Calls for airlines to open up to shippers are increasing in frequency and volume. Freight forwarders are wondering if they should be worried by this.
The Shippers Advisory Council, a newly created body, has added its voice to the chorus of calls for direct access to airlines. Whereas ocean carriers routinely deal directly with shippers, airlines keep hiding behind freight forwarders, complained Lars Droog, head of EMEA Supply Chain for Tosoh Corporation and the chairman of the new organization, which was established in March by the International Air Cargo Association as a move to ensure that shippers would be properly represented in the industry interest group.
Droog argued that passengers buying a ticket receive ample communication from the airline they fly with, but shippers have to deal with the freight forwarder in the middle.
He reckons that efficiencies could be gained from direct access.
One element that shippers are looking for is more transparency on pricing. Logistics technology provider Freightos published a survey of 90 industry leaders which indicated customers increasingly demand transparency, including visibility throughout the quote process.
GT Nexus, a cloud technology platform, has warned that air cargo will lose more ground to ocean transportation if it is not improving transparency and the flow of data between the parties in the chain. If this brings shippers and airlines closer together, then so be it, said Greg Kefer, the company’s vice president of corporate marketing.
Forwarders should not worry about disintermediation, he added.
Ocean carriers have upped their game and now provide much improved visibility, which has helped them gain ground vis-à-vis airfreight, he argued.
The air cargo industry, on the other hand, has been painfully slow to make progress on initiatives like the e-air waybill, and shippers – even large ones – have problems extracting key data, he continued.
Much of the challenge stems from the fact that middlemen are involved, he notes, which is not the case with sea freight.
Kefer is convinced that shippers are not aiming to cut forwarders out of the process, but merely seek better transparency on pricing. Others have argued that airlines are not set up to sell directly to shippers, lacking the infrastructure and manpower to do so.
One large forwarder noted that airlines have tailored services to certain industries requiring special handling. They have honed their industry expertise in those verticals and act more like consultants, but they still need a qualified freight forwarder as an intermediary for documentation, monitoring, customs and other functions, he said.
Others could envisage a change in the forwarder’s position in the game. Droog said that forwarders would always have an important role when it comes to contract logistics, customs clearance, warehousing and storage and distribution functions, but they could arguably shift in regard to booking shipments on flights.
The Freightos survey suggests that forwarders had better concentrate on more sophisticated elements than booking freight anyway. Core logistics services are becoming increasingly commoditized. To stay in the game, logistics providers need to offer value-added services and ramp up their technology, Freightos argues – perhaps not surprisingly for a technology provider.
Some technology firms sense an opportunity to take over the booking process through a web-based platform. Singapore-based Cargobase, for instance, claims that its cloud-based platform to automate and optimize ad-hoc freight management for charters, on-board couriers, next-flight-out, regular air freight and road freight can produce substantial savings, arguing that the mark-up on charters is often near 30%.
Such efforts recall the emergence of electronic booking platforms during the dot-com boom, which signally failed to gain traction in the industry. Now, with Uber commanding much attention and e-commerce on the rise, some think it is time to speed up the data flow between shippers and airlines. This may open the door to direct booking endeavours, certainly at the large end of the e-commerce market.
“We will see Amazon and others get directly involved with lift procurement. The logistics at either end will be handled by themselves or by forwarders,” said Ram Menen, former head of Emirates SkyCargo.
By Ian Putzger
Air Freight Correspondent | Toronto