Economic malaise tempers outlook of shippers
Shippers of air cargo are hopeful but realistic about the prospects for an industry rebound in 2014. That’s the gist of opinions offered by readers responding to an Air Cargo World survey. Sustained improvement depends on the growth of the U.S. economy, they say. Global challenges include too much capacity and lack of infrastructure in some areas of the world.
Some shippers say they are shifting to oceanfreight while others say they will keep the same mix or even increase their airfreight shipments. The comments of these shippers, who represent manufacturers in North America, Europe and Asia, offer a look at how companies approach decisions related to airfreight.
Here is the panel of nine shippers for our virtual roundtable:
Lars J.T. Droog, supply chain manager, EMA for Tosoh Europe B.V., a regional office for Tosoh Corp., a Tokyo-based chemical manufacturer.
KSTS Vera Prasad, associate director, international logistics and supply chain management for Dr. Reddy’s Laboratories, a generic pharmaceutical manufacturer in Hyderabad, India.
Yuji Shimono, managing director, Japan for Smiths Heimann a division of Smiths Detection, a security technologies firm in Urayasu, Chiba, Japan.
P.J. Moffett, director of global logistics and customs compliance for Quality One Wireless, an importer of cellular phones and wireless products based in Hauppauge, N.Y
Fred Savage, manager, corporate logistics & distribution, KBA North America, the Dallas-based U.S. headquarters for Germany-based KBA Group, a manufacturer of commercial and newspaper web presses.
Bob Scribner, director, global logistics and trade compliance at Fairchild Semiconductor, a semiconductor manufacturer in South Portland, Maine.
Peter Scheerhoorn, distribution manager for Nucletron, a Veenendaal, Netherlands-based division of Elekta, a manufacturer of radiotherapy equipment.
Nicholas Lam, operations manager for Converse at the company’s Singapore location.
Walid Khoury, managing partner at ALS Logistics Solutions, a manufacturer of material handling systems based in Dubai.
How do you feel about the airfreight industry going into 2014?
Droog: The overall feeling is a bit sad, but I do hope that the airfreight industry as a whole will pick up. When the economy will accelerate, shippers will definitely need air capacity. Big threat for the full freighters is the increased cargo capacity of the modern passenger aircraft (e.g. B777).
Prasad: It is going to be tough, but everyone needs to have their own strategy and path.
Shimono: As the U.S. economy recovers, the total volume of airfreight moving out of Asia Pacific region will increase over the previous year. However, a recent trend of airfreight shows growth to be minimal, and we do not expect a big increase in volume. It will be more or less recovering the decreases the industry experienced in last couple of years.
Moffett: Mixed emotions. We’re always looking to get off of airfreight considering our product margins are so tight. However, oceanfreight still hurts us in our time to market. I will also be looking for new deferred services from the Pac Rim to the East Coast to try and shave a few dollars.
Savage: As a purchaser of these services, I particularly don’t feel great about the upcoming year as I see the industry taking a hit in the reduction of capacity and increasing rates. This, however, will not alter my shipping plans as I have to depend on this type of service but cannot always pass any additional cost on to my customers, thus reducing my bottom line proportionately.
Scribner: I see the airfreight industry more or less aligned with the global economy with a strong tie to U.S. and China’s economic health. That being said, the behavior of the industry is not easily predictable either. Moving into 2014, I suspect we’ll see similar things as early 2013: reactions to no/slow growth will be tightened up supply with static pricing and larger, more sophisticated players will be investing in more customer-focused services in the B2B technologies.