CFS: Growing e-commerce revolution dictates digitization of all processes

MIAMI – The morning after Air Cargo Management Group (ACMG) senior director Alan Hedge told 2017 Cargo Facts Symposium attendees how e-commerce is poised to change the logistics industry, conference panelists today expanded on the theme to advise air cargo participants how to capitalize on the growing e-commerce market share, and how the industry must adapt if it will thrive.

The most important tool for meeting e-commerce demand, in the minds of most panelists, is digitization, which should extend beyond the basic apps and online tracking that now are standard in tracking e-commerce deliveries.

“We have to integrate the technology into all of our logistics assets,” said Paul Tessy, CEO for Latin America with Deutsche Post DHL Group subsidiary DHL eCommerce. When dealing with e-commerce logistics, this most notably takes the form of predictive analytics, which lets anyone working in e-commerce fulfillment or delivery anticipate warehousing needs and reduce the volume of products delivered via airfreight, thus reducing shipping costs.

Lori Chao, director of international communications at JD.com, and Patrick Frith, SF Express general manager of the Americas region, said their respective companies use “demand-planning” whenever possible to make sure shipments and inventory are in the right place at the right time, limiting the need for air transport. “In terms of cross-border e-commerce, about 30 percent of our freight moves over air, and that’s not going up,” because of how JD.com uses data analysis to manage its supply chain, Chao said.

The trick, Frith added, is “to remain relevant and interesting to e-commerce players” by delivering what the customers want. “It’s the consumer who is driving this.”

ACMG’s Hedge said the same during his presentation yesterday afternoon. The e-commerce supply chain, he said, is based on a “pull” model, with the customer deciding what they want, buying products from anywhere in the world, whenever they are wanted. Although e-commerce only makes up about 8 to 10 percent of global commerce as of 2016, by 2021 it is forecasted to more than double from US$1.9 trillion to $4.5 trillion, he said.

Globally, Amazon dominates the e-commerce space due to its role as both a marketplace for third-party sellers and an e-tailer that sells its own goods, and Hedge cautioned attendees that while Amazon accounts for about 40 percent of U.S. e-commerce retail done for 2016, they captured more than half of the growth from that year.

But, Hedge added, air cargo industry participants and integrators, in particular, do have some advantages on their side that help create a “defensible moat around their businesses” – namely, the knowledge base of their employees that let them get a package from point A to point B anywhere in the world, reliably and on-time, and the massive, long-term investments they have already made and continue to make in aircraft. Integrators have an opportunity to offer fulfillment services for e-commerce without competing with their customers the way Amazon Fulfillment customers compete with Amazon as an e-tailer, Hedge said.

For an in-depth look at the explosive growth of global e-commerce air logistics, see the 2017 E-Commerce Revolution Report produced by our freighter aircraft consultancy, ACMG, which was released yesterday.