The cargo handling crisis at the end of last year has changed attitudes among Frankfurt Airport’s cargo community and presents an opportunity for significant process change, writes Will Waters
Disruptions late last year in air freight handling at Europe’s largest cargo airport, Frankfurt, have presented an opportunity for positive and long-term change, according to airport operator Fraport, which has been working with the airport’s cargo community on new initiatives to improve handling efficiency, processes, and ways of working together.
The airport and its cargo handlers faced a perfect storm in the final two months of last year as an exceptionally strong peak season coincided with industrial action by members of one German logistics and transport union that affected logistics operations across Germany. This combined with an already stretched labour force within the cargo handling and logistics sector, plus some changes in German labour law that affected companies’ ability to employ temporary third-party labour. This resulted in long delays, disruptions and backlogs at Frankfurt, overflowing warehouses, and trucks having to wait long periods to be loaded or unloaded.
“It was not just a challenging situation that we had,” but one faced by Germany’s wider logistics sector, observes Felix Kreutel, Fraport’s senior vice president for cargo. “One thing that we face in the logistics industry is a lack of staff − and this is quite challenging, to get good quality staff in the peak season. For example, Germany is short of more than 45,000 truck drivers. So, the situation at the airport was one situation, but we have the same situation for land transport. Some freight forwarders had trucks standing still because they could not get the employees to drive them.”
The changes in labour law, which mean that the wages of temporary third-party labour now have to match the level of permanent employees after a much shorter period of time, are already changing employment patterns within cargo handlers in Germany. “Several companies are getting back to the company employing the staff themselves rather than through a third party, and this will help to stabilise the quality,” observes Kreutel.
Although the use of third-party labour has been particularly vital during peak periods, this practice has been increasingly used in recent years by cargo handlers to cut their costs as the rates paid to handlers by airlines have come under ever-more pressure.
“I think this is a general discussion for the whole air cargo industry,” Kreutel says. “In the last years, the airlines have squeezed the cargo handlers like lemons. They had to reduce costs, and the air freight rates were very low; no-one cared about quality. “So, the situation that we found in the air cargo industry last year, and for some airports today, is that the handlers are not paid a high enough price to invest in staff and modern technology.”
He says the discussions have barely changed for the last 10 or 15 years, with people calling for higher quality and investments in technology, but those investments were never made – “because everyone demanded that the poorest guy changes the industry, but no one wants to pay them any more money”.
Kreutel says air cargo carriers have made good money in recent months, “having been able to charge almost what they liked from freight forwarders who needed capacity”, adding: “But do we believe that airlines will give any of that to the cargo handlers, or will they have the same discussions about reducing the price of the cargo handlers?”
However, he believes the difficult experience at Frankfurt in November and December appears to have shifted the thinking of the air cargo community.
“We have the impression that people have woken up and things are not going to be able to continue as in the past − and we see a strong acceptance among all people in the supply chain that finger-pointing does not work any more, and we have to cooperate in order to improve quality.”
One criticism levelled at the airport has been that it does not have an effective ‘truck-appointment’ system. Kreutel says several of the cargo handlers at Frankfurt airport, including Frankfur Cargo Services (FCS) – 49% owned by Fraport – offer this, but the problem has been that many freight forwarders and trucking firms have not been willing to use them, or not reliably. “However, we have been in talks with the participants in the supply chain, and the associations, and we are on the way to establishing standard operating procedures (SOPs) for the way that the business is done.”
These would be SOPs agreed across the air cargo community at Frankfurt airport “to create a kind of framework for a harmonised air freight process. So, we have our air cargo community involved in this, and individual companies talking about this framework.”
As the landlord and a neutral party in the supply chain, the airport accepts that there is a need for it to act as the moderator in these discussions. “The challenges last year have opened people’s eyes that we need someone to moderate, and that is the role of the airport.”
He is reluctant to commit to a timeframe for developing a standard process, adding that such a framework will be developed on a continuous basis. “But we are optimistic that in the first half of this year we will find the various parties to establish an agreement that is needed.”
