Airfreight upgrade: Making air logistics more valuable for shippers

Like it or not, all transportation today comes at a premium price, but only air can move with any sort of speed. “We have used a lot of airfreight this year, which we’re not excited about, but it’s a necessary thing with the challenges that we’re all being faced with,” said Under Armour CFO David Bergman in an earnings presentation late last year. The lack of excitement expressed by Bergman may not be exactly what airfreight logistics providers would hope to hear, but is still a fair assessment. Historically the most expensive transportation mode, airfreight is usually a mode of last resort; when supply chain planning goes awry, when the new videogame console must be on shelves for the holidays, and when fragile vaccine doses demand rapid distribution, airfreight is the solution. Now well into the first quarter of 2022, and shippers like Under Armour are well aware that the year ahead will demand much more airfreight utilization to keep store shelves and e-commerce distribution centers well stocked. During the presentation, Bergman confirmed as much, though with the hope that the reliance on air would taper off somewhat later in the year. Market dynamics of supply and demand may keep rates well above pre-COVID levels, but pricing is far from the only concern of shippers in today’s market. Congestion at ports and airports, opaque points in the air cargo supply chain and similar concerns afflicting global transportation persist, leaving shippers frustrated. Problems that used to be easily resolved with a full workforce and normal throughput can now stall freight for days or even weeks in a transportation industry under pressure. The airfreight industry has already proven its creativity and ability to overcome obstacles, as with the introduction of passenger freighters that are still flying nearly two years later. But can the industry convince shippers skeptical of airfreight who rarely if ever utilized the mode before, to see its value even after the current frantic pace of logistics eases? Loading speed The compelling argument for air has always been its rapid speed. Even for international shipments that must clear customs, expedited shipments as recently as 2019 could dependably make their way from Shanghai Pudong International Airport (PVG) to the U.S. West Coast in only a handful of days, compared with several weeks for ocean shipping on the same route. Such service wasn’t much in demand for fashion retailers like Under Armour, but an automotive factory in need of a replacement part could quickly procure the replacement and resume production, justifying the higher price tag. Ocean freight has infamously slowed more than air as supply chains become snarled with each demand surge. Ocean shipping delays have “just been increasing steadily since October,” SEKO Logistics President and CEO James Gagne said during a late January media call. “Delays are just simply routine now. And as some of you may already know well, empty shipping containers across the world are just not in the right places.” Aircraft, at least, are faced with a six-day wait at the airport to even unload pallets. That hasn’t prevented some shipments from taking weeks in transit. At Orchard Custom Beauty, a Canadian business-to-business private labeling company specializing in cosmetics, beauty tools and bath accessories, airfreight shipments are seasonal and frequently driven by promotions. That business model means airfreight needs are more varied, making it difficult for Audrey Ross, in-house logistics and customs specialist, to commit to regular weekly shipments with freight forwarding partners. Varied shipping needs, alongside unpredictable and reduced flight schedules, add up to long lead times — even via air. “We used to have direct flights from Shanghai into Vancouver and into Toronto and into Montreal, and maybe some of the smaller locations in the U.S. — not just the hubs like Chicago or New York or Los Angeles, but your Philadelphias and Pittsburghs,” Ross told Air Cargo World . “That hasn’t recovered, so finding the space to move pallets is still just such a challenge.” For example, in December, a small Orchard shipment of only around two pallets awaited export from South Korea. That shipment was booked during the last week of November, with goods tendered around Dec. 5. “The flight was scheduled for Dec. 31, that was the earliest flight,” Ross explained. In discussing alternatives with Orchard’s transportation partner, Ross found few other options available, either for earlier flights or transit to other airports, she added. “Dec. 31 it finally flies out and it’s like a four-day service, fine,” Ross said. “But that’s been an unexpected piece for us in air.” Of course, outside of chartered networks, freight forwarders have little control over specific flight operations of their transportation partners. While shippers have had to some extent accept the new state of logistics, 3PLs are working to smooth out potential problems where they can, said C.H. Robinson’s Matt Castle, vice president of air freight products and services. “We have really spent a fair amount of time leveraging our infrastructure within regions,” Castle told Air Cargo World . “So our ability to move, say, from Shanghai down to Hong Kong, or from Vietnam into Hong Kong or vice versa, or we’re very fluid across all of Europe, where we’ve established a strong network of domestic carriers so that if one airport goes down, we have the ability to get drivers across borders.” “We’ve put a lot of contingencies across our network and within-region, and that’s really been our focus, is simply getting [cargo] within the region it needs to deliver in and then taking advantage of our network of other services, truckload, LTL and so forth,” Castle added. The data behind the upgrade When software companies are hurrying to ready a product before its launch, hapless programmers must buckle