Digital transformation

posted on 10th February 2020
Digital transformation

The improving products and falling costs of IT, along with affordable and secure opportunities to share data in the cloud, mean there are no real barriers to finally making progress with digital sharing of data – if air freight players and IT providers can do a better job of demonstrating the benefits, reports Will Waters

It is widely accepted that the air freight sector has been slow to embrace e-freight, and even where it has, its adoption has been only partial. At September’s Air Cargo Handling Logistics (ACHL) conference in Paris, the majority of respondents to an informal poll highlighted a ‘Fragmented approach’ or ‘Legacy and a lack of information’ as the main reasons why, with just 10% putting it down to ‘Lack of incentives’ or ‘Cost of implementing’.

Conference chairman and former IATA head of cargo Des Vertannes said the event as a whole had highlighted how digitalisation of the industry was the key to accelerating the progress the sector needs to see – and the technology and consultancy companies whose executives made up the ACHL’s Digital Transformation panel – “although they don’t hold all the keys, because that is for the entire industry to drive”.

Nevertheless, those panellists all agreed that the sector is finally making progress.

Fragmented approach

Outlining the present state of the sector, Gautam Mandal, head of products at Cargoflash Infotech, commented: “I feel the fragmented approach is one of the big reasons why we’re not having implementation globally. Secondly, not all stakeholders have the same level of infrastructure or buying power when it comes to technology. From my own experience, I have seen many handlers and even airlines that are still working using Excel or similar databases. To expect them to have e-freight implemented, therefore, is a longshot.

“I have even still seen the typewriter working in some offices, in many of the regions. So, that is one of the reasons e-freight has not been too successful.”

Another difficulty is around “what we have been doing as an industry to get these things rolling out”, although this is turning a corner, he said, noting: “We had started out with traditional carrier messaging, and more recently with XML. But now, the One Record programme by IATA – which I think is a fantastic initiative – is a jump from traditional messaging into absolute data exchange using web APIs.

“That is something that I feel is going to take the industry towards complete e-freight – where we are not only exchanging the milestones and AWB information, but we can exchange everything, including the GHA contract, KPIs, SLAs, trade documents, etc. – so that can bring e-freight forward.”

Alex Labonne, chief technology officer at Hermes Logistics Technology, also believes the sector is finally making good progress. “I think it is actually changing right now. In the past, cost of entry of technology was quite high, and the commoditised approach was found to be a risk in terms of data safety.”

He says a fresh approach from IATA has also been positive. “Two years ago, in my first (IATA) Cargo Symposium, I heard people talking about XML, and that set me back a bit. But I think it really is changing, hopefully. There are still some typewriters and old systems, but the cost of entry is going down every day; and data security is more accepted – that the cloud is more secure.”

Lipstick on a pig

Adriana Diener-Veinott, global lead for freight and logistics services at management consultant and technology specialist Accenture, agrees things are changing. “But the reality is it is a bit like putting lipstick on a pig,” she added. “Those old legacy systems are still there. Yes, we put webpages and modern systems on top of them, Java applications, and everything looks great. But at the end, we’re still collecting all the information because we don’t know what is going to break. There is a fear that if we apply this, we don’t know what is going to happen, because the people that built the application are no longer in the organisation.”

She continued: “So, progress is happening, but there is still a lot that needs to be reconciled behind the scenes. That means is it is costly: you still have parallel systems operating. Even in large organisations that spend millions on transformation, we still have a lot of legacy going on.”

Amar More, CEO of Kale Logistics, observed that the first air cargo shipment flew with just one document, whereas today a shipment is “accompanied by 30 kinds of document, 124 copies, and 200 signatures. And most of the data in these documents is the same”.

He added: “This is because the legacy has built up over a period of time. But over the last four or five years, the winds of change are blowing, and now there is a focus to not only remove documentation, but also to look at the overall value to end users; where people are not just measuring e-air waybill percentages, but also conditions at the airport, etc. With a new generation, digital communities and data and logistics corridors are being built. So, as an industry, we have woken up and we’re moving forward.”

Arnaud Lambert, CEO of CHAMP Cargosystems, said the industry “is clearly late in digitalisation”, adding: “There has been a change from the past, but we also need to start to actually address the right problems. We still have a combination of legacy and new systems – which we don’t need to oppose, but invest more in digital systems where there is a business case and where it adds value.”

He said other sectors – including travel agencies and even the banking system – still have a lot of what are basically ‘green screen’ systems behind them, “but they have completely revisited the whole customer and security and service side around it, embracing digitalisation.

