Capacity has been a challenge this year from many airports, but the world’s largest air freight forwarder is upbeat about demand trends and confident traditional players can see off the threat posed by new digital entrants, writes Mike King
That 2017 has been a good year for most air freight stakeholders is beyond doubt. Analysing the first nine months of the year recently, WorldACD noted that September 2017 was the thirteenth month in a row to enjoy year-on-year volume growth of well above 5%. However, as with any major surge in demand, not least one that caught most observers off guard, it has also created challenges.
Ingo-Alexander Rahn, global head of air freight at DHL Global Forwarding (DGF), told CAAS that the technology sector, manufacturing, retail, consumer goods and chemicals had all provided strong demand on the back of robust global economic growth during 2017. This has seen traffic surge on the Transpacific outbound from Asia as well as on Asia-Europe routes, while Transatlantic and South American markets have also been buoyant.
The upshot of such rapid growth has been a capacity squeeze through much of 2017, one that has been particularly tight at key Asian air freight hubs. As a result, on many lanes the challenge facing forwarders has been one of procuring ample capacity.
“Securing freighter slots and capacity has proven to be challenging this year – and still is,” Rahn told CAAS in early November. “The market is more and more turning from a buyers’ market to a sellers’ market as capacity is short and the demand is rising due to a very well performing world economy. Additional limiting factors are curfew restrictions in Hong Kong and Shanghai Pudong and the charter ban for all Shanghai airports by the Chinese Authorities.”
DGF has responded by securing more charter capacity and procuring more block space agreements this year than in previous seasons. “And,” added Rahn, “we are looking for alternatives. Zhengzhou airport is, for instance, one of these alternatives DHL Global Forwarding is making heavy use of to operate additional charters during peak season. With this capacity preparation, we are in the position to ensure a smooth service to our customers.
“Another alternative for some of our shippers is the usage of rail solutions into Europe. Though trans-modal transport solutions are becoming more and more an option to gain more flexibility in terms of capacity and lead times, customers – especially from the high tech and electronics sector – still rely on airlift due to short time to market and production cycles.”
DGF has also been taking steps to make its air freight operations more efficient, both internally and for shippers. In this, the increasing use of technology is paramount.
“We have, for instance, implemented a new Electronic Document Management (EDM) system in nearly all countries in which we operate,” said Rahn. “This system enables paperless transport and allows faster processing of shipments moving less paper. I personally believe this is the right direction the market has to move, to make the handling of shipments more efficient, faster and easier.”
Tobias Meyer, COO of DGF, is another firm believer in the power of technology to transform the forwarding market. “Digitalization opens new opportunities to rethink processes, solve customers’ problems better and provide added value for our customers,” he says. “In a digital world, customers expect better shipment visibility, which we have improved significantly over the last year, and easier, more efficient ways to interact.”
Meyer says EDM had enabled DGF to not only remove paper from many processes and make documents readily available in a searchable repository, it had also enabled process automation such as automatic customer notifications and e-Billing. “The system captures over three million shipment-related documents every month,” he adds. “75% of these documents are only created digitally.
“The documents are accessed throughout the DHL Global Forwarding network to expedite processing of shipments, for instance, allowing them to clear customs while the shipment is in transit. Additionally, the documents can also be accessed by our customers via DHL Interactive, our online customer portal.”
DHL has recently launched a huge array of digital products covering all modes of transport ranging from trucking apps for smartphones to entire platforms designed to make the procurement of freight services far easier to navigate for customers. And the company has strong plans in the air forwarding segment, including the launch next year of AirView and AirSecure, applications designed specifically for air freight markets.
“We also have online quotation and booking functionality live for Air Freight in 20 countries and will expand this to more geographies and more services, especially to LCL,” adds Meyer. “So we are moving to make freight forwarding services easier to use and provide better shipment visibility, which is a key customer demand across segments.”
The company’s progress is timely given the emergence of multiple digital start-ups and the rush of incumbent forwarders to raise their game to meet the challenge. But according to Meyer, DGF’s traditional rivals remain the key competitive challenge.
He takes the view that most new entrants are not yet equipped to offer full-service ranges or cope with a major supply chain disruption, although he concedes that all new entrants – irrespective of industry – benefit from initial advantages on speed and flexibility of product development.
“Of course, we are observing the industry closely and if a competitor – established or a newcomer – finds a way to better solve a customer’s problem, we will take notice and act,” he says.
But whether a new entrant can effectively support a larger shipper in the event of a major disruption situation remains to be seen. During such times, Meyer says “having a couple of well-trained and experienced freight forwarding experts around is not such a bad thing if you want to keep cargo moving”.
Meyer also claims there is a misperception in the market that new entrants have already reached a higher level of maturity than a traditional forwarder in terms of productivity. “If you look at the number of people – even excluding developers and management – relative to volume, it shows low productivity as many backend operations are still very manual,” he says.
“The streamlined, digital frontend is relevant to attract a customer, no doubt. But the proof is out whether these new entrants will indeed be able to get to ‘low touch’ or ‘zero touch’ shipments anytime sooner than the traditional forwarders, who are working on this as well.
“So do we see new entrants as relevant competitors: yes. Do we see them as more relevant than our traditional competitors: clearly, no.
“Will one or two of the new entrants stay around: yes, likely so. Will they wipe out all traditional freight forwarders: highly unlikely.” nnn