down for the infamous “crunch time,” working 80-hour weeks or longer with the goal of delivering a grand technological improvement or program. While never the most tech-savvy of industries, air cargo operators have in the past two years dedicated major investments of time, personnel and money to make similar process and technology improvements amid the supply chain “crunch time.” With so many stakeholders involved in almost every shipment, airfreight’s technology upgrade process hasn’t yet completely illuminated each step in the transportation journey, though. Orchard Custom Beauty’s Ross noted that visibility in ocean freight has improved significantly over the past five years, but with regard to airfreight, “it’s a bit of a black hole,” Ross said, although she does receive a flight number and updates from the 3PL she has hired. That can lead to some real challenges for shippers and for the 3PLs managing their shipments, as cargo may end up temporarily misplaced within packed, understaffed warehouses at or near airports, which Ross noted is particularly disappointing alongside the innovations and improvements occurring in warehouse management. “I think sometimes B2B providers, or specifically in supply chain, they’re not realizing that the sort of culture or market expectations are sort of shifting. ... I’m not going to be tolerant to the fact that you lost my stuff for a week,” Ross explained. “I’m going to immediately start looking for someone who knows where my stuff is all the time.” Problems like airfreight shipments “lost” in a warehouse for a week are a result of the difficulties the industry has faced during the pandemic, C.H. Robinson’s Castle said. But proactive forwarders still take on the burden of improving their own processes to avoid those situations for their customers. “We all but completely stopped tendering freight loose [to airlines] and we went to full unit load builds,” Castle said. The 3PL also visually distinguished its shipments by adding specific tarping along with C.H. Robinson logos and labels on pallets, with the strategy of moving the cargo to its own dedicated warehouse as quickly as possible, “where we could control the speed and the priority of what was being broken down.” Still, while conspicuous tagging of pallets within on-airport or multi-tenant warehouses eases visual identification, they don’t increase visibility for customers who must rely on an unbroken communication chain among transportation providers to know where their cargo is. Freight forwarders are, at times, in the same position. A 3PL knows the flight number, can see that the aircraft landed and took off again, but may not have insight into where their pallets are. “I see that as another opportunity — how do we get better connectivity?” Castle said. Whether that means utilizing radio frequency identification (RFID) or similar technologies remains to be seen, but the challenge presents “a great opportunity,” he added. Value-add Operations during the past two years have demonstrated there are no simple solutions to the complex problem of airfreight logistics amid COVID-19. While not necessarily pleased with the state of airfreight, shippers are aware of many of the issues and can be reasonable about transportation delays, provided their partners maintain strong lines of communication. Unfortunately, that is often not the case, Ross noted. “It's been very challenging on the communication piece,” Ross said. In airfreight today, “you have high costs, low performance, so what can you offer? Communication.” Keeping that in mind during the year ahead will be key, as many more shippers apart from Under Armour expect to continue relying on air. In a survey of its customers conducted in January, C.H. Robinson found that 52% had leveraged new modes, ports or transport lanes during the pandemic that they expected to continue using in 2022. Meanwhile, 28% said airfreight was one of their top strategies for managing supply chain disruption. Planning for disruption sounds like an oxymoron. Still, after two years of optimism that things could return to “normal” in only a few months, perhaps letting go of the expectation that the challenges caused by the pandemic are short-term is the best way to tackle today’s problems. “I think we're at the stage now where businesses are realizing, ‘if you can't give me performance, can't give me price, can you give me an alternative route? What can you offer?’ I think we're starting to see more creativity or innovative planning, but it's sort of just happening now,” Ross said. An effective approach to 2022’s transportation issues will require participation across all parties, including those dealing more with 3PLs than directly with shippers. The investments and digitalization trends that have increased since 2020 are a good start to improving cooperation between freight forwarders and airlines, Castle said. Carriers are making good headway in digitalization, he said, adding that the increase in e-bookings since 2020 has been a boon to freight forwarders. “If we had not had that as something to operate under, it would have made the last 18 to 24 months much more difficult than what I think they already were.” The industry has also already seen enhancements in application programming interface (API) connectivity around track-and-trace software and for flight alerts, while the rise in e-bookings has contributed to more transparent and dynamic price and capacity information. While those developments are a good start, they are also among the industry’s “low-hanging fruit,” Castle noted. “How do we get a bit further upstream in some of those areas, where we don’t have wait times at terminals?” Castle questioned. “And how can we apply technology? I think those are some really great questions for us as an industry to continue to socialize and determine how we can make the experience a bit better than what it is today.”

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