The current paper-based air cargo transportation process generates around 30 documents per shipment, making for a large and weighty “pouch.” Andreas Otto, a member of Lufthansa Cargo’s executive board, told a recent media presentation that he can’t believe the airfreight industry is still producing 10,000 tons of documentation every year. He pledged to “get rid of all the useless paper by 2020.”
This surplus weight is not only bad for the planet. IATA calculates that once the whole supply chain–including shippers, forwarders, handling agents and customs authorities as well as the airlines themselves–buys into its e-freight initiative and replaces paper documents with digital files, the industry could slash its costs by almost $5 billion per year.
The trouble is that IATA’s member airlines have been unable to impose their will unilaterally on their supply chain partners, let alone convince reluctant governments of the merits of paperless trade. As of last October, shipments accompanied by electronic air waybills were running at around 90,000 per month, or a mere 5.6 percent of the total.
Announcing revised target dates of 20 percent eAWB penetration by the end of this year, 50 percent by end 2014 and 100 percent by end 2015, Tony Tyler, IATA director general and CEO, said: “We have to accept that the eAWB has been harder to drive forward than we anticipated. We have slipped by a year. It’s not satisfactory, but it is the reality in the present economic circumstances.”
A new pan-industry approach from the Global Air Cargo Advisory Group (GACAG), in the form of a “roadmap for paperless air cargo,” may finally bring the required momentum to the process. GACAG was founded in 2010 by IATA, the International Federation of Freight Forwarders Associations (FIATA), The International Air Cargo Association (TIACA), and the Global Shippers’ Forum (GSF), to ensure the air cargo industry has a strong, unified voice in its dealings with regulators. The group targeted e-commerce as a priority, along with security, customs and trade facilitation, and sustainability.
GACAG’s e-commerce task force has broken down e-freight into three key components or “pillars,” and has set goals and identified responsibilities for each part of the industry to help bring the vision to reality.
Pillar 1 involves engaging with regulators and governments worldwide to implement fully electronic customs procedures and regulations that support paperless shipments.
Pillar 2 focuses on working collaboratively within the cargo supply chain to digitize the core transportation documents passing between forwarder, handler and airline, starting with the air waybill, but also including the house manifest, flight manifest, and security declaration.
Pillar 3 will see the industry develop a plan to digitize the additional commercial documents that typically accompany airfreight, either in or outside the pouch, such as those originating with the shipper.
Bill Gottlieb, a past president of FIATA and former chair of the GACAG e-commerce task force, said at the launch of the roadmap: “The industry is now comprehensively united in our objectives and timelines for e-freight and eAWB. This sends a huge message to all industry participants and I am comfortable that this will lead to significant acceleration in adoption of e-cargo in 2013. This is a perfect example of how we can be stronger through dialogue and collaboration.”
Speaking at a media briefing at IATA headquarters in Geneva in December, Guillaume Drucy, head of cargo e-business, said feedback from the industry had pointed up a number of “road blocks” that were hindering e-freight.
Foremost is that many states have not yet ratified the 1999 Montreal Convention and/or do not permit electronic release of import and export cargo. Three major BRIC economies, Brazil, Russia and China, are thus far inaccessible.
IATA has therefore put its initial focus on eight specific high-volume airfreight markets within the 34 percent of global trade lanes that are presently open to e-customs. However, Drucy said that through continued lobbying, 80 percent of trade lanes could be opened up by 2015. This year, IATA hopes to launch pilot projects in two BRIC countries.
A second issue the industry highlighted was the need for a single, multilateral agreement for electronic data interchange between forwarders and carriers, replacing current bilateral EDI agreements. The front of the traditional paper air waybill, showing shipment details and the agent’s or shipper’s signature, converts happily to an electronic freight waybill (FWB) message through which the forwarder can transmit shipment details to the airline. The back side of the document, containing the limitation of liability plus conditions of contract, currently requires an individual EDI agreement to convert it into eAWB format.
IATA is trialing a multilateral agreement under which any forwarder entering into an agreement with IATA is effectively making an agreement with all carriers that have authorized IATA to act as their agent in this regard. The organization hopes to adopt a framework for multilateral agreements at its upcoming World Cargo Symposium in Doha.
Under the rules as they stand now, web e-freight business solutions provider Calogi has calculated that to go completely electronic in its home market of Dubai would require 100-plus airlines to sign bilateral agreements with around 470 forwarders, resulting in 47,000 separate EDI agreements.
The company has developed a new system that sidesteps the need for this. A forwarder simply agrees the limits of liability and conditions of contract online with the airline, and a digitally signed copy of the reverse side of the air waybill is made available to both parties.
IATA meanwhile hopes to adopt a framework for multilateral forwarder agreements at its upcoming World Cargo Symposium in Doha, after Swiss WorldCargo became the first carrier to sign up for proof of concept.
The new-look agreement will reduce the legal burden, says Oliver Evans, chief cargo officer at Swiss. “A lot of negotiating time is tied up on company-to-company and location-to-location agreements and this has slowed the adoption of e-freight.”
Evans says he is “relieved, not disappointed” that IATA is now working to a more realistic timetable. “Its initial e-freight targets were based on the thoughts of airline CEOs who had little awareness of the amazing complexity of cargo. They thought it would be like e-ticketing, where only a single document was involved.”