He says the situation at the end of last year was “eye-opening” in this regard. “Not only were the cargo handling warehouses full, but the warehouses of the freight forwarding companies were also full. It was a generally challenging situation for the whole industry. So, we are currently in very good talks with all of the participants to change something.”
And will the greater profitability recently improve the pricing environment for cargo handlers? “I think that is another question that the industry needs to ask itself,” Kreutel responds. “To what extent is the industry able to measure performance? Quite often, contractual issues for choosing cargo handlers are taken from the airline headquarters, based on price. There are only a few that have the possibility to pay something extra for higher quality. This is a challenge that will take some time, and we will see how long the nightmare some parties faced will be kept in mind to change something.”
One thing that has already been settled is the dispute that led to the industrial action at the end of last year, with companies and staff representatives signing contractual agreements for the next couple of years. “So, it is not something that will flare up in the next coming months,” Kreutel says.
He believes confidence has now returned in the airport’s ability to reliably handle air cargo smoothly if demand continues to grow. “There is no question that we will be able to handle cargo growth. It was a ‘clearing thunderstorm’; everyone got through it, and we now have a huge opportunity. The chances have never been higher to change the way that we cooperate and communicate,” Kreutel says.
“In the past, there was no data exchange; there was no digitalisation; there was no harmonising of processes. Everyone was focused on their own company, and cooperation stopped at the borders of their company.
“But the classical air cargo industry is in competition with the integrators, which don’t face these issues because they have these things in-house. Air cargo has many interfaces, and the more there are, the more difficult it is. So we have to cooperate. The interfaces can still exist, but they can’t be an operational hurdle hampering the operation of the supply chain. We have to see all participants in the supply chain deliver to their client, the shipper; they have to have a reliable air freight process.”
This need for reliable processes has become all the more pronounced because of the growth and spread of e-commerce. “It is definitely the case that everyone is more used to having this kind of information on their smart phones,” Kreutel agrees. “All these standard things are things that we don’t have in the air cargo supply chain. And so there is an increasing effort to provide customers with a better service.
“If we listen to end customers saying they want to use air freight but we have to have reliable processes and quality, the biggest requirement is to deliver as promised; it is not necessarily about speed.”
Kreutel says the current economic conditions seem to be positive for air freight, with no real signs of any downturn. Nevertheless, he believes the rate of growth this year is unlikely to be as high as last year, in part because weak demand in early 2016 had inflated growth rates in the first part of 2017. Indeed, the airport’s cargo throughput rose by just 0.7%, year on year, in the first quarter of 2018, to just below 540,000 tonnes.
However, with so much talk about the growing influence and volumes from e-commerce, does the airport need to make any changes in its infrastructure?
Kreutel says any changes needed to handle growing e-commerce traffic are “less of an infrastructure aspect, but more of a process aspect. We don’t have to have additional aircraft stands or cargo handlers. It is about the process, which is essentially about the things we have been already talking about. It is still about transporting goods from A to B, but because people have the expectation there, it needs to be fast and in a reliable way.” Nevertheless, he observes that people’s expectations from the Amazon experience for domestic, consumer deliveries, do not involve the challenges with issues such as customs that are faced by cross-border transport.
But with normality restored at FRA, and with the airport confident that it can handle future cargo growth, is there now any real motivation among its stakeholders to change?
“We have no doubts that the airport can handle future growth. But we want to change the way we work together in order to further improve our supply chain and provide customers fast and transparent processes,” Kreutel says. “The ‘clearing thunderstorm’ gave all participants a momentum to learn and to set important innovations in motion. In our neutral role, we are trying to moderate this process as best as we can and use the momentum to help deliver sustainable change for all players.”
And the co-ordinated launch already this year of new initiatives by leading air cargo handlers at the airport to improve cargo flows reinforces this sense that there is now an appetite for change.
Frankfurt’s handlers tackle truck congestion challenge
FCS and LUG pioneer compulsory use of loading bay slot-booking system at their terminals
Two of Frankfurt Airport’s major cargo handlers, Frankfurt Cargo Services (FCS) and LUG aircargo handling, are pioneering the compulsory use of a truck loading bay slot-booking system at their respective terminals from 15 May, in a bid to create a more-efficient flow of traffic to and from their warehouses.