“So, we don’t need to oppose the old systems, but invest where it makes sense from a customer perspective and adds value to the supply chain. It is changing, but we need also to look at adapting what we have already started to do.”

From observing the airlines, ground handlers and freight forwarders that CHAMP serves and connects, he says the primary data exchange method today – 95% – is Cargo-IMP, which has been decommissioned by IATA. Cargo-XML is at 2.5%; and CargoJSON – launched by CHAMP just a year previously – at 2.5%.

“So, when I hear about Cargo-XML, we need to go behind press releases and walk the talk. It is not about advertising we are Cargo-XML compliant and then only having one shipment that works; but embracing the standards – not spending another five years redefining standards, and basically 20 years to implement it,” Lambert noted.

“We need to first implement what is already there – first from a standards point of view and then from an industry point of view, and then look at how other industries have defined and implemented those methodologies.”

He agrees that One Record is a promising new approach, noting: “I’m hopeful that because it is open, it is collaborative, it is linked to the community, that it could be embraced differently. But let’s not get into the state of thinking the grass is greener in the future. We are here now, and it starts today. So, it (digitalisation) is accelerating, but we are late.”

Pinch points

Independent air freight consultant Chris Notter observed: “Over the years, I have had to call suppliers in to do a review – where the IT systems that people have spent a lot of money on are not being used properly on the ground. You may say that is the responsibility of the buyer of the system, but surely it makes sense that the pinch points in those places are being done the way they should be?”

Accenture’s Diener-Veinott sympathised: “Every time we look at changing systems, we need to start the conversation talking about what are the pain points. If we’re not solving a pain point, it is not going to get adopted. The best way is to gather a lot of people in the organisation – operations, customer service, pricing – because there are pain points everywhere. We need to fix them all, but we can’t tackle all of them at the same time. So, we need to put in a priority, and where the priority is going to go will be where the most immediate return on that investment will occur.

“What we are seeing is a lot of cargo carriers focusing on their commercial side – because that’s where the money is: pricing systems; booking systems; and operations tend to come later. There are pain points in all the areas, but people put the money where the return comes first.”

Kale’s More says Notter’s observation is a “perfect articulation of what is happening on the ground”, adding: “We have all been guilty of not looking at the end user and his ability to absorb the technology. A study showed that of the applications that are developed, only 30-35% are used. What has been happening over the last two or three years is a lot of focus on user-interface and user-interaction. We just focus on those 30% of applications that are used and making sure that the guy in Mumbai who is loading and has no education, he can also use that system on his Android phone.”

He continued: “I accept that as IT providers, there has been too much thinking among ourselves and not enough thinking of the end user. But that is changing, and that is good news.”

Background history

Introducing some background history, Vertannes highlighted that there was an attempt many years ago, driven by IATA, to do for the air cargo sector what had happened for the passenger airline business, where carriers work on three platforms that allowed them to seamlessly go from B2B to B2C. “Two companies were invited (to pitch), when it came to the last round. It took three or four years of debate until all airlines agreed after pitching from those companies that they would make a decision. When it came to a decision date, 48 carriers convened in Geneva to endorse the winner to make this a standard platform for air cargo. At that point, 50-60% said ‘no’, because after four-and-a-half years of debate, the corporate CEOs said ‘we will not write off our corporate legacy system and the book value of that system’. And that’s what prevented us from going forward.”

As a consequence, “we remain a fragmented industry, a B2B industry”, Vertannes noted.

Industry comparisons

Looking at comparisons with other industries, CargoFlash’s Mandal said one key differentiator was “the open-mindedness to embrace new technology, to experiment – and, most importantly, to take a risk; and that comes from the leadership. Each time you bring in automation, there’s a 50% chance that you will fail. But the management needs to support the leaders to say that ‘it doesn’t matter if you fail, we will support you’. That is one key factor for a successful implementation.”

CHAMP’s Lambert noted: “We use technology that is available in other industries. We don’t invent the technology; we do certain core development; we partner with other providers and we bring it together to make it meaningful to this industry.

“In the past, people who worked on the ground floor were there for many years. Today, there is a turnaround of around 40%; so, knowledge management and usability play a role.”

To Lambert, connectivity and collaboration are now key, whereas in the past, air freight companies have been focusing on optimising their internal processes – “the airlines on their process, the ground handlers on theirs, forwarders their processes. The lesson from the integrators and the new entrants is that the focus and value is on the cross-processes. That is a mindset that we really need to change to move forward.

“If you bring new people into the organisation, there is not an issue with data sharing for a common purpose. What other industries have done by working on their cross-processes, this industry needs to do.”

