Commentary | 3PL Line

Air Freight Collaboration and Agility

Tags: Air Cargo

Horst von Kanel, Senior Director Airfreight - North America/Latin America, Damco USA Inc., 973-514-5356

In response to a sluggish airfreight market and generally lower cargo volumes and capacity, airfreight forwarders (AFF) are using strategic business practices and concepts to assist them in effectively managing airfreight shipments for optimal efficiency, performance, and results. By implementing collaborative and flexible logistics practices and remaining agile, managing air freight today can be a win-win process for both shipper and forwarder.

When it comes to locking in rate commitments with carriers, the prudent tactic in the current market is to remain flexible. Short-term opportunistic transactions are the most effective strategy. With the current capacity situation, the average wait for spot requests has dropped considerably, and AFFs are certainly on the phone more these days looking for opportunities for shipper clients.

The volatility in the airfreight market suggests there’s no advantage to making long-term purchase commitments. Shippers, on the other hand, see an opportunity to lock in low rates – but this can be a double-edged sword when capacity is tight. There are times when the best rate may not always be the best solution. Higher-paying cargo may receive priority status, which can result in transit delays for lower-paying freight. It’s always a thin line between getting the cheapest rate and having your shipment offloaded for revenue reasons. Airfreight shipments tend to be time-sensitive, so it’s likely any transit delay or late arrival at destination would negatively impact the shipper’s supply chain.

What can be done to address these market challenges and reach the best supply chain solution for global shippers’ airfreight shipments? Addressing this market requires an investment in time, research, and innovative solutions when scheduling shipments. Consider the case of Latin American exports moving to Asia or Europe. When air capacity is unavailable, fruits and vegetables from the West Coast of South America often travel by ocean container to a hub location, such as Panama or Miami, then by air to their final destination. This alternative supply chain solution effectively addresses market conditions and product supply chain requirements for reliable, expedited transit. By managing a shippers’ expectations, reviewing outcomes and service options, and the differences among them, AFFs are able to more effectively serve the needs of shippers with varying supply chain options.

To better navigate today’s market fluctuations, AFFs and global and regional airlines develop collaborative business partnerships that serve both well. By working together as preferred vendor partners, AFFs and carriers are able to better manage capacity, balance trade lane freight load factors, and support each other’s business needs. This global carrier concept, down to the field level, helps maintain quality service levels for shippers and maintain efficiencies.

Global gateway efficiencies

The global gateway concept involves superior freight management and achieves supply chain cost savings. Global gateway locations are strategically positioned to safely and quickly handle cargo being transferred between regions. At these dedicated hub locations, logistics service providers are able to effectively and securely receive airfreight, organize expedited transit, and carefully control and monitor freight shipments until they reach their final destination.

Freight consolidation at these hub locations effectively reduces production costs in specific trade lanes, and will usually reduce operational costs at the final destination. Gateways handle imports and exports from global markets, and utilize fixed schedules to ensure predictable transit for service providers and other trading partners. For example, trucking companies may work with fixed schedules, like airlines, with trucks leaving the origin point at 10 p.m. and arriving at destination within one hour of the scheduled arrival. This predictability ensures the shipper client and other service provider partners have a detailed schedule of when the freight will be delivered. Reliable, consistent service helps shippers maintain the integrity of their supply chain, resulting in a more cost-efficient process. The global gateway concept provides the control and service level performance needed when delivering global coverage and a high-quality, reliable service to global shippers.

The airfreight market’s unpredictability poses a real challenge for many shippers. For 10 to 15 years, purchasing behavior was driven by the calendar. But now, the classic seasonality in airfreight is gone. There was a time when the industry knew in January that pricing on certain lanes would go up by X in August and decrease again at the end of December. In recent years, these predictable swings have mostly disappeared.

By following market conditions, managing distribution channels with flexible solutions and innovative ideas, and making the best use of established gateways for optimal performance, forwarders are able to respond with efficient, dependable results.