Swiss is upgrading its back-office systems to handle successive air waybills, recognizing that forwarders may be making adjustments right up to the last minute. This is not only a feature of consolidations, Evans says.
Jan Vreeburg, director of logistics at KLM Cargo, says the original Cargo 2000 concept when the group started looking to streamline the supply chain was that only the first message was valid and later updates to the air waybill were not acceptable. “But volumes and weights may change frequently and in the paper-based chain, it is the waybill that goes to the handler that qualifies as the legal document,” he says. “All major forwarders need to update documents, and we had to adapt to this reality.”
Evans says the IT investment is “relatively minor” for most carriers. “We’re having to upgrade but we would be doing it anyway.”
He accepts that IT and infrastructure costs are more challenging for smaller players, but says community services such as those established in Hong Kong and the Netherlands can help. Switzerland is looking to set up something similar, he says. “It enables you to send and accept the necessary messages at low cost.”
Saskia van Pelt, cargo business development director at Amsterdam’s Schiphol Airport, believes some forwarders have had a negative attitude toward e-freight, slowing progress. Unable to see a payback, they have been unwilling to change their working methods or invest in new systems without a financial incentive from airlines, who they see as the chief beneficiaries.
This view is flawed, van Pelt claims. “The fact that a single data set can be input by one party at the beginning of the supply chain, and then used to populate fields in every process along the way, must surely save time and money for everyone.”
Data captured at source can improve tracking and tracing of cargo, increasing visibility to all parties in the supply chain and reducing the time staff take answering enquiries from customers. The less visible price of error and delay is potential loss of customers, van Pelt argues. “Airfreight is an expensive mode of transportation and, unless it demonstrates its value in reducing transit times, there is a real risk that customers and traffic will gradually defect to other modes of transport.”
KLM’s Vreeburg agrees that “some forwarders are lagging behind on e-freight, and that’s blocking deployment. But a lot of the major ones have the systems in place and are really making an effort. They may not call it e-freight, but they have pre-messaging on shipments so the destination knows what to expect. It’s a small thing to remove documents from this process.”
The Netherlands took a holistic approach via E-freight@NL, a two-year project that was awarded a €1.2 million grant by the Dutch government in 2010. KLM Cargo acted as secretary, and the project involved Air Cargo Netherlands (the industry’s representative body, bringing together airlines, agents, handlers and truckers) as well as major shippers.
The participants worked together on reconfiguring their processes to facilitate large-scale paperless import and export operations. IT companies serving the Dutch airfreight market also linked their systems and adopted uniform standards to facilitate e-freight.
Schiphol signed agreements with Incheon Airport in Seoul and Changi in Singapore, taking the view that a “big bang” approach would not work and that e-freight must be pursued at individual trade lane level.
However, van Pelt is resigned to the fact that the local situation differs markedly for airports and their home carriers. “Incheon is at a different level to where we are in Amsterdam. We’re not really aligned yet,” she says.
Lufthansa Cargo began looking at the feasibility of a paperless supply chain back in 2007, analyzing the gaps in its existing systems and the changes that would be needed to infrastructure, IT and current processes. It took five years before LC was ready to roll out the eAWB on a large scale, according to Mario Zimmermann, head of technology and innovation. By the end of last year, more than 250 customers were benefiting from e-freight.
IATA designates “lead carriers” in specific markets, a role LC holds for Germany and Japan. The carrier calculates that about 25 percent of shipments could be handled electronically on this trade lane.
“Lufthansa Cargo has set itself ambitious targets and timelines for digitizing current paper-based processes. But countries in South America, Africa and across large parts of Asia still require a paper AWB, so in 2013, we will concentrate our activities and penetration campaigns in our home market in Germany,” Zimmermann says.
There is not yet a seamless flow of information along the supply chain, which creates inefficiencies, he points out. The lack of interoperability between existing IT systems and stakeholders remains an obstacle.
“We are working closely with our customers to improve the interfaces and message quality. As soon as all stakeholders–including shippers–implement e-freight as their standard process, the full range of benefits will emerge,” Zimmermann insists. “Managing information means you’re managing the business. Pre-clearance of shipments becomes possible; and on the export side, in the best case, you save on the documented export receipt, eliminating an entire step of the process. This allows forwarders to better plan their routes, and reduces waiting times.”
Alongside fully implementation of the eAWB, Lufthansa Cargo is preparing to launch the electronic house air waybill (e-HAWB), enabling the industry to move nearer its objective of completely paperless freight transportation by 2015.
“An ePouch solution will further allow customers to upload all kind of documents accompanying the freight, such as temperature control sheets and so on, offering clients an independent platform for storing confidential documents digitally,” Zimmermann says.
Steve Smith, head of e-business airfreight for DHL Global Forwarding and chairman of GACAG’s e-commerce task force, believes that despite the challenges, integrating risk management into the e-freight process is essential and will incentivize the slow adopters.
IATA’s Guillaume Drucy agrees, fearing that if the industry doesn’t take this route, security declarations will simply create yet more paper instead of eliminating it.
However, the signs are that historically skeptical state authorities are warming to new technology. Schiphol’s van Pelt says a “very promising” meeting took place between Dutch and Chinese Customs in Shanghai last October. “The good thing is that once they’re ready to say yes, they’re 100 percent ready. Implementation will be total. I believe it can happen within three years,” she predicts.