Digital journey

posted on 22nd October 2019
Digital journey

Many air freight initiatives, including e-freight, struggle to make rapid progress in the absence of government mandates or sufficiently strong and obvious incentives, observes Emirates’ Henrik Ambak. But progress is being made – including within Cargo iQ towards the ultimate goal of piece-level visibility

Air freight’s digitalisation journey has been a long and challenging one. Henrik Ambak, SVP for cargo operations worldwide at Emirates, remembers the creation of the air freight sector’s e-freight programme back in 2006, among “a small enthusiastic group of airlines and forwarders, under the umbrella of IATA”, with the aim to build an end-to-end paperless transport process for air cargo, made possible with a new expected regulatory framework, modern electronic messages and high quality of data. And he recalls the promise to “take away all our paper” and moving beyond the governance and regulations and all the things that still required a piece of paper.

As of March 2019, the electronic air waybill (eAWB) network – locations where the legal framework has been created to allow an electronic contract of carriage – covers around 67% of worldwide trade. And the global eAWB penetration level on these legally feasible trade lanes has continued to rise, exceeding 66.3% in August – meaning that a little over 44% of total global air freight currently travels under an eAWB. And that’s just the eAWB; it doesn’t include all the other documents in the pouch.

But progress is being made. And Ambak and Emirates are believers, he stresses.

“The whole thing with digitalisation is obviously super-important,” Ambak says. “And you can say that cargo is super-late.

“Fast forward to today, we embrace digitalisation or ‘digi’. We have a number of active work strings on this: billing, distribution, booking, full operations. You will see major announcements from us in this space. But it’s something that must happen. We are behind as an industry, and we want to be ahead.”

The latest e-freight figures from IATA list Emirates as 7th worldwide in terms of eAWB volumes, although in percentage or ‘penetration’ terms, the level stood at just 40.7% in July, well below some industry frontrunners and most of the major carriers –many of which have penetration levels in the region of 70-90%.

As an organization, Emirates SkyCargo has taken a pragmatic view that seems to broadly reflect the motivations of its customers to participate – and their perceptions about whether e-freight brings them any meaningful value, yet.

“We embrace it. We make use of it. And we have, over the last months, seen a resurgence in requests from forwarders,” says Ambak. “For some years now, it’s been a dormant kind of required conversation. We’ve seen some of them, the global forwarders, coming back and wanting e-air waybills again – possibly because it also fits in with their own digi work plan efforts. And that gives it a kind of a second life, which we fully embrace.”

Missing incentives

Some carriers report that it has been tough to persuade forwarders to participate and make progress with eAWB use. But Ambak says: “It has been difficult for airlines and forwarders – because the final incentive, that you don’t need the paper, has been missing. In many countries, you still need all kinds of certificates, signed not in a black but in a blue ballpen.”

He continues: “So, we can do whatever digi-ing we want. But at the end, when you pass a border, there will be a customs officer or a pharmaceutical or health inspector who would like to see this kind of documentation with the right stamp and the right blue signature. And then the whole concept of ‘digi’ falls apart, because governments are not embracing it wholeheartedly. So, if you really want to see this digitalization kick through also at the operational level, governments are sitting on the key.”

IATA recognises that this remains a problem, with IATA’s head of digital cargo, Henk Mulder, observing: “That’s right, and that’s half our challenge. The other half is getting airlines and forwarders to implement eAWB.”

Although most important aviation and air freight nations have now ratified the Montreal Convention 1999 (MC-99), which facilitates – among other things – the use of electronic air waybills (eAWBs) and other documents of carriage, many “customs, health, and all kind of other authorities still want (paper) documents”, Ambak highlights. “As long as it’s not good enough to send electronic messages to customs in many countries, then we still have to transport the document – which means that I still need to employ a driver to drive from the cargo terminal to the aircraft. It’s inefficient.”

This explains why Emirates’ eAWB penetration percentage levels are below the industry frontrunners and most of the major carriers. “First of all, it is important to note that in terms of eAWB cargo volume, Emirates SkyCargo is ranked within the top 10 carriers globally,” Ambak notes. “(However), what we see in our day-to-day operations is that there is a lack of true value for eAWB. This is because in many of the markets where we operate, there is still a legal requirement to carry all paper documents for customs clearance.”

Mulder acknowledges that the international protocols refer to the air waybill transport document, adding: “This indicates that eAWB and paperless are not the same thing at all. Ideally all documents would be electronic but we have focused on the eAWB.”

