Yuval Baruch, CEO of Hermes Logistics Technologies, talks to Will Waters about partnering with other best-of-breed third-party technology providers to offer customers a fully integrated solution from forwarder to consignee, built around the company’s cargo management system core
The idea of creating a seamless end-to-end logistics chain for air freight shipments and their accompanying data is hardly new, and various parties in the air logistics chain have been progressively pulling together the numerous pieces and processes as best they can, according to the requirements of their and their customers’ businesses – and the available technology of the day.
Integrators, for example, have been doing it relatively successfully for decades for packages and small shipments. And for the last 25 years, Cargo iQ has been painstakingly constructing standardised processes and route maps to provide equivalent capabilities for air freight. Individual freight forwarding and logistics companies have developed their own systems for linking together the parts of the process where they have control or visibility. And third-party technology companies have helped the assorted air freight entities to various extents to digitalise, manage, automate, track, measure, record, integrate and streamline various aspects of their processes – including within cargo handling warehouses.
Further significant progress has been made in the last few years, often built around data-sharing platforms and cargo community systems (CCS), which have become increasingly important as a way for the otherwise fragmented air logistics chain to align processes and priorities in order to facilitate effective air cargo operations.
But there has also been growing interest from individual companies to move forward with certain elements of a CCS where they can see potential easy benefits from linking with or partnering with certain other parties in the air logistics chain, rather than waiting for entire airport communities to move forward with an initiative. Some of the tech companies argue that uptake is often much faster than in a full community context, as there are fewer parties that need to align.
The development of cloud-based technology and APIs, along with an increasing awareness among air freight stakeholders of the value of sharing data and a consequent appetite for collaboration, has also led to growing calls for partnerships among and between the various third-party air freight technology specialists.
Cargo management systems (CMS) specialist Hermes Logistics Technologies has been on a collaboration journey in the last few years that has led to a number of productive partnerships that extend the range and value of its services. Notable examples include teaming up since last year with data-sharing and ‘connected cargo community’ specialist Nallian to empower cargo ground handling agents (GHAs) with an end-to-end solution to digitalise and streamline their landside management processes. And in September, Hermes announced it was integrating Speedcargo’s Cargo Eye solution and HLT’s New Generation (NG) Ecosystem at the point of cargo acceptance to make enhanced digital information of physical cargo available within the Hermes CMS.
Hermes CEO Yuval Baruch says the development of such partnerships, for example with Nallian, goes back to a change in strategy in 2018, when lots of people in the sector were talking about the need for greater connectivity.
“The inception of Hermes was as a pure CMS. We focused primarily on that core application, and developed the functionality to a massive degree,” he notes.
An ecosystem strategy
“Around 2018, we realised this was probably not enough to generate the value that could be generated for our customers, because there is a huge ecosystem around us and a lot of stakeholders. So, we updated our core technology, to be able to move to the cloud. The next step was devising an ecosystem strategy, where we would identify basically three areas: applications, data, and interfacing.”
The move to cloud-based capabilities accompanied the launch of Hermes NG (Next Generation), the next step in the evolution of its Hermes 5 (H5) CMS. Building on key features of H5 – which was released in 2017 and remains at its core – Hermes NG is a modular, cloud-hosted cargo management ecosystem, offered as part of Hermes SaaS or added to H5 as a monthly pay-as-you-go, software as a service (SaaS) model.
The ecosystem means offering and allowing users to pick from a menu of integrated solutions, provided by Hermes or third-party partner companies via Hermes NG, to solve specific problems and improve efficiency in targeted areas.
“APIs are one core element that is necessary to be able to communicate with different companies,” Baruch says. “Hermes is a huge manufacturer of data. So capturing that data, and using that data for insights, for AI, and so on, was key. And then additional solutions that would be surrounding the core CMS to provide additional value.
“We’re looking at the ecosystem of what is surrounding the CMS, because that’s our core competency. Some things we will develop ourselves, and some things we will go out and partner with good other solutions. So, we are constantly looking for additional quality, best-of-breed partners to work together”
He continues: “When we looked at landside management, we said maybe there are other solutions that are better than we would develop. We started looking at how we would develop an e-check-in application, which is the closer element to the warehouse. And then we scanned the market, we saw different community system solutions that are in part also a ‘truck visit management’ (TVM) solution, which is the component of the Nallian solution that is integrated with Hermes. And we teamed up with Nallian to do that.”
Because Hermes considers that data is “core” to its business, it developed that part itself. “We’ve developed our own data lakes, and we’ve developed our own reporting tool,” says Baruch. “Nallian will offer our customers the full solution for truck visit management – the road feeder, the digital apps, slot booking, kiosks, and part of e-reception. But the data that Nallian would be getting from the operation is integrated with Hermes and Hermes will be getting that data.”
Benefits to customers include that “people in the (warehouse) operation know what to prepare, what trucks are coming, what needs to be done, when and so on – they can schedule that. The truckers know when to book the slot, when their cargo will be available to them, and so on. That integration really empowers the next step.”
Baruch notes: “We did a very good job on the warehouse side. Nallian did a very good job on the door towards the outside. Integrating those would now get you full integration from the trucking company, all the way into build-up and break-down within the warehouse.
“So, that’s the real power and logic behind it. We found that there are good solutions out there. And the obvious thing would be integrate well, and offer an integrated joint solution.”
