Air Cargo Faces These Four Logistics Challenges in 2019
Date: Friday, December 28, 2018
Source: Aircargo News
Many factors have combined to create an optimistic yet challenging climate for the air cargo industry. One of these is the continued growth of e-commerce globally, which has had a profound impact on the sector.
In a way, air cargo has experienced a renaissance in the last several years because of skyrocketing international e-commerce amid heightened consumer expectations and reduced oil prices.
Additionally, airfreight has become increasingly competitive against other modes of transportation in recent years. According to the International Air Transport Association (IATA), airfreight demand is at its highest level since May 2018, growing more than three percent in October compared to the previous year.
While this increase was driven largely by an expectedly busy Q4 peak, $17.5 billion worth of cargo—35% of all global trade by value—is moved via airfreight daily. Airlines themselves are also performing well. IATA predicts the global airline industry will end 2019 with its tenth year of profitability. Impressive gains for an industry that was once—not long ago—on the brink of collapse.
Despite favorable circumstances, sustained performance and an optimistic economic outlook, the air cargo industry does face challenges ahead. From evolving global trade tensions to continued pressure to embrace industry-wide digitalisation, here are four key logistics issues that will be important for top performers to address in the New Year:
Nearly 10 years after its first introduction in 2010, on January 1, 2019, the electronic air waybill (e-AWB) will become the default contract of carriage for all air cargo shipments in a move designed to embrace digital processes throughout the air supply chain.
While this necessary change helps the industry get one step closer to eliminating inefficiencies, shipment delays and costly errors resulting from paper- and manual-based processes, it also introduces bigger challenges that cannot be solved overnight.
In short, not only do supply chain stakeholders need to be able to effectively communicate electronically, they also require access to timely and accurate information. Therefore, data quality and the timeliness of that data quickly become a top concern, alongside technologies that support mandatory digital requirements.
From a security filings perspective, more and more nations now require air carriers to supply advanced information to customs and/or border control on incoming shipments.
Nations that already have this capability in place realize that they need the information earlier and with better data quality. As a result, initiatives like Air Cargo Advance Screening (ACAS) in the US (or, more generically, Pre-Loading Advance Commercial Information (PLACI)) have been introduced and are becoming mandatory.
Along these same lines, the exporting air forwarder is also required to provide information either to the carrier or directly to customs in the importing country prior to loading at the airport. With the US and European Union (EU), this is relatively easy, but what if you are a US forwarder with a shipment to, for example, Angola—do you have the ability to file to Angola?
Yet, perhaps the biggest challenge related to security filings is knowing which information customs agencies internationally will require from one month to the next.
While customs may be communicating to companies within their own countries, supply chain partners and their providers are often left scrambling to fulfill new or upcoming requirements.
New Mail Requirements
2019 also brings several important changes related to security filings and mail shipments. In particular, the SAFE Framework of Standards as well as ICS-2 have eliminated the exempt status previously given to mail.
In 2019, these changes require postal organizations and air express carriers to report information on the mail shipments they carry to customs agents. As of 2023 (and the expectation is that this will move forward), air carriers will also need to report postal shipments.
As a result, these entities must now determine how to get the required information from their mail system into an environment that can be used to complete security filings. Further, filing for both cargo and mail shipments needs to be provided to customs in a consolidated manner, requiring even closer cooperation between air carriers’ cargo and mail systems.
While the international e-commerce boom has been good for air cargo, the sheer volume of e-commerce packages does pose new challenges for both domestic and international shipments.
Chief among them is the requirement of everyone involved in the air logistics chain—shippers, brokers, forwarders, air carriers and truckers—to execute flawlessly to accelerate the movement of goods, achieve quick clearances from customs and provide new levels of visibility to customers throughout the shipment lifecycle.
The air cargo industry is in the midst of a significant transformation, one that grows stronger in lock step with the need to move cargo more cost-effectively and faster than ever before.
Despite challenges ahead, technology holds the key to helping companies automate processes, simplify compliance requirements and achieve new levels of data quality and information-sharing with air cargo partners.
For the industry to continue to modernize itself, its processes and systems must also keep pace with change.