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Mar 14, 2018 - delivery speed. “This is also a call to arms — finally — so we have the rea- son we need to apply t
PRESENTS

DAILY r

DALLAS, TEXAS

WORLD CARGO SYMPOSIUM

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THE CROSS-BORDER E-COMMERCE WAVE IS COMING — ARE YOU READY? By Caryn Livingston

(IPC). The current geographic composition of cross-border ecommerce movements is likely to experience a shake-up, as volumes between Europe and China have declined and traffic between Africa and the United States is on the rise, but overall, e-commerce volumes are headFrom left to right, Liam O’Sullivan, director ed up — and illustrating current of operations with International Post Corp. logistical pain-points. (IPC), Lucas Kuehner, global head of air freight with Panalpina Management Ltd., and Glyn Hughes, global head of cargo with IATA.

During Tuesday’s e-commerce panel at the World Cargo Symposium, ecommerce growth was a foregone conclusion, leaving panelists to discuss the more important question — is the air cargo logistics chain ready for the coming wave? “We expect by 2020 we will see a triplification of cross-border flow,” said Liam O’Sullivan, director of operations with International Post Corporation

“We experienced huge bottlenecks moving freight in Europe last year, particularly in Germany,” as the main European ecommerce cities of Frankfurt, Luxembourg and London all saw delays impact shipments during Europe’s most recent peak season, said Panalpina’s global head of airfreight, Lucas Kuehner. With growth only continuing, Kuehner took a pragmatic view, adding, “No, I don’t think we’re ready, the infrastructure doesn’t allow for it.”

Kuehner, meanwhile, is optimistic that smart application of technology, an area in which air cargo has lagged other industries, can help facilitate delivery speed. “This is also a call to arms — finally — so we have the reason we need to apply technology to this industry,” he said.

WEDNESDAY • MARCH 14, 2018

By Charles Kauffman

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“Handlers, cargo airlines and the post will have to work very closely together,” he said. “If those three groups aren’t working hand in hand, we aren’t going to make it.”

So how best to get ready? O’Sullivan

AIR CARGO MARKET GROWTH: THREE SCENARIOS Industry-wide air cargo traffic growth is once again an invigorating subject. Despite the increase in protectionist rhetoric threatening robust global trade, evidence suggests that “nearterm geopolitical trends will not inhibit air cargo growth,” said Brian Clancy, managing director of Logistics Capital & Strategy (LogCapStrat), during yesterday’s presentation.

has confidence that current postal infrastructure can be repurposed to facilitate the shift to e-commerce, but says business needs to “provide the link between the e-commerce provider and the post or express company,” meaning logistics aside from air transport must become more efficient to meet high customer expectations of short delivery times.

Clancy began by drawing the audience’s attention to a graph on page four of yesterday’s WCS Daily Report that illustrated three different forecast scenarios for freight tonne kilometer (FTK) growth over the next five years. With a baseline in red, a bearish continuation of post-financial-crisis growth in green, and a bull[Continued on p6]

CONTENTS

Making a Business Case for Innovation

3

Schooling Shippers in CEIV

3

Understanding the 2017 Peak

4

IATA’s Four Priorities

6

March 14, 2018

WCS Daily Report

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World Cargo Symposium DALLAS, TX

DAILY REPORT

MAKING A BUSINESS CASE FOR HORIZON INNOVATION FORUM By Randy Woods

Blockchain, artificial intelligence (A.I.), augmented reality, the “internet of things” (IoT) – the formerly lowtech air cargo industry has become clogged with technical buzzwords that few cargo managers seem to truly understand. But at Monday’s Horizon Innovation Workshop, IATA moderators sparked an interactive discussion about how technology can be applied to the air cargo business and the hurdles ahead.

