Opportunities and Challenges e-Commerce Brings to the Airfreight Industry
The rise of the e-commerce has revolutionized the way goods are bought and sold throughout the world. Globally, online retail sales continue to grow and the importance for business to market their wares online become more apparent. E-commerce allows even small business the opportunity to compete with larger retailers on the world stage. Consumers have also been empowered more now than ever to buy what they want, when they want, where they want, and from whom they want. Here in lies a challenge for the airfreight industry; creating a system that can respond extremely quickly to customers’ demands and requests.
The airfreight industry has for many years now been in the process of moving towards complete digitization. While the industry is only half-way there currently, the benefits seem to warrant the need for more a collective push. One of the largest drivers for change within the industry is e-commerce and the role it continues to play in global shipping and supply chains. There’s still no method of transportation faster for cargo than air travel, and this coupled with an increasingly demanding consumer base should help to push the industry forward.
To learn more about the opportunities and challenges that e-commerce brings to the industry, we recently had the honor to speak with Mr. Glyn Hughes, Global Head of Cargo, International Aviation Trade Associations (IATA).
By some estimates, by 2020 over 900 million people will be using online e-commerce platforms and will spend $1 trillion worldwide. Consumers expect fast delivery times, and as worldwide trade grows, so will the opportunity for airfreight providers to be the defacto transport for more of these products. Staying one step ahead in satisfying customer expectations, and those who invest in digitization of their information and efficient handling processes are going to be the true winners.
“Today’s consumers demand speed, reliability, transparency of information, and predictability,” said Mr. Hughes. “As we look at the modern supply chain, there are completely different factors influencing it today. There needs to be a greater emphasis placed on the information flow and on reliability, because the e-commerce sector is all about instant gratification. When consumers buy something online they want it immediately, so it means that the supply chain that we’re used to must be optimized.”
For these great opportunities to be realized, and to get to this state of optimization the industry needs, it’s going to take a group effort. Mr. Hughes describes how he’s seen the industry changing for the better. “The first few years, the progress was slow. In fact, most time when IATA would make a presentation on promoting the benefits of digitization, mostly the questions were, ‘why they should do this,’ and ‘what is in it for them.’ That debate has evolved to the point where the question of ‘why’ turned into ‘how can people do it’ and the attitude has completely changed, because there has been so many examples of where freight forwarders, airlines, and ground handlers have seen some real significant benefit in the efficiency.”
“Digitization of information is critical because everything else we want to do is predicated in the fact that the information about the shipment is digitized.”
The fundamental change that e-commerce brings is the increased relevance of consumer choice. It’s a consumer centric business that is expanding exponentially. Traditionally, an air cargo service would provide a solution for one particular freight forwarder’s one particular shipment belonging to one particular end customer. However, e-commerce is doing business on a very different level. “Where e-commerce is different is it’s actually a multiple-to-multiple type of supply chain. It’s not just one, but multiple suppliers that the air cargo players are making promises to, as well as multiple recipients,” explained Mr. Hughes.
“Digitization of information is critical because everything else we want to do is predicated in the fact that the information about the shipment is digitized. We’re working on another project right now called Piece Level Tracking. This is an extremely important, but difficult process to implement. People quite often say when the shipment or box comes into the air cargo supply chain; it goes into a ‘black box’ and end customers can only sit and wait for it arrive. People want to know where their shipment is. This technology exists on the baggage side. There are very smart and sophisticated application where messages are sent to smartphones from your suitcase just to let you know it has gone through the screening system, boarding into the plane, getting off the plane, and coming down the conveyor. That technology is already there. We just need to make sure that the industry has a process and ability to apply that type of approach and technology to the cargo supply chain.”
Piecing it Together
Other industries with close ties to logistics, such as retail, have been revolutionized by digital technology, and the chances of this digital disruption engulfing the logistics industry are ever increasing. The slow rate of digital adoption brings enormous risks that should not be ignored. Aside from the trends and noticeable changes in dynamics, studies have been done around e-retail industry who relies on increasingly complex international supply chains and many times the air cargo logistics service. An example of a study is done by Manhattan Associates and its Thai geographical partner, Logiciel. Manhattan Associates and Logiciel conducted a research on Thai online shoppers and the factors that frustrate them the most and create customer loyalty when it comes to online shopping.
With 43% of online consumers making regular two to three purchases a month, Thai consumers responded that they will continue to do more online shop over the next year. The studying of the Thai bustling online shopping market suggests that 48% of consumers say that slow delivery makes them the most frustrated when shopping online. At the same time, 78% of consumers say that reliable delivery service will make them more loyal. The findings are simply a reflection of the growing demand for revolutionized logistics processes and supply chain. More and more Thai consumers of all age, ranging from 18-55 and older, are put off by slow deliveries, but are willing to be loyal with a predictable and knowledgeable logistics service. While the study was conducted in Thailand; the reality of online shopping is that of an international or global retail market that will require multiple players and sectors of all stake-holding industries to get up to the pace of how
capitals and demands are flowing. Therefore, the findings from the study are suggesting the directions logistics businesses, big and small, need to take. In order to meet the demand of regional and global e-commerce clients, digitization is the only way to businesses can ride the e-commerce wave and benefit from the rising disruptive.
As the benefits of digitizing the industry for e-commerce are becoming more evident, most players in the industry see that digitization is the way forward. E-commerce has been the driving force to changing the attitude towards digitization and many stand to benefit from an upgraded airfreight industry. No one’s saying that digitization will be the panacea for all the airfreight industries issues, but it’s a fantastic start. By growing alongside the ever-expanding e-commerce industry and embracing digitization not only saves time and money, it also presents untapped opportunities for more innovation, increased profits, and a more robust and resilient industry.