From 15 May onwards, only trucks that have pre-booked a loading or unloading slot online via the FAIR@Link ‘Door Management System’ will be allowed to approach the landside truck loading doors of the cargo handling warehouses, respectively, of FCS and LUG – both of which use the FAIR@Link Door Management function from the German software company Dakosy, also used by Lufthansa Cargo. Drivers without a slot agreement must book their slot on site in the freight receiving or delivery office, FCS says, although it stresses that “a timely slot cannot be guaranteed” for bookings made on site.
The move follows discussions on a community-wide basis that have taken place between airport stakeholders this year, within the airport association Air Cargo Community Frankfurt (ACCF), following the disruptions and delays that occurred in the final two months of last year. FCS says the control of traffic by means of compulsory use of a slot system is a joint initiative of airport operator Fraport, LUG, and FCS, in close cooperation with the Hessen Freight Forwarding and Logistics Association.
“With the introduction of a binding registration, we expect significant process improvements for all delivering and collecting companies,” FCS says. “Waiting times should be avoided, and the transparency and predictability of truck scheduling should be increased.”
LUG says the regional freight forwarders’ association and ground handling agents (GHAs) “agree that slot booking systems can only be successful if they are supported by all. Thus they are working on a code of conduct to promote the improvement of cargo deliveries and collections.” The company says it hopes that other GHAs with a slot booking system will make theirs also compulsory, although competition laws would not allow GHAs to be mandated to conform.
FCS says a large proportion of the freight forwarders and trucking companies in CargoCity South “are already familiar with” the FAIR@Link slot-booking system. Those that are already FAIR@Link users can make slot bookings with their existing access data, while other customers can register for one of two usage variants: The free ‘standard variant’ includes all the functions required for the slot booking, while the paid ‘professional version’ offers a number of additional functions. In addition, software companies can connect their applications to FAIR@Link via the appropriate EDI interface, enabling their customers to make slot bookings, FCS says.
But LUG stresses that there are several landside slot-booking systems in use at Frankfurt airport, and there is no obligation or pressure from the ACCF or any other body for all GHAs to use the same system – whether FAIR@Link or any other system.
Patrik Tschirch, managing director and CEO of LUG aircargo handling, is also the current cargo handling representative of ACCF’s executive board, having been a founding member and part of the community at Frankfurt airport since 2015.
He believes the requirement to use a slot-booking system is an important initiative for LUG and for the Frankfurt cargo community in general – particularly given that some forwarders were very critical of service levels at the end of last year due to congestion and long waiting times for trucks.
He says LUG has “invested large sums in its IT infrastructure for decades”, adding: “We believe that digitization and automation are key to process improvements and lower costs. In 2015, we implemented a first dynamic time slot management system at our terminal in the CargoCity South at Frankfurt International Airport. Although the service was offered free of charge, unfortunately too few forwarders and trucking companies actually made use of it.”
He says the company has now “modernised” its slot management system, switching to the FAIR@Link module of Dakosy “to further optimise our freight acceptance as well as freight delivery processes and raise efficiency”, with the rollout completed just before Easter.
“Of course, we hope for a wider acceptance this time round,” he says. “The project has been discussed with the regional freight forwarding association on several occasions and has their support. We are going to make the use of the slot management system mandatory at our facilities, effective 15 May; I am confident that other handlers in the Frankfurt Air Cargo Community will join us in due course.”
He also highlights that cargo handlers, led by FCS and LUG, and forwarders are “discussing a code of conduct for deliveries and collections. The draft is due to be finalised by summer. This would give us some weeks to test it before the peak season starts. The aim is to increase transparency and predictability regarding the cargo volumes due to arrive at the airport. However, the most important thing will be that all stick to this code. The Frankfurt Air Cargo Community with its 50 stakeholders will play a leading role in the success of this initiative.”
Tschirch is a strong believer that “communication between GHA and forwarders will have to be digital in future, whether via FAIR@Link or some other digital solution”.
He insists that the new slot-management system that LUG has chosen is easy to access and use.