Mulder continues: “You may wonder what the point is then? Aside from the legal obstacles to paperless, one defining factor is the ability of the transport partners to issue and process electronic documents such as eAWB. That number 66.3% in August is an indication of the capability to issue and manage electronic documents as a technical and business competence. This is why that number is very important – even if there is still a lot of paper in the process.”

Legal requirements

Ambak is not persuaded yet that it is worth airlines promoting the use of eAWBs on lanes where full digitalisation is not yet possible. “In this (kind of) case, where there is a legal requirement for transporting paper documents, we do not create an eAWB, as this is a duplication of effort – unless specifically requested by a customer. Other carriers may choose to drive eAWB in addition to sending physical documents in markets where physical documentation is required.

“However, where a customer specifically requests for eAWB or in markets where there are no legal requirements for paper documents for clearance, we do promote eAWB.”

He says the reason for developing e-freight in the beginning was because the industry “thought that there were still cost elements we can take out, but we can’t because we’re still transporting the documents in parallel to the electronic information. So those benefits that we should’ve been able to enjoy in terms of cost savings are very difficult to enjoy.”

Nevertheless, the real benefits are surely not about eliminating the paper, but what you can do with data if you can get it earlier and digitally.

“And that is why we embrace it, because having the information is important,” says Ambak.

Other benefits often cited of e-freight include operational efficiency through the reduction of the end-to-end processing time; cost effectiveness through the reduction of document processing and archiving costs; improved data quality and accuracy; digitization enabling the development of new innovative services and solutions, thus increasing the value of the air freight to shippers – such as with real-time status updates; and regulatory compliance.  

Compliance focus

Compliance has become an even bigger focus area for air cargo carriers recently, with world leaders “handing out sanctions left and right and centre”, Ambak notes. “Whenever government issues a sanction, it has huge implication for the supply chain – because we have to vet that every shipper, every consignee, and every commodity we transport is not breaching the sanction somewhere. The US even enforces their sanctions extra-territorially.”

Carriers as well as shippers are penalised if they transport something between two other countries and it breaches a US sanction – “which has consequences”, he notes.

The company now has a dedicated team, including computer support or system support from a company that traditionally has been supporting the financial sector – which has been under similar pressure for years.

Airlines such as Emirates have been implementing systems that allow them to screen everything and, “based on our existing controls, we turn back some shipments because either the shipper, the consignee, the country it is going to – or the combination of the country and the commodity – is not where it should be”.

This has been accelerated by the recent China-US sanctions on certain tech companies, but also by the sanctions on Iran – an important local market for Dubai-based companies.

Single Process

But despite the benefits of having this data early, Emirates SkyCargo has not been tempted to go down the road some airlines have, like Lufthansa Cargo, of allowing or requiring forwarders to submit eAWBs for all destinations – the so-called ‘Single Process’.

Ambak says he cannot see the point, given that in some countries such as Brazil “customs may even board your aircraft on arrival just to check your documents are on board. And if they’re not on board, they will give you a fine”.

Under the Single Process model, the airline decides whether a paper-AWB is needed by local authorities or at destination; and on non-eAWB-capable lanes, the airline will then reproduce the paper-AWB for the customer, as would be the case for shipments going to Brazil.

“I’m at a loss to see the benefit… that what the forwarders are printing today, the airlines start printing instead,” says Ambak.

He is not fully persuaded by the argument that by encouraging forwarders to supply the data early through an eAWB on all shipments, the airline benefits significantly by receiving the data early, and digitally.

Advance Cargo Information

“I still get the data today, because there are so many countries that have implemented ACI – advance cargo information,” he says. This means countries with such schemes can issue pre-loading denials if the authorities believe a shipment or shipper may be suspicious.

He says country after country are now requiring advanced cargo information, with recent additions including Kenya and Sri Lanka, estimating that ACI is required now for something like 80% of air freight shipments.

“So, the customs authorities around the world force us to provide this information electronically. We get it from the forwarders, we onforward it, everybody is happy,” says Ambak.

Or they might be happy, in a rational world.

“Who would think we then still need to provide a paper invoice for customs clearance?” Ambak asks, rhetorically. “That is where the insanity kicks in. They (customs) have all this information. But do they use it then to make sure that you can take away all the documentation?

“There’s a disconnect. Governments have a huge role to play in helping this.”

Mandatory requirements

He says the mandating of requirements by governments can often be helpful – and indeed necessary – in forcing industry to change and modernize.