Speaker DeviPrasad Rambhatla, a vice president at IT services firm Wipro Ltd., said technological advances in aviation are no longer just made on the passenger side and then handed down to the cargo department. “We find that the head of cargo are mandating their teams to explore new technology,” he said. “It’s a cultural mindset… and it’s possible only when the whole industry is growing.” By using mobile app SLI.do, workshop participants responded to questions about their comfort with, and belief in, these new tech tools. Responses were then shared in real time on a large display screen. For instance, 60 percent of the audience said they knew the concept of blockchain and

felt there was a positive argument to adopt it, and 63 percent said they believed that, in the next three-to-five years, the industry would regularly track individual packages in real time. In the second half of the forum, attendees broke into smaller groups and discussed the opportunities, challenges and next steps to take regarding three of the most promising technological advances: blockchain, A.I. and IoT. For each, the groups identified promising uses of the technologies, especially in the form of item-level tracking. However, the biggest hurdles facing nearly all new technologies are the difficulty in establishing trust to share data with the entire supply chain, and building a business case for justifying the initial costs.

SCHOOLING SHIPPERS IN CEIV-PHARMA By Caryn Livingston

As with the proverbial horse that is led to water it refuses to drink, air cargo players offering shipments certified by the Center of Excellence for Independent Validators in Pharmaceutical Logistics (CEIV-Pharma) have found their own challenge in shippers not taking advantage of available shipment options. Shippers instead opt to book pharma products either as perishables, or even as general cargo. IATA’s head of special cargo, Andrea Gruber, advocated improving communication with shippers to explain that a pharma shipment classified as general cargo will not have the same handling and storage expectations as those shipments booked with CEIV standards. Gruber encouraged CEIV-certified carriers to have their forwarder partners explain to shippers, “If that’s really precious cargo or sensitive cargo, you might want to let your customer know there are Subscribe to Air Cargo World at: AirCargoWorld.com/subscribe

processes in place to make sure it’s handled in a specific way.” When shippers book a pharmaceutical shipment as general cargo, “they still expect cargo handlers and airlines to handle the shipment based on its packaging,” said Bruno Guella, the managing director at terminal operator MVD Free Airport. MVD created a policy requiring shippers to opt out of high-cost handling of cargo packaged for cool-chain transport. Other airport attendees took a hardline stance, noting that it was important, in some cases, to “just say no.” Airline attendees concurred, adding that the deciding factor is the air waybill. Brussels Airport’s cargo and product development manager Nathan de Valck said getting the entire airport community onboard with that strategy has worked. “We had to educate our whole community,” said de Valck, “but once you start doing that

as a community, you really start educating the shippers.” Educating shippers on CEIV Pharma transportation options is the ideal option, but if pharma shippers still select general cargo, Gruber added that communication goals should shift to explain to shippers that their shipments will not have access to the higher standards required by CEIVPharma. “If I book an economy ticket, I can’t be allowed in business [class],” Gruber added.

March 14, 2018

WCS Daily Report

3

World Cargo Symposium DALLAS, TX

DAILY REPORT

AIR CARGO IN 2017: WHAT DROVE THE RELENTLESS PEAK? By Randy Woods The fact that 2017 was a spectacular year is no surprise. The reasons behind the surge in air cargo demand, however, are less clear, and were the focus of Tuesday’s Plenary Session address by Marco Bloemen, managing director of Seabury Consulting.

“We saw 10.8 percent growth in tonnage terms globally last year — an enormous amount,” he said. Asia outbound to Europe saw 12 percent year-over-year growth to North America, Europe and inter-Asia. “Truly fantastic,” he added.

