Collaboration across the supply chain is crucial for air cargo to get up to speed with e-commerce, reports Donald Urquhart from IATA’s World Cargo Symposium in Singapore.
“The digital train has left the station – most of the economy will be ‘e’ very soon and that impacts everyone,” says senior supply chain executive, Wolfgang Lehmacher.
Saying that it is becoming harder and harder to distinguish traditional commerce from e-commerce, Lehmacher says the air cargo industry must think more about digitalisation.
While e-commerce is a hot topic and clearly inspires excitement amongst the air cargo supply chain, Atlas Air Worldwide EVP and chief commercial officer, Michael Steen (pictured above), cautions that while it currently represents 10-12 per cent of total global commerce, a good chunk of that figure is pure digital, like streaming for instance, and not carried on aircraft.
“But if we think about the addition of 2 billion more consuming middle class by 2025, it’s a massive amount of people entering the consuming class,” he adds.
Moderating the session, IATA global head of cargo, Glyn Hughes, highlights that if you take out the streaming portion the percentage of physical goods moving as a result of e-commerce becomes only single digits.
“But already it is having a major impact on supply chains,” he says, pointing to Amazon’s Prime Air as an example. With this in mind, Hughes points to the elephant in the room asking: “Will the industry be able to handle potential volumes?”
For Steen its not going to be an exponential growth, but something more gradual. “There are still many issues like taxation, customs, financial deregulation, infrastructure – obstacles that need to be overcome.”
Overall though, Steen feels the industry is not in a place to cater to future e-commerce growth.
“On the asset side we are lagging behind, on the digislisation side we are a lot behind. We need to think about this and figure out how to be relevant to these e-commerce platforms,” Steen adds, highlighting that some 800 freighters will be retired in the next 10 years.
Infrastructure on the ground also varies widely. Using Southeast Asia as an example, Singapore is very good but Indonesia has some way to go, he says. In the Indonesian example, “geography lends itself to e-commerce so this will revolutionise infrastructure there.”
Amongst the challenges the air cargo supply chain faces in being a true player in the e-commerce space, Lehmacher says integrating digitally is one of the major prerequisites to be a good player.
“I’m not so worried about capacity, but digtalisation in order to plug into all the platforms is crucial.” He highlights that two-thirds of the value global business creates is via platform transactions.
“This means the industry has to support this,” he says adding that some are more ready than others. “As an industry, work must be done to build platforms and standards to support them.”
The issue for Steen, is not so much in terms of not enough investment, but how the industry views these investments. “There are far too many unilateral investments – we should look at it as an integrated industry,” he says.
While noting that the ability to have complete visibility through entire supply chain is absolutely possible today in technological terms, “it can’t be done without alignment, harmonization and collaboration between the various players in the fragmented industry.”
The way integrators came about disrupted the general cargo industry, we now see e-commerce platforms doing same thing, Steen adds.
For Lehmacher it’s important that the industry changes the way it looks at the business. “Will technology revolutionise the logistics industry? Amazon already has,” he emphasizes.
“I don’t believe individual players alone are capable of setting up what is needed to bring the industry up to speed, he says. “There has to be a new model of looking at industry and it’s about collaboration. It is about learning across the supply chain, learning in the ecosystem.”
Lehmacher adds that, “the bottleneck is not money but imagination.” It’s the tech talent that can build the solutions and this industry is competing with every other in the world for talent, he cautions. “We can learn from other industries, but we must build capacity within the industry and within the companies themselves.”