Customisation trend

Accenture’s Diener-Veinott noted: “What we’re finding is a trend towards customised solutions for customised products.  If you take any organisation, you will find they won’t even have a standard process in all the geographies. That is one of the problems: we are trying to standardise across companies and we don’t even have standardisation within companies.

“So, the reason we see this need for customised solutions is because the people in Asia will say ‘our colleagues in China are so different’. Then the people in Latin America will say ‘we have all these extra regulations and have to do things differently’. And then if you try to find a common solution for everybody, that is really difficult.

“So, we’re now seeing some sectors of industry reverting back to old legacy systems that work, custom-built to new technology – and on top of that, what technology guys call ‘micro-services’, which is a way of preserving the legacies and starting to bolt on little things and plugging in through APIs and other technologies that extend the capability and the life of the legacy system. And that is what we’re seeing today as a major trend, across all parties of the logistics industry.”

Benefits of deployment

Vertannes said everybody wants to reduce cost, to do more for less, in order to survive, often meaning reducing the number of people required. He asked technology companies to highlight examples where the benefits of deployment of digitalisation have been measured, preferably in financial terms.

Labonne said this is possible, adding: “We wouldn’t start developing a product if we didn’t think there was a clear advantage – something that we can measure financially, directly. For example, if you look at all the applications going around about booking and check-in – you can wait two hours here with your truck, or you can go in directly with your shipment.”

But it has been more challenging to demonstrate the value of data exchange, business intelligence and machine learning, “because people can’t always see that these tools will actually help them make the biggest decisions; they can’t always see the value of sharing – it is not directly financial. We’re getting there, because now it’s more widespread, people can see that by exchanging the data better, by having more eventful data, there are lots of collateral advantages to that. Putting those in numbers, we are getting there. But in the end, we don’t have to because the costs are so low now. This is why I am now very positive because we are able to create these products with very low entry costs, sometimes with zero entry costs: don’t use it, don’t pay anything.”

He continued: “I come from consulting, where we had to show value for everything; where are no client will do anything unless there is a return on investment. For the cargo industry, there is a lot of low-hanging fruit, and when I started in cargo two years ago, I thought ‘this is for the taking’,” although he acknowledged: “It is taking a little bit longer than expected.”

CargoFlash’s Mandal noted an example of “one airline client and how we helped them increase revenues with technology.

We created a platform which enabled them to become a virtual integrator. We set up a complete e-commerce platform from first mile to last mile, without a single investment apart from the technology investment. The system enabled them to have multiple vendors. I can’t go into details, but what I can divulge is the growth they have achieved was 1,800% in 26 months, in the number of air waybills – and with the same limited capacity. This meant a direct revenue increase, because the traditional cargo volumes became small packets, where the revenue per kilo was exponentially higher. So that is what technology can do if we look at partnership – and not just look at the vendor-and-principal relationship.”

Cargo community systems

One recent area of progress in digitalisation has been through the proliferation of airport cargo community systems, seen by many as a way of reducing air freight’s fragmented approach by connecting companies together.

More said Kale had been deeply involved in developing these for ports and airports, highlighting that these are “not just centred around airports”, but “also connecting exporter to freight forwarder, and freight forwarder to transporter, customs broker, ground handlers, airlines, and then destination communities.

“And the benefits are very obvious. We have received two awards from the United Nations for cargo community systems – one on the maritime side and one on the air cargo side.

For example, before creating a digital community of 1,800 freight forwarders and 40+ airlines at Mumbai airport, the airport had nine cargo counters – “and that was reduced to just one, for one-time shippers or contingency measures”.

More continued: “Before having an integrated platform, a freight forwarder came with cargo, stops the truck, goes to the handling company, hands over documentation, and by that time another truck comes, and it builds up congestion. With this digital platform, information is sent to the handler’s system, and it knows how many trucks are expected, what cargo it is bringing, and these are real benefits.”

These days, the airport’s relatively small cargo warehouse handles around 1 million tonnes of cargo per year and close to 1,000 trucks a day. “Increasing the throughput of the facility is what happens,” he added. “So, cargo community systems are essentially a game changer. Similarly, on the maritime side, there is so much opportunity to reduce documentation, because the same data is repeated six or seven times.”

CHAMP’s Lambert said no two airport cargo communities are the same, but “that does not mean they can’t use the same data, potentially the same platform – and connected platforms”.

He continued: “The focus on communities is about creating the value of collaboration at the local level, versus on the worldwide level or a specific network level. So, to me it’s a very good step. Suddenly, what you have is a traditional chain between the typical customer or the top 10 suppliers, you cross those different customers into one specific node, and you try to optimise that node to the specific requirements.”

