Other News

FIA18: e-commerce boom proving challenging as it is continues to grow

E-commerce is certainly driving air cargo and presents both opportunities and challenges and is causing disruption across the industry, delegates at the Farnborough International Airshow heard yesterday.

The boom in the sector has led to a strain on capacity while the likes of Alibaba and Amazon are creating their own end-to-end chains and operators across the supply chain are busy adjusting or creating new strategies to deal with the sector.

Panellists discussed the impact of express and e-commerce freight in the Cargo Village’s conference, the first to be held at the airshow, which was moderated by IATA’s head of cargo, Glyn Hughes.

Seabury Consulting managing director, Marco Bloeman first gave delegates the lowdown of the impact that e-commerce and small parcels are having on the industry and he said in the fourth quarter of last there was strong growth in the number of shipments.

He added ambitious delivery targets of key e-commerce players may change global supply chains and will likely cause increasing disruption across the air cargo industry.

Turkish Cargo chief cargo officer, Turhan Ozen was upbeat about the prospects for the industry and said it is the perfect position to meet the demands that e-commerce brings.

He said shippers’ and their customers are looking for speed, reliability, versatility, predictability, visibility and transparency. Ozen added: “I believe we should be looking at it from an integrated perspective for the whole process.”

DHL Global Forwarding head of network carrier management, Henk Venema said the e-commerce boom is providing the integrator with widespread challenges.

“From a freight forwarding view we are doubting if it (e-commerce) is an opportunity or a competitor for space,” he said.

Venema said individual players are working on their own within the e-commerce marketplace and using their own systems and ways of operating.

“As an industry we are simply too slow and there is know willingness for people to market an investment for someone else,” he said.

Venema also said another challenge when it comes to the sector is Customs as these vary from country to country and explained that many operators are focusing solely on one e-commerce trade lane.

“E-commerce players are always looking for Customs clearance and want it to be quick. Freight forwarders are not able to cope with that which express operators can do,” he added.

Fellow panellist Etihad Airways managing director of cargo and logistics services, Abdulla Shadid agreed and said Customs varies from China to the EU and the Middle East which can prove difficult as different ways of working are needed and there is no certainty of flow.

He said another challenge was the fragmentation of the market: “The big obstacle we find is there are people to only want to play in this market. Key players can play there but hold hands with other critical parts of the industry.

“The key challenge is to form the right players and the right partners in each area and they hold hands to create a seamless flow,” he said.

The lack of investment in air cargo infrastructure is often talked about and panellists felt there is a lack of facilities in the air cargo industry to meet strong e-commerce demand now and in the future.

“The infrastructure has not caught up,” Venema said and he added neither has the people side of the business to deal with the increasing number of shipments e-commerce is bringing and put the blame at procurements strategies.

The industry has had trouble in recruiting talent and he used an example in the US, where he said it is better for a person to flip burgers than work in cargo handling as they are paid more in a fast food chain.

Shadid believed it is not just about bricks and mortar but also about developing IT systems to make operations seamless and investments are needed in facilities.

“The amount of facilities that are new is a minority and the majority of the industry is sweating on existing facilities,” he said.

Hughes asked the panellists to sum up views and Ozen said the challenge to operators is determining where they want to play and whether a business wants to act as an integrator or as a point to point operator.

Venema said the challenge for DHL is how does it maximise the benefits that the e-commerce boom can bring and also how does it protect the existing freight forwarding business which-commerce is impacting.

For Etihad, Shadid said it was all about developing key product verticals with high yield and with the capacity it has it needs to choose commodities and play to its strengths.

Air cargo is certainly in pole position in the modal fight for e-commerce business as can provide customers with the speed shippers and customers crave, but how it will pan out is certainly unknown.