each organization needs access to certain pieces of information in certain events. One of the ways in which the cargo industry will try to streamline this process is by implementing a ‘data backbone’ that connects the information of all involved parties. The shipper can upload all of the data pertaining to the shipment to the backbone, and they will be digitally available to whichever organization needs the data further along in the process. However this may include sensitive data including invoices, banking details, and the contents of shipments. With such a large number of organizations involved in the chain, it is important that they can only access the data relevant to their role in the process. Managing the access rights of every party will prevent backdoor hacks where criminals gain access to systems via less secure organizations.
Micro-segmentation is an important weapon in the fight for data security. Micro-segmentation is a newer approach to security that enables organizations to quickly and easily divide a network into multiple micro-segments, each of which can function as if they were all separate networks with separate access privileges. This means that it is much easier to manage the access rights of each player in the cargo value chain and also ensure that they can only access the information relevant to them. It also means that any compromise is contained within a micro-segment, mitigating some of the potential fallout from a breach.
Flying into the Cloud
Cloud-based technology services deliver speed and savings compared to traditional software and Software-as-a- Service models (SaaS). They offer the benefit of quick implementation – often in less than six months compared to the years typically required of other models, and with much lower capital cost. As enhancement costs can be shared among clients of a cloud-based service, vendors can deliver services at a lower price point than through traditional software.
This approach is particularly suited to low cost carriers who need to be nimble in the way they respond to market opportunities or constraints.
Harnessing the community nature of cloud also drives collaboration to tackle joint challenges such as facilitating a fully electronic supply chain, meeting new regulations and changing established ways of working across the industry.
Time to Change
These are just a few examples of how the transportation and cargo industry can benefit from more tech-enabled processes. To remain competitive, the industry needs a shakeup, to embrace new technologies and their power to boost efficiency, save money and create new business opportunities. Innovative technology can change the way processes in air freight work. Most importantly, automation and integrated pricing systems have the potential to revolutionize current workflows.
