American baseball star Yogi Berra once said that when you get to a fork in the road, take it.
His quote recently came to mind while listening to speakers at the recent Air Cargo Forum, sponsored by The International Air Cargo Association (TIACA) in Paris. Participants in the conference suggested that shipping companies that fail to adopt digital processes risk losing out to rivals and industry disruptors that don’t even offer delivery services. While the integrators are using big data in adopting new technologies to satisfy e-commerce customer visibility demands, forwarders may be traveling the road at a slower pace, not quite ready for the upcoming fork they will undoubtedly be forced to “take.”
The e-commerce boom has resulted in significant growth in express delivery volumes for integrated carriers and ambitious forwarders. These companies and their e-commerce customers know that, to remain competitive, the visibility of shipment information is essential, since more than half of all online orders result in a tracking request within 30 minutes of the purchase transaction. Over 40 percent of such orders get placed after 10 p.m. and weekend deliveries are no longer exceptional, since the majority of Saturday deliveries to homes are due to online ordering. Thanks to technology, those delivery destinations can be changed at the last minute, with just a few keystrokes. Digital information and technology is, indeed, critical for providing the quick information needed to meet these new demands.
For freight forwarders and their airline partners, the air cargo business has averaged only a 2.4 percent growth rate over the last 15 years, and this pace is markedly slowing down. From 2004 to 2014, technology was the primary growth driver, but thanks to innovative products and design advancements, shipments such as flat-panel televisions have reduced in size and weight, while laptops and desktop computers are lasting longer, thus stemming air cargo demand. The nature of airfreight is changing because of reduced economic demand and manufacturing improvements.
Despite the lackluster air cargo industry performance, Boeing recently received uplifting news from two major freighter operators that its 747 production line could remain operational as the pair submitted orders totaling more than 30 freighters. The report, while encouraging, fails to overcome the reality that passenger demand is scheduled to double in the next 10 years, resulting in more planes, contributing to overcapacity and, ultimately, perhaps marginalizing the role of the freighter.
Manufacturers are improving their predictive technology tools, allowing for better forecasts, which results in a reduced need for air cargo and more demand for slower, less-costly transportation options. Forwarders can benefit and play a primary role in this shift by helping shippers improve processes, automate product flows and, through close consultative relationships, anticipate shipper expectations and future demands. Indeed, a proactive forwarder, providing advice and harnessing technology, can help customers reduce operating costs, improve productivity and provide essential door-to-door transparency.
But digitalization, while promising, is just a tool that will not replace the forwarder advisory role, as was learned from the recent Hanjin bankruptcy, where forwarders played an active part in developing alternatives to recover cargo and minimize delays. Forwarders create flexibility to reduce the impact of unplanned events and disruptions. No technology will ever replace the value derived from the face-to-face interaction that is essential in not only understanding customer needs, but also in helping them appreciate inherent service limitations.
Both forwarders and integrators should continue to join efforts in mitigating the effect of excessive regulation through increased engagement with authorities worldwide. Regulations have a necessary role, but must embrace digitalization by alleviating requirements for paper-based customs processes and by instead using shipment information that is uploaded only once for multiple regulatory supply chain purposes. As was pointed out in Paris, regulators must become facilitators for a change and not speed bumps on the road to progress.
As shippers continue to participate in the digital revolution, interconnection of production networks will increase their transparency expectations, and automation of processes will put pressure on the freight forwarder. In time, industry disruptors will play an even more prominent role for the forwarder and shipper. We see these today in Amazon, Uber Trucking, mobile technology, cloud computing, 3-D printing, robotics and autonomous vehicles to name a few.
Digitalization of shipment information provides an opportunity for forwarders to satisfy demands faster while increasing customer value. Choosing the right solution that is most appropriate will not be easy since there are so many product choices and service providers. Any solution, once chosen, must integrate smoothly and be scalable to take advantage of future opportunities, regulations and customer demands.
For freight forwarders, the road to success is long, often unpaved and somewhat unpredictable. In considering technology for forwarding, a fork lies ahead. Yogi’s quote may be a classic joke, but for forwarders, there really is only one path to take.