Cutting the slack

posted on 7th June 2018
Rene de Koning, chief commercial officer for forwarding and logistics group IJS Global, describes how some customer, compliance and regulatory changes may offer potential airport cargo handling efficiency improvements.

And as a relatively new company, IJS Global has attempted to bring new approaches and technology into freight forwarding, which it hopes to use to bring better communication throughout the air freight chain, including the airport handling process. Established in 2004 but with an annual turnover already exceeding €300 million, the forwarding and logistics company covers all sectors but has particular strengths in pharmaceuticals and medical equipment, aerospace and defence – se ctors with demanding needs and customers. Chief commercial officer Rene de Koning, who describes IJS Global as “a very young company with some very experienced people”, believes processes developed for dealing with such demanding customers could be applied to other sectors of the air freight handling chain.

He points out that new regulations, such as those relating to security, have added to the need for transparency, and the information technology system the company has invested in means it can make a variety of information visible to the authorities and customers. “I’m also willing to share my information with airline handlers or airlines and trucking companies,” he says.

So far, this information has only been shared on a selective basis. “We do it specifically for the difficult shipments, because for pharmaceutical shipments you create a much closer relationship with the airline, or with an AOG spare part, you have to create a very close relationship with the airline handler,” he observes. “So we do it in pockets where we have to because the value proposition for our customer pushes us towards seamlessly working with an airline and a trucking company, for example.”

For this to work, the customer needs to be open and needs to see the added value, “and in these specific sectors the customers do see the added value”, says de Koning. “Other industries see it less, or at least that is what I have encountered. But it is just a matter of time, because customers want to have full transparency.”

Invisible ‘slack’

He says end customers currently do not see “the slack that is happening at an airport, where you can cooperate more closely between the airline, the handler, the trucking company and the freight forwarder. But because they now want more visibility, they will see that there is slack.”

He continues: “You can then do it two ways: you can wait until the customer starts to complain and argue about it, or you take a step ahead and try to solve it first.”

He says this is something that the air cargo community needs to work on together, if it wants to improve its efficiency and services to customers. But he acknowledges this is a challenge.

“Everybody is working on short-term things, thinking about tomorrow not about next week,” he observes.

But he says the desire for greater visibility is coming from customers across the board, including small and medium-sized companies, although it is particularly obvious in some sectors, such as healthcare and aerospace, where compliance is such a big and increasingly important issue.

“So it is transparency and compliance, and lately those two things have come together to create a whole new dynamic, because the moment you have transparency you can change things in the supply chain and make the supply chain better, cheaper, more agile and more cost-effective.”

Most of the time, end customers are not aware of problems in the airport environment.  “The only thing that they are aware of is if Customs holds a shipment,” he observes. “Some of them don’t even care about the airline, depending on the business that you are in.” But customers with “critical processes” want to see the handling processes. “With pharmaceuticals, they need to know the airline, they need to know what the touch points are, they need to know everything,” he says.

The difficult relationship

He says the relationship between the forwarder and the cargo handler can be a challenging one, because there is no direct contractual relationship and because the forwarder has no choice of handler if it wants to use a certain airline. 

“You need to build up a relationship with an airline handler so that if you ask them to do something, he does something, because some shipments need priority,” he suggests. Furthermore, relationships with a particular handler might work very well in Frankfurt, but with the same handling company in Miami or in Amsterdam it doesn’t. “So again, it is a people business and also a local business,” he says. “It is about relationships, but you also have to have the vision to have an IT system where you can share information, and if I can tell the airline handling agent exactly that I want to have a certain product and when I want to pick it up, and they can manage that, for them it makes the process much more convenient – instead of having products that stay in the airline handling warehouse for three weeks.”

Not all handlers necessarily have a system that can deal with that kind of pull information, and so they need to see the added value in order to invest. “For them it could be to have a more streamlined operation and do their asset management properly – to have the right resources in the right place when they need them,” he suggests. “For us it is easier because I get my products when I want them.”

He acknowledges there can sometimes also be an attitude problem towards forwarders within some handlers, because they are not the handler’s ‘paymaster’. “But that is inherent to people,” he says.

Nevertheless, there may also be training issues. “Perhaps to train them that it is not only the airline that is their customer,” he suggests. “I train the people in our company that everybody is a customer; even to treat Customs as a customer. An airline is a supplier to us, but you have to treat them as a customer.

“As long as you have the mind-set to treat everyone that you would like to be treated, like a customer, people start to work for you and start to appreciate you. It is better to build a relationship and build business together rather than shouting at each other, because that doesn’t work.”

One of the challenges is to get handling staff to take care of sensitive shipments. “For an airline handler, a guy that is unloading a plane, he doesn’t care whether it’s a box full of Apple iPads or pharmaceuticals: to him it’s a box, and he is only measured on throughput, regardless of what it is,” says de Koning.

But where the company has been sharing information with an airline or handling company, it has made a noticeable difference, “because there is a push from our side or a pull from our side, and then the airline handler starts to understand the importance of the shipment”, de Koning says. “Some airlines also treat healthcare products the same way as a textile product, so also those airlines need to be aware that if they don’t change their attitude, a lot of shippers are going to say ‘I’m not going to use airline A for my pharmaceuticals any more’.

“So, we push and we pull a lot of information towards the airline and from the airline, and in that field we do a lot of triangular meetings where we sit with the healthcare customer and with the airline and ourselves.”

Incentives

In many cases, airlines are already paid an additional premium for pharma shipments, although de Koning doubts whether these incentives are often passed on to handlers to encourage the handler to take more care of certain kinds of products.

“But incentivising the airline handler could also be about enabling them to do more with fewer people,” de Koning says. “As soon as you start to share information, then they can optimise their own processes and become more efficient and they save money. So that is certainly an argument for them to reach out and to want to have that information.”

But he acknowledges that things may look different from the perspective of a handler, which, on the surface, may feel it currently retains greater control under the current process. “If I have three forwarders, the moment those three forwarders start to say ‘I want this shipment at this time’, an airline handler then suddenly has to make a decision about who to help first,” observes de Koning. “But they need to open their minds to outside influence and use the information from the airline and from the freight forwarder to create a better and optimised process.”

He says that if there is a place where you can do very easy optimisation, it is between the four walls of the warehouse. “I’m not sure that a lot of airline handlers work with ‘lean’ solutions, where you basically optimise your processes; perhaps they need to hire some logisticians,” he suggests.

He believes handlers need to move on from the idea they simply move boxes. “That is what they always will do, but if you can find a way to add more value, embrace it,” he urges.

De Koning is positive about recent moves by some of the Gulf airlines to try to improve handling consistency and standards by introducing preferred handling partner programmes and certification processes.

“Again, this is being pushed by an airline that wants to make a change. So somebody needs to be the driver, and I think it is better that either the airline or the freight forwarder drives the change before the ultimate customer is doing it – the consignee or the shipper.”

He believes that ultimately, as more visibility and transparency comes in, those who have made the effort are likely to be rewarded.

“That is the benefit of innovation,” he says. “There’s a lot of work to be done, but it’s interesting.”