The Role of Technology in Shaping a Fast, Enhanced, and Transparent Air Cargo Industry
Technology, as is the case of every other industry, has led to a complete revolution in how air cargo businesses operate, and this shift has just started. Radhesh R Menon, VP & Head of Strategy & Product Management, CLS, at IBS Software helps us understand how airfreight technology is shaping the future of the industry and the latest air cargo technology trends
How do you envision digitalization transforming the cargo industry, going forward?
Digitization has become a way of life in today's business landscape, which has transformed the way many traditional industries such as banking operate, and aviation is no exception. While travel, in general, has undergone several radical transformations over the past decade, the logistics part of the industry, even in a seemingly technology-centric industry like aviation has lagged, the primary cause being the inherent complexity of the air cargo supply chain, extraneous factors such as socio-political environment, regulatory requirements and the multitude of stakeholders that are involved in the end-to-end delivery of the service. Having said that, there has been a big shift in the way the cargo industry is approaching digitization and air cargo technology, especially in the past five years. A lot of the positive change is the result of the recent pandemic, which accelerated digitization across industries.
Going forward, it is safe to predict that, the air logistics industries will start designing their own products, services and end-to-end customer engagement with digital elements built into it. For instance, a digitally reimagined service delivery would be one in which digital is part and parcel of all touch points of the shipment journey – with omni-channel sales, enabling customers to use a variety of channels to procure capacity followed through with a service delivery that digitally connects all supply chain partners to ensure that the service delivery is homogenous and everyone works to the same game plan and all the while, offering customers access to rich, real-time shipment status information through a choice of digital tools. Another key enabler for air cargo to achieve this vision would be the optimization of internal business processes with increased automation, and digitizing of paper-based processes.
While there has been significant uptake in the digitization of the sales process through usage of booking channels, one of the critical challenges will be to enable all of the stakeholders involved in the partner ecosystem of the cargo industry to deliver a consistent service experience. A typical shipment does not just involve the airline. A complex ecosystem of airports, ground handing units, customs departments, other regulators, and many others is involved in the transit. Currently, this process is very "paper-based". In the future, it is expected that there will be better connectivity between these players, enabled by digitization.
What is required of airlines to move away from the commoditization of the cargo business?
Depreciating yield, commoditization and overcapacity are three intrinsic problems to air cargo and, transportation businesses in general. This happens because of the lack of differentiation. When all businesses are offering more or less the same service, and the demand is limited, it leads to a price war. The lowest bidder gets the business. This is not very sustainable, and moving away from commoditization becomes fundamental.
The best way to do this is with differentiation. Businesses should start thinking about offering products and services that are aligned to the unique needs of specific segments of the overall target market for cargo businesses.
For instance, there is a huge demand for cargo handlers that can transport specialized cargo. Even within this segment, there are specializations such as live animals, perishables, medical equipment and pharma, all of which require tailored operating procedures in order to provide complete peace of mind to the final beneficiary of service. Delivery of such tailored processes will be cumbersome and cost prohibitive in the traditional model of service – digitalization and automation of the supply chain is an imperative requirement to be able to harness such opportunities.
As cargo businesses start developing products and processes designed to deliver delightful experiences to unique and specific segments across the target market, they will be able to command premium prices.
What is your view on the trend toward digital booking platforms and how will this shape the future of the industry?
The use of digital booking platforms is a recent phenomenon in air cargo, unlike passenger airlines. This has opened up a brand new channel for air cargo operators to reach a broader part of the market. Typically, the air cargo business has been a B2B business and for a large part, it will remain so in the near future.
However, there is still an entire segment of the market, the SME market, which is demanding a different approach from cargo airline operators. With such businesses, the currently popular account-based approach does not work well. Doing business with this, currently, underserviced segment of the market will require a more agile and "always-on" approach. Businesses should be able to provide quotes 24*7 using digital platforms. These platforms should also be able to receive and confirm bookings for customers. There is a big need for smart and quick responding systems like dynamic pricing. Despite the availability of a few air cargo software, these capabilities are still a distant dream for many cargo airline operators. In addition, this fundamental change is inevitable.
The common notion is that Air Cargo is slow in the adoption of technology – do you see this changing and how?
The change is definitely happening, and this has become especially apparent in the past few years. The adoption of technology has traditionally been slow in the logistics and air cargo management industry, but in the past few years, it has been on the uptake.
What has prevented cargo airlines from making progress in terms of technological adoption is the dependency on outdated legacy systems and complicated IT environments. Fortunately, this is changing. At IBS Software, we have seen a significant uptick in the demand for innovative technologies as well as in modernization of core IT systems – which is what has made our flagship cargo IT platform iCargo so successful in the market. . Carriers across the industry are realizing the need to modernize their IT capabilities in order to take the next step forward in their digitization journey by shifting away from legacy platforms. IBS has itself partnered with its customers to create new innovative technology solutions leveraging on established industry practices like eAWB such as intelligent pre-check systems and digital self-service kiosks – much like any modern passenger terminals that we see at many airports these days. So technological adoption is definitely accelerating, and it is safe to say that such practices will start to become more and more standardized in the industry.
Is there a role for high-end innovations like AI in air cargo? Which business areas do you see getting benefited from this?
When speaking generally about AI as a technology, it has become entrenched in almost every industry in these times. It is safe to say that the technology is here to stay and is set to become more and more all-pervasive given the pace of innovation in data science and high-end computing, combined with the democratization of computing power (cloud computing) has made these technologies more accessible.
AI in the air cargo industry definitely has a role and quite a significant one. The need for agility that we discussed earlier, like the need for dynamic pricing, will benefit tremendously from the implementation of AI. In fact, the technology is being actively used in the cargo industry right now.
A good example is the Analytical Revenue feature of our platform iCargo. This new offering - developed in partnership with Korean Air uses historical data to identify and "learn" business behaviour and then uses that to interpret ongoing business performance to predict future events. Given the volatile and complex nature of the air cargo business, traditional statistical models are often unable to provide accurate results and hence, IBS relied on AI techniques like machine learning to identify patterns, make predictions, and give actionable suggestions. For instance, by analyzing historical data, the tool can tell you how packed a particular flight is going to be on the day of departure.
AI-based technologies are all set to find even more applications across different aspects of business, like Revenue Accounting, which currently demands intensive human effort in ensuring error-free billing and accounting. With AI, many such processes can be effectively automated. The implementation of AI technology will result in greater efficiency and speed for air cargo businesses and cargo carriers will be able to offer a more quick and seamless experience to their customers in the future.