Question of leadership

One delegate questioned how many airlines today allow its cargo handlers to move all shipments without any documentation, noting: “Today, we have the ability to take out costs; they still have not exercised that ability to do so. There is a lack of leadership.”

Another questioned whether any new legislation is likely to force implementation to speed up.

Lambert responded: “Fast and legislation don’t normally go together… but the moment they start to impose something, of course things move faster. You don’t have a choice. But I’m more concerned that we move when we start to see a real threat; and I believe we are starting to see a real threat from customer expectation, from customer experience. We need to continue to accelerate further and to go from proof of concept into wide adoption. And that will need to be together – suppliers in collaboration with each other.”

More commented: “Regulators always take technology adoption to the next level. We developed a community system and thought ‘what a fantastic thing we have developed’. But the adoption was very low.” Then new European regulations came in forcing customers to send shipment data electronically to carriers, “because that is the only way to get submitted to European customs – the largest trading partner of India. In 15 days, adoption of the system increased 16 times.”

He continued: “There are three ways of getting things done: carrot, stick, and carrot and stick. And the stick comes from the regulators. We are a segregated or fragmented industry, and if you have to explain all the benefits, it’s a big task. To me, regulation definitely help things move faster.

Stan Wraight, president and CEO of consultancy Strategic Aviation Solutions International, said he is a fan of the cargo community and also of the virtual integrator concept, but that a lot of companies, for example, trucking companies and freight forwarders in both sea freight and air freight, remain reluctant to share data – especially with proprietary systems or a single carrier. He asked why tech companies aren’t “spending more time as an industry getting that comfort level so that they will be willing to adopt, and removing that pain point”?

Accenture’s Diener-Veinott responded: “This is something I have been investing time in. Sharing data today with traditional technologies can mean somebody has a view of the entire picture. This is fuelling the lack of trust: I’m trusting that somebody has some database with everything that everybody contributed – which is why we have been looking at technology like blockchain.

Blockchain’s potential

“The concept of blockchain is distributed databases – which means you can build a community system solution or platform where there is no central database that has everybody’s data or the entire picture. And on top of that, blockchain gives you encryption and other bells of whistles. But a distributed ledger or distributed database, you can still bring it all together for the parties that are involved in that particular transaction; they can see the information they need to see, but nobody has the complete picture for all the transaction.

“That is something we have tested on the maritime side of the industry and something that has proven to be giving people that comfort level. There are still some other issues to overcome, but from a technology point of view, that is the experimentation that has to happen. The lack of trust is due to the fact that somebody will have that whole picture and somebody will want to monetise that.”

Wraight responded: “We all know about blockchain, but the little freight forwarder or trucking company and small airline, they don’t know anything about this.”

Diener-Veinott responded: “They don’t need to know.”

Wraight disagreed: “They do need to, because they won’t sign on to a cargo community system because they want to keep their information proprietary, because they are afraid that other people get their hands on it.

“We don’t do a good enough job – you don’t do a good enough job – promoting that. I think you as an (IT) industry are looking after your own interests too much and not looking after the interests of this industry as a whole.”

Lambert noted: “For me, it is not about blockchain, and it is not a technical discussion, because we have enough technology to be able to trust and secure information. We have a role to play there, I agree.

“Today, if you look at the actors, even if it is their core partner, they just don’t want to exchange information between the airline and the forwarder and the forwarder and the ground handler. And if you compare this industry with other industries, or the difference with younger generations, we have an issue there.

“It needs a mindset change – to the fact that I have more to gain by sharing my data than to lose. I don’t mean every single bit of data; just on the operational side. People hold the entire logistics chain hostage for a few bits of data that they want to keep, to keep their options open. For example, freight forwarders keep their data until the last minute, so they can change the airline at the last minute. But they actually prevent the rest of the logistics chain being efficient.

“When do they change their mind in the last 24 hours? For less than 5% of shipments. So, they hold the entire logistics chain hostage from a data point of view to be efficient, including up to the shipper, for just an exception.

“So, let’s share everything and manage the exception, versus blocking the entire logistics chain from an information point of view.

A blocker to the business

Labonne from Hermes acknowledged that the IT sector had at times be “a blocker to the business, been charging millions for years. But it is changing now”, partly because there are some disrupters coming in. “Now it is very different: we are opening the doors now; using digital technology in the cloud, raising digital technology. Now people are so set in their ways, and perhaps that is our fault in the past, it meant send all of your data. Now, we just change an event.”

