he air cargo industry continues to search for ways to reduce cost while still maintaining an acceptable level of service. This is an extremely tough task when you consider revenue and yields for air freight movement have remained flat or even declined while costs continue to increase. That leaves air cargo providers with the question of how to maintain an acceptable service level in an era in which inflation may take a 3 percent annual bite while operators cannot pass that increased along to shipping customers.

The answer is simple; you can't, without a continuous evaluation of processes and procedures, which includes penny pinching.

In many cases, air carriers outsource much of their cargo operations to ground handling companies. That leaves carriers dependent on the quality of service being performed by ground handlers of varying size and commitment. Carriers often select those ground handlers the way many forwarders choose their airlines - on price. That's unfortunate because the way ground handlers hold down their own costs is by keeping their salary structure low, depending on entry-level hiring and indirectly encouraging high turnover.

In these days of discussion about continuous improvement of time-definite delivery, high service demands and high-tech solutions to age-old problems, ground handling remains one of the hidden topics of the air cargo industry. That should not be the case because it may be the one area where air carriers will find their greatest possibilities for service improvement.

It's a truism that air freight shipments may spend only about 10 percent of their transit time in the air; some of the remaining 90 percent may be spent going to and from airports, but too much is spent on the ground at departure and destination airports.

It is easy to justify the selection of one ground handler over another because their per-pound or per-kilogram handling rate is less than its competitors. There is always an implied understanding that the service offered for the price quoted will meet the standard criteria for handling. In other words, you get what you pay for.

Airline cargo station managers are constantly pressured to keep costs low. So how can a manager convince upper management to accept a marginally higher bid when, presumably, all the bids are supposed to reflect the specific service needs of a carrier?

There are some things managers should look at closely as they evaluate bid proposals. In some cases, that may include asking questions beyond what is in a written bid. Here are some things to look at in evaluating value over price:

1. Are entry-level salaries near minimum wage and is there a salary range progression identified in the proposal?
2. What is the turnover rate for workers? If it is over 50 percent, you may see new hires coming almost every week.
3. Does the handler have a history of customer complaints about service resulting from failure to provide fundamental training?
4. Are there high cargo claims concerning damage, shortage and suspected pilferage?

or carriers and others operating at airports, there are standard ways of evaluating most ground handling operations.

The Price Per Pound contract is the most common because it's the easiest to oversee. Cargo handling is charged based on the actual weight of cargo being handled. One of the key drawbacks of the PPP agreement has been that the manpower assigned to the operation may look good on the cost side, but it can be kept artificially low in a way that comprises service.

Obviously less manpower used provides the ground handler greater revenue. In some of the more progressive PPP contracts, carriers have placed minimum manpower requirements.

The Man Per Hour contract is an alternative. This agreement allows the carrier to recommend the manpower quantities necessary to handle their operation. The ground handling company provides a specific price for the various levels of personnel and essentially becomes an air cargo employment service provider.

The problem with this contract is managing the actual use of manpower. This requires the carrier to get regular weekly reports on manpower usage and in some cases review time cards. A carrier must also be diligent in developing minimum manpower requirements. This is an important item since there is a need to distinguish overtime required for excess activity while there is also overtime the ground handler uses to fill minimum manpower requirements.

A third idea is to combine MPH and PPP. The objective with this combination is to increase productivity allowing both the carrier and the ground handler to receive mutual benefits when goals are achieved.

o accurately assess needed manpower, one must take into account several issues, including employee experience, turnover, training, management, work performance, quality of automation and warehouse/office operational efficiency.

Quality of automation and warehouse efficiency are important characteristics that can add to productivity. These items can either be obtained by outside consultants or at the very least should be identified by prospective bidders for ground handling services.

Here are some of the standard ranges we have developed to identify manpower quantities:

A Warehouse Agent has the potential to handle between 100,000 - 200,000 pounds per month. In the United States, we believe the average WA peaks at 140,000 pounds per month. A WA with less than one year of experience, after initial training, should handle 100,000 pounds per month. After the first year, that should increase by 20,000 pounds per month and after the second year by another 20,000 pounds per month. There may be a 10,000-pound-per-month increase if training allows the agent to more functions. It is possible to increase productivity by another 20,000 pounds per month after the third year. However, when considering the average rate of turnover, combined with a limited individual growth interest, the WA category will settle at the 120,000 pounds per month if the worker is left in place.

There are myriad ways a handler can increase productivity. Automation with a material handling system combined with intact unit delivery can significantly increase manpower productivity. We have developed facility-rating criteria we use in our warehouse evaluation: Class A, for the most sophisticated automated handling systems; Class B, for less automated system; and Class C, for little or no automation.

In practice, for example, a Class B facility with a ratio of 30 percent intact units to 70 percent loose cargo adds an additional 10,000 pounds of demands per warehouse agent.

A Class B facility with 70 percent intact cargo to 30 percent loose adds an additional 20,000 pounds per WA.

The average ratio in handling is one supervisor to eight-12 WA's. An additional 10,000 pounds per WA can be achieved with good supervision.

When combining some of the factors described earlier, we can see how supervision may figure in. A warehouse agent with one year of experience can handle 120,000 pounds per month. Add 10,000 pounds for a Class B-rated facility with 30 percent intact units and 70 percent loose cargo and 10,000 pounds for good supervision, and you have reached the 140,000-pound target for a single warehouse agent.

Similar factors may be taken into account when determining how many office agents are needed to handle documentation and data entry.

The information used in these calculations is based on studies we have conducted. In the near future, carriers will have this type of information automatically generated as a result of barcode scanning. This type of rapid information can produce enormous efficiency gains over the long run and help carriers and forwarders better manage existing and future ground handling contracts.

Today, most handling times require manual input if looking to capture times of specific functions. Acceptance and delivery are the two most important time sensitive functions. In some warehouses, acceptance may not be recorded until export data entry takes place hours after actual acceptance. Because of shipment volumes and dual use of the same computer for various functions, delivery data input can sometimes take days.

Using management software, a forwarder or carrier can evaluate the time and days of the week in which the larger volumes of cargo are handled. This evaluation allows the manager to place manpower at times where cargo handling activity is the busiest.

Allowing employees to log in to a barcode scanner will record of scanning activity, which can be turned into pounds/per person productivity assessment.

Many freight forwarders and import brokers are quick to criticize carrier services and like to blame the use of inexperienced ground handlers. I've even heard some say that carriers should go back to having their own higher paid staff. However, even carriers who handle their own traffic are facing service problems on the ground. And with carrier finances under pressure these days, I expect more will outsource their services to agents in the near future.

That's why strong assessment of the abilities of those companies will become ever more important. Carriers are learning that such assessment, planning and contract management will go a long way toward eliminating the choice they must now make between price and service quality.

A rigorous check of ability and productivity should make carriers aware that the few cents they think they may save on signing a contract could end up costing far more over the life of a contract.

— Robert Caton is the president of Cargo Shipping Transportation Analysts, a consultancy based in St. James, N.Y., that specializes in cargo handling.