Air cargo volumes are slowly recovering from their 2008 cliff fall, but shipper inventory replenishment uncertainties are making future numbers difficult to project. The only certainties are that yields and margins have been squeezed, and that operating costs, security requirements and regulatory compliance issues have increased.
Carriers, integrators and forwarders have reviewed their operations and implemented new systems to take advantage of the upturn and drive efficiency. There will be new “winners and losers” once stability returns. Where does information technology fit into the current picture? The highest profile application of IT is the International Air Transport Association’s E-freight initiative. The program involves electronic information exchange between airlines, shippers, freight forwarders and other companies. The key word in that description is between; many of those parties still have significant information exchange issues within their own operations. Only when processes are clearly understood and optimized can an IT solution be applied; this is clearly the lesson from IATA, but many organizations have not learned it. IT was historically applied to record data, present information, and produce documents. Today, system investments should focus on efficiency; this means starting with a strategy that identifies individual business values, and understanding which operational activities add value and which ones can be automated. For instance, if you are keying in data for a customer’s airway bill, how many fields are auto-populated, and how many could be filled automatically? Is there information received by email that could easily be submitted through a website with pre-validated fields? The next level of efficiency is driven by analyzing required skill levels. If data must be keyed manually, how much knowledge is applied during this process? Ask yourself if the task requires a skilled employee or if it could be achieved in a back-office production environment. Consider if the system workflow will allow repetitive tasks to only be reviewed by a skilled worker if exceptions arise. Are your best employees interacting with customers, or are they in the back office adding little value? Optimization is a maligned word, but with clear process flows, it’s possible to apply optimization technology to air cargo at strategic, tactical and operational levels. Strategic optimization is typified by decisions about where facilities, hubs and assets are to be located. Data about historic and target volumes can be entered into software that projects long-term business decisions. Tactical optimization is used to support decisions on a quarterly or seasonal basis. For a carrier, it’s about maintaining the network and positioning assets on a daily basis. A forwarder can use tactical optimization for supplier contact negotiations and customer pricing in addition to staffing and other medium-term decisions. Operational optimization is rarely used in the airfreight industry, but it can potentially deliver the biggest benefits. With actual cargo bookings and airway bills in hand, speedy decisions must be made about routing, consolidating, co-loading … even bumping. Historically, these decisions have been made on the ground at a moment’s notice and with little available information. Using operational optimization can deliver short-term decision support to meet overall business objectives. IT should be regarded as a business transformation tool — not an overhead cost. A current parallel is the industry’s regulatory landscape. Most have addressed each additional compliance validation as purely a task to be added to an existing process — an additional cost to be absorbed. By seeing the tasks as opportunities to improve existing processes, compliance can be achieved with lower cost. Likewise, implementing the appropriate technology can turn a perceived burden into a cost reduction. Operations need to be continuously improved inside the walls in order to retain and develop satisfied customers. IT can underpin these improvements by providing insight and supporting incremental changes to drive efficiency and effectiveness through automation and workflow. — John Love is the vice president, global business, for Hyderabad, India-based Four Soft.