“Users can reserve slots well in advance – even before leaving their home base – by entering their vehicle’s ETA, type of transport (import/export), and other consignment information (e.g. weight, number of pieces) into the slot booking site. The system validates the information and confirms the request. It assigns a time slot and gate based on the user’s Transport Pre Announcement (TPA) or provides the customer with an alternative suggestion if there are no available slots at the requested time.”
In addition, it calculates the loading or unloading time based on the freight volume and initiates the documentation process prior to the vehicle’s arrival. And upon arrival at the LUG terminal, drivers proceed directly to the pre-booked loading door.
“If the vehicle arrives prior to the booked time slot, misses it, for example due to traffic jams, or if the freight amount has changed, the information can be updated on the website − including via mobile devices − even at short notice,” he explains. “Flexible rescheduling is always possible. The system reacts dynamically and fast. It assigns a new time slot or ramp if necessary and alerts the staff about the change.”
Tschirch says instructions and support for the use of the system are available in ten languages, and it is also possible to evaluate user statistics for continuous improvements.
Tschirch is also a firm advocate for a much wider digitalisation of air freight operations. “Unfortunately, we have to recognise that the air cargo industry has been very slow to embark on a digital transformation,” he notes. “We urge all our landside customers to use e-AWB and e-customs documents instead of paper. We are very anxious that more airlines insist on e-AWB; so far, taking into account all shipments handled by LUG, e-AWB penetration is still low at 17%.
“However, I am confident that digitization is gaining momentum and companies see the benefits in terms of transparency and efficiency gains. There is a definite commitment in the air cargo industry to modernize processes. The International Air Transport Association (IATA) has recently taken a significant step forward in the digitalization of the dangerous goods supply chain following the adoption of the e-Dangerous Goods Declaration (e-DGD) standards. The International Federation of Freight Forwarders Associations (FIATA) is also pushing its national member associations to take more vigorous steps to promote digital transformation.”
Handlers respond to labour challenges
Alongside introducing a mandatory slot-booking requirement for trucks delivering to or collecting cargo from its Frankfurt handling warehouse, LUG aircargo handling has also been pursuing other initiatives to improve the efficiency and flexibility of its operations. Key among these has been tackling the challenge faced by all air cargo handlers in Germany of recruiting and retaining greater numbers of staff to manage growing cargo volumes, says Patrik Tschirch, managing director and CEO of LUG aircargo handling.
CAAS: To what extent are labour issues a challenge to LUG and how are you looking to achieve the right balance between staffing capacity and flexibility, at a cost level that allows you to still make a decent return?
PT: LUG has had difficulties in finding well-trained staff in sufficient numbers for its station in Frankfurt for many years. But we are not alone. The Rhine-Main-Neckar triangle is one of the most prosperous and thriving business areas in Germany with low unemployment levels and high labour costs.
The Dettmer Group has its own recruitment company, the Logistic Competence Team (That’s the name of the company). In addition, we are cooperating closely with the regional employment exchange and job centres, and offer training and further training on a continuous basis. New regulations for dangerous goods and heightened security requirements mean that newly employed staff does not become productive immediately. They have to be trained first, for example in building palettes, handling hazardous material or temperature controlled shipments.
However, staff availability has deteriorated considerably since summer 2016 and then gathered further pace in the second half of 2017. At the same time our volumes increased. At the beginning of last year LUG started handling cargo for Aer Lingus and Etihad in Munich and Frankfurt. In September, we added Emirates to our customer portfolio in Frankfurt.
CAAS: Are you expecting to recruit staff in the near future and if so, could you elaborate on these plans?
PT: Naturally we are trying to recruit staff in line with volume expectations. At the moment LUG is in a consolidation phase. But the German economy is thriving and thus air cargo volumes too.
CAAS: Given the challenges of Q4 last year, and the fact that airfreight prices and hence airline profitability has improved, are airlines any more willing to help fund the staffing needed for the cargo handlers to be able to provide a good quality service at peak times?
PT: LUG has focused on a consistent top process quality for many years. This allows us to attract new airline clients and hold onto existing ones.
Competition among cargo handlers is fierce, particularly in Frankfurt, but also in Germany as a whole. Airlines pay us on the basis of service level agreements. It would be unrealistic to expect them to help fund staffing. n