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Delivering digitization: A reality check on air cargo today - Part II
In my previous blog post Game Changers: A reality check on air cargo today - Part I, we explored the anomalous capacity paradox as the core reason behind the decreased yield in the cargo industry. As profitability dips, the most viable solution for the sustenance of the industry begins with increasing productivity of output and must proceed through intense customization of product. Technology, or more specifically digitization, is not a mere enabler here but the very foundation on which the industry must be rebuilt.
IATA proposed to achieve this in 2016 through a portfolio of transformational projects, titled StB Cargo, the thrust of which was technological progress for the industry. In June 2017, at the 73rd Annual General Meeting of the organization, a resolution was adopted to "accelerate modernization and transformation of the air cargo industry" thereby cementing industry consensus on the goals.
Upgrading the airline cargo supply chain
Overall, the technology landscape still shows a high potential for improvement in the industry. It is observable that the time spent on meaningful operational activity is extremely low when compared to slack or lag times in a typical manual operation. McKinsey estimates that agile processes and digital systems which ensure data transparency can slash response times by as much as 90% for air cargo. This will not only increase operational efficiency, but also have ripple effects on cost savings, resource management and enhanced capabilities, thereby boosting customer satisfaction.
Full digitization of the customer experience is also the first step towards a leaner supplier chain; by eliminating intermediaries, the shipper interacts directly with the carrier on a digital platform. Traditional freight forwarders stand to lose significant control over the supply chain on this account. This may be a core reason for the frictions faced by this sector as it attempts to modernize.
The eAWB initiative, which was supposed to build significant momentum for technology adoption (and save 7,800 tons of paper in the bargain), has just about hit the halfway mark on a global scale according to IATA – well behind schedule. To be fair, the blame isn't necessarily on the carriers (which handles barely around 1/3 of the entire supply chain) but in the absence of 100% compliance across the supply chain, airlines cannot claim or take advantage of the efficiencies either.
Catching up with future demands
Industry resource Transportfolio, citing a World Air Cargo forecast report from Boeing, predicts that volumes will double in a twenty year period from 2015-35, at a rate of approximately 4.2% per year. Capacity is expected to be scarce, although this would be more likely a problem of quality rather than quantity in the face of the anomalous capacity paradox. Efficient management of capacity, time and other resources therefore becomes a top priority for technology investment.
Broadly, systems have evolved in form factor as well as capabilities – from desktop computers tucked away in a corner of the office far away from the shop floor, to hand held or even wearable devices which can be used in real time on the shop floor by the worker to gather and process information of all kinds. In a sense, physical assets are merging with digital ones, which means data capture is embedded into every aspect of the physical process. The cargo industry therefore offers tremendous scope for implementing the Internet of Things (IoT), and stands to make significant gains from the resultant insights.
The iCargo user group got a ringside view of the next level of human-machine interaction recently. The targets, of course, aren't the end customers (shippers) but employees of the carrier airline which seeks more efficiencies in the way they handle shipments.
Interaction of man and machine
It is inconceivable with current technology that the entire air cargo supply chain will be digital and machine-operated in the very near future. However, there are some aspects of the chain which can be delinked from the conventional platforms and recast as digital. For instance, air cargo is an information-intensive business at all stages of the supply chain; therefore the primary objective of a technology platform would be to ensure accuracy, reliability and transparency of this information as it gets captured and passed along the chain. Making data available is only the first step in enabling on-the-ground decision making. Sensors can detect scenarios in tangible form, predictive algorithms can suggest possible responses and the system can execute them once the human worker makes choices based on what's presented to him/her. The human element is not eliminated; it is empowered for more productivity.
Another example: Emergencies like the one detailed in this blog post on cold chain logistics can disrupt demand/supply estimates all the time. Carriers need trained manpower at short notice to handle these high risk shipments. Simulating scenarios and computer-based risk assessments can also reduce costs associated with ensuring safety and integrity of the shipment. Reducing the complexity of interactions, as well as utilizing technology for simulation based training methods, are a major part of the solution.
This is how one can trace the evolution of these interactions. Very soon, one can expect the human element to merge with the machine element – no more interfaces; humans are the interfaces!
Ashok Rajan is Senior Vice President & Head of Airline Cargo Services line of business at IBS. An accomplished specialist in the Travel & Transportation domain, he has a track record of 18+ years in conceptualizing and building products for the industry. Having played multiple roles in the organization from development to product management to running transition programs for customers, Ashok is involved with building and executing the strategy for the flag-ship iCargo product line of the company.