In an ideal world

posted on 7th June 2018

Industry representatives have identified a new model for the airport cargo handling environment of the future, reports Will Waters  

Contributors to a debate on how to create the perfect airport cargo handling environment reached a surprising amount of agreement on the current main challenges, possible solutions, and a potential blueprint for the future.

The round-table mini-conference organised by Schiphol Cargo at the Air Cargo Europe event in Munich involved airports, cargo handlers, forwarders, airlines, road feeder service providers, technology providers and air cargo association representatives. Starting with the premise that cargo ground handling takes up a large proportion of total air cargo transit times and that little has been achieved in speeding processes over several decades, moderator Enno Osinga, Schiphol Cargo’s senior VP, said most airports have limited space for handlers, and if the industry is growing, there isn’t going to be enough space to do that. “So something needs to change,” he proposed.

Osinga compared the different airport layouts and processes at Amsterdam Schiphol and Frankfurt airports, including the presence of freight forwarders with airside access at Schiphol. To stimulate debate, he asked: “If you have forwarders on airside, do you really need a handling company. This is a bit black-and-white, but this is the level of change that we see happening.”

‘One-stop shop’

He said everyone wanted a ‘one-stop shop’, but what air cargo had was “lots of in-between stops – which is what the RFS operators live on because they move cargo from one place to the next. But is that actually efficient? And why doesn’t the trucker do all the handling themselves?” he challenged.

“These are all things that we’re looking at: loose cargo versus ULDs; airside handling versus non-airside handling; where are the security points? How do we improve waiting times? Fast lanes, and how we make that work with second-line handling facilities; and the concept of the milk run, where you get everything that is in the handling company at the moment it arrives and put it in a truck and take it away from airside.”

He said import shipments often waited three or four days before they get picked up, meaning airports’ and handlers’ prime space is then used as a storage area.

Also contrasting the models of Schiphol and Frankfurt, Fraport’s Winfried Hartmann asked whether it is better to aim for a frictionless process with fewer handling interfaces and a limited number of ramp handlers, or to have multiple handling companies in cargo warehouses that have the interface to the ramp built into the cargo warehouse and process, as at Schiphol.

Osinga said the reason the two models had evolved this way was because Schiphol had emphasised the importance of market competition, whereas Fraport had been looking at it more from a process productivity perspective. “You can do either – there is no right or wrong,” said Osinga. “The question is, is this sustainable as a model in the long run, or will things change?”

Hartmann suggested starting with a ‘greenfield’ approach and identifying what is the best process, “and then ask yourself which particular situations we have at different airports and what has to be changed if these airports are to become efficient cargo airports”?

IT perspective

Nanne Onland, executive director at IT supplier Cargonaut, said information was one of the ingredients in the equation. “If you know in advance what shipments are coming and all the compliance tasks are prepared in advance so the shipment is ready to take on board the aircraft when it arrives, then you can process more via single points and solve the physical bottleneck problems.”

Forwarder representative Rene de Koning said forwarders adapt to whichever model is operated at an airport, although the ability to have airside access and “act as an airline handler”, provided “more opportunities to integrate the whole chain”.

Sebastiaan Scholte, CEO of road feeder service provider Jan de Rijk, commented: “From a trucking perspective, there are three drivers for profitability: load factor, asset utilisation – making the drivers move as much as possible – and the yield, and two of them are influenced by the handling process: the load factor and the asset utilisation.” Long waiting times affected asset utilisation and whether cargo is loose or built-up affects your load factor.

“So for us, it is easier to have fewer points where we pick up than many points, because asset utilisation goes up and hopefully load factor goes up as well. Our ideal situation would be one place where we could pick everything up – as long as we are quickly served, of course; not having a huge bottleneck because there is only one point of entry!”

Ben Radstaak, MD of the association Air Cargo Netherlands, observed that at Maastricht airport there is just one handler, with six or seven forwarder offices above. “There is one gate, the trucks collect and pick up the goods and drive them to the handler; the forwarder adds the paperwork. That is the ideal model if you’re small; for a big hub, I think that is not economical – you get a big queue there because it is too big a facility.”

Besides, EU regulations stipulate that larger airports need multiple handling agents – basically three handlers, he added. “So there is no one-size-fits-all.” Regarding forwarders getting airside access, he said this was fine for companies with big flows, like Panalpina and Rhenus at Schiphol, but for smaller players it was not economical.

Trucking optimisation

Osinga asked how important optimisation of the trucker is for the whole chain? If they can get all their pickups and deliveries from one location without queues, how much money could that save?

“It depends,” replied Scholte. “On longer routes, the amount of waiting time is lower in terms of percentages. But it could be anything between 5% and 20%, I would think in terms of asset utilisation.”

Hartmann said the most important thing was not whether to have a single pick-up point, but that you don’t have any queues.

Scholte responded: “I would like to have no waiting times and high load factors. But another factor that is important here is IT: the information is everywhere, but it’s not shared. I have no problem waiting if cargo is not ready – as long as I know in advance, I can plan.” Scholte added that it was also not just about cost, but also about speeding up the service to customers.

De Koning agreed: “As soon as you start to share information if there is a waiting time, we can inform the customer and plan our processes.”

Felix Keck, MD of Champ Cargosystems, said: “We we need to think greenfield from the information side as well as from the physical side. A greenfield approach to information means disconnecting the physical flow from the information flow.”

Emergency room

Hartmann said the determining factor in the air cargo process is the scheduled arrival time of the aircraft. “If we take this as a fixed point, then we can develop the process from the arrival of an aircraft to delivering the goods to the final consignee. We have many different players, but what we need is to have a kind of discipline in the process, where we have the arrival of the aircraft, the delivery of goods to a warehouse, breaking down the shipments, and then all this information is shared by everyone.

