Air cargo and the digital revolution

While shippers remain focused on the evolution of the domestic carrier market, with the development of hours of service tracking technology and more dynamic transportation management system (TMS) products, ocean and air carriers handling interna­tional shipments are going through their own disrup­tive changes.

The air forwarders, third-party logistics (3PL) providers, drayage, warehouse and airport opera­tors are experiencing a revolution well beyond the decade of security-focused investments that had captured so much attention.

Shippers may not see all the behind-the-scene changes, but they will feel the impact of tech­nology and consolidation that service providers are making today. Here are just a few air cargo trends that we’re hearing about at conferences and in casual mar­ket conversations.

First is the ongoing drive toward horizontal inte­gration. A number of major airlines have merged in the past decade, and the trend is likely to continue as, like their counterparts in other modes, air carriers recognize the capability of technology to enable them to manage larger fleets with fewer people. The value of landing slots at key airports continues to be a driver for consolidation and space optimization, as fewer players means higher prices.

Second is vertical integration with the role of forwarder, warehouse intermediary and local cartage being eyed for more control of cargo further from the airports, allowing for more time in transit for carriers to optimize routes and adjust schedules to maximize aircraft utilization.

As parcel carriers have demonstrated, overland routes can be effective in substituting for regional airport usage and can take advantage of TMS opti­mization tools. Rather than be passive in the receipt of cargo for their prime business, cargo carriers have started door-to-door planning, using their own and joint venture services.

Third on the list is Artificial Intelligence (AI) and drones. Self-controlled and remote-controlled aircraft are the subject of major investment by aircraft mak­ers Boeing and Airbus, but more significantly there are others getting into the game. In the area of local air service, there are numerous permits pending for delivery of out-of-the-line-of-sight craft flying at lower altitudes. From large drones to huge air ships, ship­pers can expect a growing list of options for air delivery modes in the future.

The discussion of AI would not be complete without talking about the replacement of warehouse staff, for­warder experts and pilots. Lack of skilled labor has been a drag on logistics service provider growth, and the pros­pect of robots and software executing “boring” transpor­tation operations has executives investing in dozens of start-ups hoping to find a working solution. Where there is a decent margin, Silicon Valley is exploring.

Fourth is the trend toward more security in transactions and physical security of cargo. Cyber currencies such as Bitcoin are the subject of intense research and testing. The reason is that they take out a cost—banking transaction fees—while enhancing “hack-proof” traceability of cargo at the item level. “Smart packages” that interact with their surroundings to report status will reduce the incidence of counter­feiting and spoilage.

Shippers need to be aware of the changes taking place in all modes. They should not wait for their for­warder to announce that they’re being absorbed—or worse. The air cargo market is a part of the supply chain where literally anything is possible.