In Good Time: Cut it close, pay a price

From aerospace and energy to manufacturing, the need for mission-critical shipment delivery to avoid line-down situations is a booming market, said Ingo-Alexander Rahn, global head of air freight for DHL-GF. SameDay Speedline provides guaranteed priority lift, 24/7/365, along with monitoring and customized solutions as the key planks of the new offering, he said. In light of the higher service profile and the urgency on the shipper side, margins are juicy. “Given the high levels of service, the yields are appropriate,” Rahn commented.

Paul Martins, CEO of MNX Global Logistics, a firm specializing in time-critical shipments, said cost is rarely an issue when production is threatened. “We don’t call an airline and ask for their best cost. We usually buy the highest service,” he said. MNX has focused increasingly on the high-value life sciences sector, which now accounts for 48 percent of business. “We’re firing on all cylinders,” Martins said. “We do everything from medical equipment to live organs.”

U.K.-based Priority Freight, which concentrates chiefly on time-critical flows within Europe, boosted its revenues from US$14.99 million to $62.48 million in four years, said Stuart Stobie, group sales and marketing director.

“Nobody plans to have a problem in their supply chain,” Stobie said. Hence the majority of Priority Freight’s clients do not formulate contingency plans for emergency logistics. They accept the need for time-critical service when this occurs but do not budget for such a contingency for the following year, he remarked. “It’s a necessary evil. We offer a cost-effective way of repairing the supply chain.”

IAG’s Critical service, which is available across the carrier group’s network, offers guaranteed capacity up to the maximum operating limit of the aircraft. It was developed on the basis of IAG’s express product, using input from clients that had unusual requirements, Johnson said. Loading and transfer processes are identical to the express offering, but acceptance and delivery times were tightened and dedicated check-in desks were installed at IAG’s hubs in London Heathrow and Madrid. Critical shipments are also closely monitored and expedited through hubs by special teams.

IAG moved more than 650 shipments on Critical during the first four months after the launch, ranging from aircraft parts and auto parts to oil and gas equipment, Formula One racing car tires and perishables, including one consignment of tuna that was carried from Mauritius to California.

At time:matters, most of the business is focused on the B2B sector, which faces intense competition for expediting products to the global market. “Cycle times are shorter, supply chains are more international, disruptions happen more often,” said Franz-Josef Miller, managing director of time:matters. “We have had enormous growth because supply chains get faster and people want stuff faster.”

Revenues for time:matters (€65 million in 2015) may seem modest compared to the €2.3 billion that Lufthansa Cargo tabled for that year. However, time:matters’ revenues grew in excess of 300 percent over ten years, Miller said, and margins are a lot better than in the overall cargo sector. He said he expects to see growth between eight and 10 percent in 2017. “We’ve seen good development across our entire portfolio,” Miller added.

Inevitably, some verticals will play a more prominent role. “We see DHL SameDay Speedline as a multi-sector product offering that is especially attractive for aerospace and aviation, automotive, technology, energy, marine logistics and life sciences industries, including temperature-controlled, dangerous or out-of-gauge goods,” Rahn said.

Seeking transparency

The demand for time-critical shipments did not develop overnight. For his part, Miller has been working to move away from ad hoc emergency response to a more strategic approach. Much of his focus in recent years has been on the development of planned and standardized processes.

“A few years ago, time-critical was still, to some extent, very hands-on, very manual, with individual offerings for each inquiry that we got,” he said. “Now we have solutions that are partly integrated in our customers’ planning for production logistics, and [procedures for] how critical parts move to factories or to technicians in the field.”

A key element in the growth of the time-critical shipment business has been digitization – particularly the automation of the booking process, which shifted online two years ago, making the entire process visible, Miller said. This allows time:matters and its partners to react faster and deploy solutions more quickly. “With digitization, you can develop scalable solutions, and your employees are free to deal with more complex tasks or with new enquiries,” he remarked.

With greater visibility also comes a greater ability to intervene rapidly if something goes wrong. MNX’s Martins recalled shipping a critically important human blood sample from Eastern Europe to the U.S. that did not go exactly like clockwork for its client, iCAN Integrated Cell Therapy Network. At first, the sample moved smoothly on its proritized route until it reached the European hub through which it was to connect to its U.S.-bound flight, he said. But as the aircraft departed on the second leg of the journey, the MNX agent, who was following the shipment via a GPS monitoring device, noted that the shipment was still motionless at the gate.

With the help of the airline cargo supervisor, the MNX courier managed to retrieve the blood sample shipment from a baggage cart at the gate and drove it to another terminal just in time for an alternate flight that had been identified and booked as soon as the rogue package was relocated. Upon arrival at the U.S. airport, another MNX courier collected the package and drove it to iCAN’s destination, two hours away. The sample was three hours late, but still viable, Martins said.

MNX measures airlines’ on-time performance. If shipments are routed over a hub, it looks at connectivity statistics. For instance, “next flight out” is less important than finding the “best flight out,” which takes in elements like weather conditions and aircraft type used. “If there was a delay, what contingencies to they have to minimize the impact of the delay?” Martins said. “Do they understand if you have an organ for a transplant that someone has to walk that to the plane, or do they send it out with the rest of the cargo and hope it works?”

Expecting the unexpected

As for the future of these time-critical services, Miller said he sees a lot more room for standardization. Currently, time:matters is working on a platform to digitize and automate some labor-intensive processes that should cut the processing time from 60 minutes to just three.

Based on recurring patterns in certain segments, time:matters has also developed modules for certain popular verticals. This changes the game to a “planned emergency,” where standard operating processes for emergency solutions are integrated into the preparation. For shippers, this means that they do not have to scramble for a response when a problem threatens to derail their operations, Miller added.

For the most part, operators are upbeat about the potential of this segment going forward. Miller described management of growth as his biggest challenge, as he sees potential in a number of areas. “You need focus,” he reflected. “If you do too much, there is a danger that you end up with too many manual processes.”

So far the heightened interest in the time-critical sector has not affected yields, according to operators. Many clients are not too concerned about the cost, as their overriding priority is to bring a costly disruption of their operations to an end as fast as possible.

Still, it would be counterproductive to charge extravagantly for time-critical solutions, said Priority Freight’s Stobie. “If you don’t behave in an ethical manner, you can make a lot of money on a single job, but you can lose a customer very quickly,” he commented. “Our customer turnover is very low, less than one percent. They realize we do not rip them off.”

After all, there’s only so much money a soccer team can spend on emergency shoes.

Back to top | See sidebar on KLM’s 12Send

Exit mobile version