“In this industry, when we develop something ourselves it’s often not possible, ‘too complicated’, to get everybody on board,” he notes. “Then the government somewhere says ‘this is the law by the 1st of July’, and suddenly everybody’s ready.

“It’s an amazing effect; when it’s voluntary, and therefore to your own benefit, you would imagine, everybody has an opinion and it takes forever to get to an agreement. But when the government says we must, then we can.”

Cargo iQ exception

Cargo iQ is kind of an exception to this, although it has taken a very long time to progress.

“To me, one of the most important things about Cargo IQ is it’s the only equal platform we have between airlines and forwarders,” he notes. “Airlines and forwarders sit together with an equal voting right, and construct something. Does that take a little bit longer because you need to get approved? Yes.” But it’s making progress, he says.

“And we have given ourselves three things we want to deliver by the World Cargo Symposium next year. We want to deliver a specific service overlay for Pharma, so you are capable of any measurement milestones for pharmaceutical transport.

“We want to have the capability of quality measurement for time-definite services. Today, the Cargo iQ measurement system is based on the itinerary of flight sequencing and flown as booked: I’ve booked this cargo first to take flight 123, then it comes to Dubai and it takes flight 564, and maybe it continues on a truck to a final destination. So, you put up an itinerary. That is what today’s quality management needs. That’s fine; that’s a commercial choice.

“We also now understand the need to put out a framework for time-based, time-definite services. You may say to me ‘I don’t care what flight you use, but you have to promise to be there after 72 hours, or 48 hours’, whatever it is – which we see an increasing amount of forwarders with in their RFQs. Then we’ll also have the quality measurement capability to measure against – not replacing the itinerary, but adding to it.”

He continues: “The third and last one is finally getting our arms around piece-level control. Today, if we have 20 pieces, and one piece is not where it should be, you’ll be told that one piece is missing. But is it the box with the drawings? The box with the bolts? Or the box with the sheets? Nobody knows. It’s a box. It will be helpful if you can say ‘it’s box number 18 out of 20’. So, the shipper can say: ‘ah, it’s the box with the drawings that’s gone. Now I can do something to rescue the situation’.”

That need for piece-level tracking and control is further emphasised by the growth and requirements of e-commerce traffic – where in many cases, each box has a different end customer, he notes, adding: “So, the whole concept of piece-level control becomes more important than it ever was before.”

Delivering solutions

Delivering a solution for this by the next WCS means having a method or process for piece-level control, “meaning that between the shipper, the forwarder, the airline, the handler, we know how to identify the piece, so that it makes sense between us, so we can communicate between us – to allow us to have that information across the supply chain”, says Ambak, to identify “what is it that is not working?”

He continues: “Or in some areas of the world, forwarders will give you a very large shipment, maybe a thousand pieces. And they will tell you, we can actually forward this over three consecutive flights; but it’s quite important that piece number 1 to number 100 are on the first flight. Then you can spread the rest as you like. Then it’s good to know where piece number 1 to 100 is, out of the thousand pieces.

“So, there are a number of very different commercial situations also, where having piece level control is going to enhance airlines’ and forwarders’ ability to serve the ultimate shipper.”

He says airlines and forwarders are both equally motivated to do that. “And that is what I like about Cargo iQ – it’s a group of people who have a common interest. Yes, we compete with these other airlines, and the forwarders around the table also compete with each other; but we have a common interest – so that the industry fits together.”

In the absence of this kind of standardised approach and process, airlines have to do a lot of programming specific to individual clients or partners, “which is not helping the industry to become simple”, nor is it efficient.

Piece-level labelling

Piece-level control also means standardising piece-level labelling. But Ambak says that’s a relatively simple part of the challenge – “the lowest level of that conversation. What is it that the label says? Today you have the air waybill level with the airway bill number. It says the destination and it says 100 pieces. But it doesn’t say anything about what piece number this is. So, we need to add this.”

He continues: “How is that information captured and communicated between computer systems? If we look at the supply chain, the information is handed over many times between many players’ IT systems. Shipper, forwarder, airline, handler, handler, airline local station, local forwarder, maybe the trucking company, consignees. Along the supply chain, information is exchanged many times between very distinct, different entities. And to make that efficient, the data exchange standards or digi standards are essential.”

That means both the data-exchange standards and standards for the labels themselves are important. “Because for Benjamin’s warehouse, when he sees the shipment, he should know it,” notes Ambak. “You may barcode scan it. But you can also just visibly see it. The majority of the world’s warehouses are still managed by people. So, because this is piece number 2, he knows what he’s looking at.