“Currently what we have is a process where everyone is being pushed. So we get cargo from somewhere and we don’t know what is coming, when it’s coming, in what quantities it is coming. The cargo handler is like an emergency room in a hospital: you never know what is coming, but you have to react. What we want to do is pull.”

De Koning says this absence of information is strange, because forwarders know what is coming and when – at least for exports.

Hartmann said it is the forwarder that is causing these problems because they are optimising things for themselves; deciding whether to build pallets or deliver loose; deliver a shipment 72 hours in advance because they need the warehouse space; or sometimes delivering just four hours before the flight.

“The handling company is the last step on the way to the aircraft; it is the last correction point,” said Hartmann. “It is like the chewing gum between the teeth of the airline and the forwarder!”

Osinga summarised: “So the forwarder knows what is coming, and the trucker knows. So it has nothing to do with goods and information; it is to do with behaviour.”

One freight forwarder admitted that even if he leaves an import shipment for three weeks in a handler’s warehouse and the handling company charges him very high storage costs, the forwarder will cost-charge this to his customer. “So you need to find a way where the freight forwarder gets an improved supply chain through sharing information with its partners in the handling chain, because perhaps it is easier to buffer something at the airline warehouse because it is out of my warehouse.”

Gerton Hulsman, MD of Düsseldorf Airport Cargo, said space shortages at his airport and in its warehouse means Düsseldorf is exploring building a large remote consolidation point for smaller forwarders to use, perhaps a 30,000 sqm facility around 3 km from the airport, where land is much cheaper. Import and export cargo could be consolidated there and shuttled several times a day between that area and the airport.

Osinga speculated how this could work for larger airports: “So we could have a massive departure hall for cargo, a cross-docking warehouse with 200 truck doors, where everybody can deliver whenever they wanted. And then the handler, who is on the airport, gets the information, which is separate from the physical goods, so that they know exactly what is there and he simply has to decide when he wants it – so the handler can pull, rather than having the cargo thrown onto them.”

Radstaak said a large airport like Schiphol would need more than one consolidation point, but you could have all the forwarders and handlers connected via some kind of “internal transportation system. Then you can easily have a pull and push mechanism.”

Scholte questioned who would pay for this new facility. “I’m willing to pay something if I am saving 20% on my waiting times and that is equivalent to X amount of money; I’m willing to share that. But who else is willing to share that cost?” he asked.

But Osinga said having a large remote consolidation point would mean that the on-airport handling facilities could be much smaller, reducing costs.

One delegate suggested that under this model, the ‘value-added’ of the handler would be minimised and that the trucking company could run the connection between the consolidation point and the ramp handler.

Conceptual agreement

Osinga commented: “What I’m getting from people is that this, conceptually, is the model for the future. We all seem to agree that it would be useful to optimise the truckers to have a single point that does not need to be airside, to minimise the space on airside; that we need a good process; that we need the information; and we all are prepared in essence share that information. Everything is there. So the question is, how do we get there?”

But Nicolien Hendrickx, programme manager at the Dutch Institute for Advanced Logistics (Dinalog), asked: “If everybody is saying they have this information and they’re willing to share it, why is it not shared now?”

Hartmann said this question exposed a big obstacle. “And there is a very simple answer to it: because then you have to deliver transparency, and who is willing to deliver transparency that means everybody can look into your processes?”

He said similar discussions had taken place in Frankfurt in relation to a new communications system. Everyone had initially agreed to share their information, but when they later realised the implications, they decided not to.

But another delegate said that it was not necessary to share information with competitors; it just has to be shared vertically.

Osinga said everybody already shared information with Customs.

Shippers demanding transparency

Another delegate commented that anyone who is hesitant about sharing information should realise that shippers are going to put transparency into the supply chain “whether you want it or not”, through GPS or whichever package-tracking technology is used. “So, we might as well go along with it and enable it, because the customers need it.”

Osinga said one key thing was to demonstrate the benefits this model would bring. So could Dinalog play a role in creating visibility of the total costs and benefits?”

Hendrickx said there was a European project, CO3, “looking at the whole gain-sharing model” for collaborations in logistics. Another delegate said Price Waterhouse had also done some calculations around the costs and benefits of shared-user consolidation points, although Osinga cautioned that the things measured by these studies were likely to differ from the airport cargo scenario under discussion.

Hendrickx also cautioned that it was fine to talk about potential gains, but a major transition could present big challenges to some participants. “Do we still need a handler, for instance? What would be his new role? And that transition is the hard part. So, when is a party willing to make that change, because it is a new business model.”

Osinga commented: “The transition problem would be huge, but I don’t think we’ve gone so far yet that everybody in the chain agrees what the greenfield model should be. We’re still at the stage where we need to get the chain to embrace this philosophy.”

Conclusion

Concluding the debate, he commented: “It is not often in our industry that you have a discussion where everybody seems to agree so readily about what the solution should be – as long as you make the outcome far enough away! This does need a lot of follow-up, but the idea was at least to trigger some different ideas and validate the ideas, which I think we have done.”

Speaking after the event, Osinga said: “Handling is an important element of the air cargo supply chain, with potential to speed up or slow down processes. Yet nobody seems happy with the current situation globally. Airlines want better space utilisation and reduced costs; forwarders and 3PLs seek value-added opportunities; handling agents need to make investments in new technology but are held back by low margins; trucking companies want better vehicle utilisation and faster turnarounds; and IT providers are struggling to create seamless information flows.”

He continued: “But everyone at this conference seemed to feel that handling needs new thinking, and that this fundamental topic needs much more open and widespread debate. This is not about blame; we all need to work together to find solutions for everyone, and strengthen our industry’s role in global trade. It’s going to be a long journey, but this mini-conference was hopefully the first step in taking this debate to a wider audience.”