Here\u2019s an open secret: physical \u201cbrick and mortar\u201d shops are closing as multitudes of shoppers flock to online retail sites, such as Amazon and Alibaba. In the stores that still remain, many of the consumers are \u201cjust looking,\u201d but will make their purchases later on the web.
\nUnlike general air cargo, which will likely clock a modest 3 to 4 percent growth rate for 2016, global e-commerce is booming. At last year\u2019s Cargo Facts Asia conference in Hong Kong, Steven Li, director of strategic partnerships for Alibaba\u2019s Cainiao logistics network, said that \u201cone-third of the US$3 trillion global e-commerce market is cross-border trade, which is growing faster than domestic sales.\u201d While Li admitted that e-commerce has driven more demand for airfreight, he warned that the industry will not benefit fully until it \u201crecognizes the need to change.\u201d What drives e-commerce boils down to \u201cfast, transparent, easy and dependable,\u201d he added. No one gets around these basics.
\nYet here we are, in 2017, with the air cargo industry scratching its collective head, still trying to figure out how to catch up to this new digital age that\u2019s passing us by. Where did we go wrong?
\nIt\u2019s not as if we weren\u2019t warned. For years, \u201ce-tailers\u201d have repeatedly voiced their concerns about transparency and reliability. They have opened up global shopping to anyone with a computer or smartphone. By changing the distribution channels, they unlocked whole new markets, providing the world with new levels of availability and comfort. Understandably, they cannot \u2013 and will not \u2013 have their growth frustrated by below-par logistics.
\nOn the passenger side, this online mentality was taken seriously from the start. Every airline jumped on the web more than a decade ago, enabling customers to buy tickets, book hotels, rent cars, choose insurance, etc. \u2013 all online and completely transparent. Now, every airline passenger division has an e-commerce department.
\nRather than sticking with the old airfreight model of \u201cpush logistics\u201d \u2013 moving goods from concentrated production locations to markets \u2013 the integrators embraced a \u201cpull logistics\u201d approach, similar to the passenger sector, in which consumers trawl the web for whatever they require, even if it\u2019s from the other side of the world, drop it in their digital shopping cart and leave it to Amazon, Alibaba and others to get it to them by the next day or two.
\nThe general cargo industry, meanwhile, still favors the more economical tactic of bundling and consolidating shipments, which set it off on the hunt for lower unit costs, which led to freighters, which, in turn, called for geographical concentration on fewer consolidation gateways. But this is getting farther away from door-to-door delivery, not closer. Though outdated and largely ineffective from a user perspective, export-oriented budgets and price-capacity air cargo deals persist, while key investments in the speed of aircraft are not fully leveraged. Hence, airlines and forwarders are collectively missing out in initiating collaborative solutions.
\nCargo \u2013 especially during the last peak season \u2013 is growing at a healthy pace, but it\u2019s not guaranteed to remain a service of scheduled airlines or forwarders. Airfreight is, by far, the fastest service for cargo shipments, but it is also the most expensive. Despite this vulnerability, airlines aren\u2019t fully embracing the possibilities that strategic alliances and open dialogue with ground handlers and IT service providers can bring.
\nAt some point, if the status quo holds, major e-commerce companies may decide there is no other solution than to develop their own logistics systems \u2013 in fact, both Amazon and Alibaba have already moved in this direction. Their basic business may be order consolidation, but their IT prowess and financial resources will allow them to extend their controls from beginning to end. There is no lack of logistics services with which they can subcontract, but there is a critical consideration of whether it is wise to rely on carriers that seem unable to streamline their operations and keep up with today\u2019s innovations.
\nThe challenge, therefore, lies not with e-commerce itself \u2013 the marketing of goods via the web \u2013 but with the raised expectations of today\u2019s clients, which now demand time-sensitive, door-to-door service. The logistics industry, particularly the airline\/forwarder combination in its \u201copen system arrangement,\u201d has some work to do in order to better meet these new e-commerce logistics requirements.
\nThis is the first in a special ACW series about the need for changes in the international cargo industry. The next installment will examine the carrier\/forwarder relationship, and how transparency will be the only way the industry can survive.
\nStan Wraight is president of Strategic Aircargo Solutions (SASI), a Canadian firm that provides consulting and management services for international trade organizations and logistics companies.
\nSource: aircargoworld<\/p>\n","protected":false},"excerpt":{"rendered":"
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