“So, in these discussions, we always have to be quite practical about the people who are going to use this: it’s going to hit some very real people sitting on some very real forklifts, who can either make things work or can make things go seriously wrong – not because they want to. You can have the process and the information, but if it’s not available to them, how are they going to do it correctly? They can’t. And that’s where we want to fix.”

Barcode resolution

Ambak continues: “I still remember 1996, at the Peacock Hotel in Memphis, Tennessee when resolution 606 under barcode labelling was passed by IATA. And everybody in 1996 thought ‘now we’ll get piece labeling under control’. That is 23 years ago… and we’re still talking about this.

“So, Cargo iQ have decided that it’s about time!”

But it is still unclear where in the process that labelling is going to take place. “My personal view is, I would imagine it happens at the forwarder level,” says Ambak. “Some would argue that you can use UN standards so that the shipper can put it on, and you can have 16 fields of mandatory digital data.” He believes that is fine in theory, but it would mean labelling the shipment before it has even been determined whether that’s going to be shipped by air.

Ambak also highlights “the problem we have is Benjamin on his forklift”, who sees a package and finds several barcode labels and information – for example, one from the consignee or manufacturer, for its own internal purposes; another from a local delivery firm; alongside an air waybill.

“Which one is it he has to look at?” Ambak asks. “What is the chance that he’s going to read the wrong label?

“That’s a discussion to be had. But we believe, as Emirates, not Cargo iQ, that the air waybill label that says ‘this goes to Hong Kong… airway bill number 176 or 020, whatever the airline is, 100 pieces… this is piece number 1’, has to be one label. So that when the players have to instruct the guys in the warehouse – be it forwarders, handlers, or at airline facilities – the information is simple and realistic, so that it’s going to work.”

He continues: “To me, a lot of this is about simplicity; don’t make things more complicated than they have to be – because then they will fail. And always think that in the industry, you have advanced players with a high level of automation, high level of digitalization, and you have players who have basically nothing. And the same parcels, packages, are going to move through the supply chain where, on the same journey, it will hit facilities with very different degrees of sophistication.”

He continues: “So you could actually talk about an element of ‘lowest common denominator’.

Ambak is confident in using Cargo iQ standards as the template or the framework for operations, with Cargo iQ member airlines and forwarders now “the majority, the key players on the market on both sides. If we adopt this, walk away and do it, I’m quite comfortable that the rest of the industry will follow suit. Because then there is an actual de facto standard in place, that can be taken up and used.”

That will be true in terms of piece-level standards, just as it has been for other elements of Cargo iQ processes. “And it’s not that Cargo iQ is going to keep this secret to itself,” he says. “If Cargo iQ can develop something that the rest of the industry can make use of… then we’ve done something beneficial for all of us.”

Cargo operations control centre

In terms of using Cargo iQ in Emirates’ process, that data is sent to and managed via a cargo operations control centre that has been in place for around two years. That centre has helped to improve the airline’s cargo operational processes in several ways.

“The first thing is, it allows us to standardize what happens in stations across the network. So, whether you went to Buenos Aires, London Gatwick, Stockholm, Frankfurt, Dubai, Hong Kong, it has to follow a certain sequence – which, I have to admit, was not the case and I don’t think is the case for any airline who has not been through this process of standards.

“The second step is that you standardize your interaction with the different handling agents. That’s why handlers are also taking interest in Cargo iQ; for people like Swissport and WFS, it helps them and their business that there is a facilitation standard.”

He continues: “The next step, once we have the booking in place and a shipment plan in place, we have a team which monitors, 24/7, that we actually do it like that. Like any other operation, of course, things go wrong. They identify something happening between origin and destination that puts our original promise in danger. So, we have to make an intervention, and bring this shipment back on track.

“At the moment, they rescue around 300 shipments a week.”

Although Emirates SkyCargo has always focused on being reliable, Ambak says “applying the normal process that was good enough five years ago is not good enough today and will not be good enough five years from now. We still need to continue to improve.”

Identifying when a shipment has deviated or risks deviating from its shipment plan is one thing in Dubai, where Emirates handles itself. But in the rest of the world, “it’s important that all the handling agents give us the status of the shipment feedback the same way, so we can see and use the computer system to manage this.”

He says in most parts of the world, where Cargo iQ-compliant GHAs are available, “you are not a GHA for Emirates if you don’t”.