He continued: “Now, we have an open door; but people don’t want to walk through them still. I understand that in the past, IT was responsible for that; but things have changed. We have adapted; we are ready; we have got the tech; we have a few customers walking through the doors now. But sharing, people still don’t want to do it.”

Mandal from Cargoflash said technology organisations were now also much more open for collaboration, adding: “If I have a solution, or if someone else has a solution that is unique, there is no need for the industry to reinvent the wheel. We collaborate; collaboration is the new word in our industry. Unless we collaborate, we cannot do good things within the industry. If a solution is available, we’ll collaborate and provide a solution to their clients so that customers can also benefit from that proprietary solution.”

More commented: “When we launched the community system, we went to people and said: ‘here’s the infrastructure; start using it’. The same questions popped up: ‘why should I’? ‘How secure is my data’? So, I asked them back: ‘how secure is your data today? If your runner goes to the airport, your documents could easily be handed to your competitors and you would not even know. Here, if a data breach happens, you will at least know’.”

He continued: “Another question is: ‘how secure is your data in your facility? It is only protected by the limitation of your IT manager’s skill, whereas if it is in the cloud, where there are seven layers of security, it is that much more secure’. When you start explaining this, people do come on – because they know that the data is not safe on paper. So, yes, we need to do a better job of explaining these things – and tools like blockchain, there are practical use cases.”

Cost of change

Lambert added: “In the past, the cost of change on the digital side was on the IT side. In the future – and I have two examples from RFPs that went out this year – it is about the cost of the change management; the change of the mentality and changing the process as a result of new technology”.

That becomes a problem if people want to change everything in one go. “No, you need to change and focus on what makes sense, and usually focus first on the customer experience, on what can improve the margin, and lastly usually go to operations. But that is where the biggest costs are: the costs of change, not of IT.”

He concluded: “Hopefully we (technology firms) can improve and be a better partner in the future. The change mentality is a difficult one to have; but hopefully with younger people being attracted to the industry, it could be easier in the future.”

Céline Hourcade, now a project manager for TIACA but who until September was IATA’s head of cargo innovation, questioned whether everyone in air freight needed to know what ‘Cargo-IMP’ and ‘Cargo-XML’ and ‘blockchain’ mean, adding: “When we are using a smartphone, we don’t know all the protocols behind it. For a user, it is not necessary to know the technical details like that. I’m just wondering whether we have the right approach in this industry, by always trying to know and having very deep IT discussions.

“We have people in this industry where IT is their job and expertise, and we need to give them the freedom and room to deliver what is best, and for each stakeholder to just say: those are my needs, and deal with the technology park, instead of having those constant discussions about IT elements.”

Sara van Gelder, cargo digital development manager at Brussels Airport Company, commented: “I fully agree; and I also don’t think it is the job of the technology companies to push forward towards the change. They need to facilitate and make sure that the change is possible in a secure way, but it for is all of us – handlers, freight forwarders, airlines – when you are interacting with your customers and doing the business, you need to create added value for the partners you work with, and say: ‘if you give me data, the technology is there, but I can give you in return a more efficient process, a more-qualitative process’; and if we all start doing this in our own inner circles, then we could move forward. That is the reason we’re not moving forward today.”

Alex Driesen, co-entrepreneur from IT and data-sharing specialist Nallian, commented: “I think that as a technology company, and collectively, we have been doing a bad marketing job. We have been stressing this concept of data sharing, but is not about data sharing; it is about the applications.

“Take the example of an iPhone: if the first time using an iPhone it asks you ‘what is your location?’ you will not give it. But then you install an application like Waze or some satellite navigation system and it asks you your location, and then obviously you give it – because otherwise, what’s the point of using a satellite navigation system?

“So, collectively as an industry we should be focusing much more on these process improvements and specific applications, and the data sharing will come automatically.”

Vertannes was surprised to discover that although the freight sector has associations representing various other parts of the business, there is nothing like this for air freight’s IT sector.

Kale’s More commented: “No, not yet. But at TIACA, we are creating a technology cluster.”

Connecting cargo communities

Alex Driesen, from IT and data-sharing specialist Nallian, says that connecting different cargo communities to one another is easier than some people may believe. Allowing the different parties in the community to communicate with each other and share data already requires the community’s platform provider to be able to translate the various communication formats that each participant uses. Connecting with different communities would mean doing that again, albeit at a different level – or “on the side”.

He says it is useful to have messaging standards, but there is no great need to switch from Cargo-IMP to XML, or any new version. “Of course, if you are going to start afresh, then it makes sense to use the latest version,” he says. “But if you have something that still works, then there is no need to change it. There are ways to translate and work with that.”