Integrated joint solution
The first pilot of the Hermes-Nallian partnership went live in LAX a few months ago with Menzies, which was already an existing Hermes 5 customer at LAX. The landside part will initially be a ‘Tier Two’ solution – a standalone truck visit management solution, featuring “reception, slot booking, road feeder information, kiosks, mobile apps”. Tier Four would be a natural evolution of the integrated solution, linking the TVM solutions with the Hermes CMS.
“The integration part is planned to be completed in first quarter 2023,” says Baruch.
Hermes is “in the process of agreeing with additional customers about rolling out the integrated solution”
Once the Tier Four solution is released at the end of this year, “it’s just a short implementation by Nallian and a simple upgrade by HLT, and the customer has the integrated solution”.
Because Hermes’ New Generation (NG) ecosystem is a cloud-based and pure subscription-based set of SaaS products users can pick and choose exactly which applications they want and need, to solve specific problems and improve efficiency in targeted areas. “You can, for example, choose to use the Business Intelligence (BI) solution and data lakes and track and trace, like, for example, we have in Australia and in Singapore. It depends on what the customer wants,” says Baruch.
“Whatever you subscribe to, it’s basically on from that point onwards. You don’t have to install anything. It’s a pure SaaS product.”
Integrated airline solution
Another extension Hermes is looking to offer is an integrated airline solution, “which means integrating with the air cargo sales and reservations module” that a third-party provider offers to carriers, “and that will become part of our NG ecosystem offering.”
But that’s “not easy” and involves identifying the right partner where its product, brand and technical capabilities are equal to those of Hermes, before “you can sit down and see, how will this partnership look?”
Baruch says you then look at doing that integration on behalf of existing cargo handling customers or the other party’s airline customers, noting that Hermes has “some level of interest already” from potential users.
“We can then go together and offer airlines a true best-of-breed, well-integrated solution that would cover all their needs,” he notes.
This then starts to look like something approaching the fully integrated solution that people have been talking about, from shipper to consignee.
“We are now talking to the trucking companies through truck visits; we are now doing it for the airlines – the integrated almost end-to-end process they have internally; maybe integrating with a freight forwarding solution in the future, or maybe with a GSA solution. That ecosystem perspective is a must, and we’ve started that. So, this is an area of focus for us.”
Although there may be some competitors offering certain of these solutions already, or even a whole ecosystem, Baruch says “every company has their core competency, in the same way that we have recognised that our real expertise is with the warehouse ground handling, the cargo in the warehouse – that’s what we do better than anybody else in the world”.
And by identifying and partnering with other “best of breed” suppliers, “we’re positioning ourselves much better when we are competing on business, as that will create enormous value for customers. That will be our strategy.”
Whether that continues as a “partnership approach” in the long term, Baruch acknowledges that in the future they could turn into merger opportunities. He notes that Hermes is owned by a very large multinational tech group called Magic Software, where “part of the group’s growth DNA is through partnerships and M&A”. He says Hermes is “actively looking in the market to see what type of expansion opportunities we have, also through M&A. But I think the immediate benefit is with these partnerships. If they work, they do present an M&A opportunity.”
Cargo community developments
Meanwhile, partnerships and cooperation within cargo communities seem also to be accelerating in linking up the various airport cargo players. Baruch agrees that this “has to happen”, although he believes “it’s more difficult in terms of implementation and rollout. Because if you think about an airport and the number of stakeholders, it is a fragmented industry. So if you want to do that, at an airport level, the airport has to be strong and drive this. The business case showing commercial benefit has to be there; however, it’s a bit difficult to prove that to the ground handlers, to the freight forwarders that eventually will have to pay for that and charge their customers.”
He continues: “So, I think it’s an easier sell for us, with our customers (individually). Because there is a clear immediate benefit: your reception is faster; you don’t have trucks waiting; you don’t need so many people in reception. You can increase your handling volumes without increasing your space because you’re building up cargo and you know that the truck is going to be there on time, because they booked the right slot; and you can load that and then go onto the next one.”
“So, the ground handler becomes immediately more efficient, but also their customers and the trucking companies. So, they’re paying less to their drivers. There’s a clear cost saving, efficiency, available to them right away. So the business case is very, very clear.”
In contrast, he questions how many airports are that concerned about trucks having to wait or ground handlers can’t really process their cargo efficiently, because trucks are arriving to their own schedules.
“But I do think ground handlers and trucking companies care. So, I think it’s easier for us to build it out. I think the community element will happen, but I don’t think it will happen as fast as others want it to happen.”
But he says there is certainly no conflict between what Hermes is doing and these airport cargo communities, illustrating this with a recent example in Singapore. “Nallian has been selected as the community system for Changi Airport. We have been implementing the NG ecosystem, so the BI, track and trace, but also the core application with a cargo handler in Singapore. Once the integration is there, the cargo handler will be able to immediately benefit from our Tier Four integration.
“And when Changi is ready, they will install the community system in Changi. But they’re already integrated. It’s a great example of how, from the bottom up, we will deliver those efficiencies for the ground handler.”
Baruch continues: “Our approach to integration and APIs is to create them as system-agnostic. So, whatever solutions a handler, an airline or an airport decides to implement, if we have already created the necessary integrations or APIs, we should be able to integrate with their selected solutions, dependent on having NG available with our customer.”