Interestingly, the industries that performed the best were mostly intermediates, Bloemen said. “Machinery parts, automotive parts, capital equipment, some raw materials.” One of the fundamental reasons for 2017’s success came from a dip in the inventory-tosales ratio, Bloemen said. This ratio was also decreasing from 2002 and 2007, when airfreight demand last boomed. “If you don’t have enough inventory when people are buying, then you need to fly it in,” he added. Then, when the global crisis hit in 2008 and sales took a nosedive, inventories quickly swelled, diminishing the need for airfreight. Soon after came a quick recovery in 2010, followed by six years of stagnation. Finally, by September 2016, the ratio began to fall again, “which is what we’ve been waiting for.” Another major reason for the increase was the boom in e-commerce, particularly in China. The country saw air cargo tonnage grow 14 percent yo-y in 2017, with 880,000 tonnes of additional airfreight, he said, thanks to increased spending from a growing middle class. A few other drivers were commoditydriven, such as the “fidget spinners” that became a popular toy last year and accounted for a 38,000-tonne surge out of China in May and June. That was “an enormous good-guy for airfreight,” he added. “After a phenomenal 2017, we will still see continuing growth, but more moderate,” Bloemen concluded. “We’ll have to take a look at how demand and capacity balance out.”

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March 14, 2018

WCS Daily Report

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World Cargo Symposium DALLAS, TX

DAILY REPORT

IATA COMMITS TO FOUR CARGO PRIORITIES FOR FUTURE SUCCESS By Randy Woods

During the official first day of the World Cargo Symposium (WCS), IATA’s head of cargo, Glyn Hughes, enumerated four priorities for the future success of the air cargo industry. The four points include: 1) Accelerating the digitalization of the supply chain. A key element will be market adoption of the e-air waybill (e-AWB). Global penetration has nearly reached 53 percent and the industry is targeting 68 percent by year-end. IATA is also facilitating this process through its Simplifying

AIR CARGO MARKET GROWTH: THREE SCENARIOS

the Business (StB) program. 2) Improving enforcement of safety regulations for lithium batteries. While global regulations are in place to ensure the safe transport of dangerous goods (DG), Hughes said misdeclared DG shipments continue, especially those involving lithium batteries. Governments must “take a tougher stance against rogue shippers,” he said. 3) Smarter and more efficient borders. Hughes said It took an average of 1.41 days to clear goods through [Continued from p1]

echoed that of IATA’s chief economist, Brian Pearce, who called most of the current proposed barriers to trade forms of “soft protectionism,”. Regardless of how much weight the rhetoric carries, Pearce told delegates, “Border modernizing procedures are critical to offsetting protectionism.”

Brian Clancy, managing director of Logistics Capital & Strategy, LLC (LogCapStrat).

ish return to pre-crisis performance in blue, Clancy asked the audience where they would place their wagers. Although impending trade wars and the deterioration of multinational pacts like NAFTA dominate the headlines, Clancy argued that, at least in the case of the U.S., with Trump, “current rhetoric is nothing more than ‘Let’s Make a Deal.’” Clancy’s tone

customs in 2017, according to IATA’s Cargo iQ statistics. "This is too slow,” he said. ”We need to work together with governments to cut the red tape and facilitate faster, cheaper and easier trade.” 4) Attract, retain and develop talent. The ability of air cargo to reach its full potential will hinge upon the creation of a professional, skilled and sustainable workforce, Hughes continued. IATA’s Future Air Cargo Executives (FACE) program aims to develop young professionals. litical will to push through infrastructure improvements is critical. Revisiting the page four graph, which scenario do you support?

The WCS Daily Report is published by:

Although much of last year’s record upturn was a result of cyclical restocking linked to economic recovery, a remaining portion of the growth lacks an explanation. LogCapStrat believes this growth stems from e-commerce, which in 2017 “reached critical mass.”

Publisher:

The next phase of e-commerce will be characterized by growth in the cross-border segment, which is just getting started. Clancy warned that infrastructure is severely underprepared, and that mustering up the po-

Contributors:

Visit us at AirCargoWorld.com JJ Hornblass • [email protected]

Editors:

Charles Kauffman • [email protected] Randy Woods • [email protected] Caryn Livingston • [email protected] Katherine Kaczynska, IATA • [email protected]

Evangelia Lilian Spanos, IATA • [email protected] Creative Director:

Michael Archuleta • [email protected]

Advertising:

Tim Lord • [email protected] Chris Cope • [email protected]

Events & Marketing:

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