Race to the top

posted on 4th April 2018

Air freight should focus on a ‘race to the top’ on quality rather than the current race to the bottom of ever-lower prices, according to the European Shippers’ Council’s head of air freight policy, who argues that operators must develop clear measures so that shippers can differentiate clearly in terms of levels of service performance.

Joost van Doesburg, who is also secretary of Dutch shipper association EVO’s air freight council, believes too much attention is currently given to shippers who say they will ship more by air if the air freight rate is cheaper, instead of how the sector can focus on the more complex demands of shippers in the air cargo industry. He notes, for example, that a presentation at this year’s World Cargo Symposium highlighted the finding within a report by consultant Seabury that 20% of shippers would use more air freight if the price was reduced. “But that was not the best way to frame this, because for 80% of the shippers, the other categories were much more service focused,” van Doesburg says.

“So I would like to claim that if you improve your service, the amount used by shippers would be increased. Currently we have a race to the bottom in terms of air cargo rates, but we should start a race to the top in relation to providing the best services.

“Service should be the driver of the next coming years, and we should be really transparent with what kind of service we have – but also what kind of performance freight forwarders that go to the cheapest airlines do deliver. Right now, shippers do not know what is a good freight forwarder or what is a good airline – on a specific lane, or in general.”

Quality tools

He says the tools currently available that attempt to measure quality are not very helpful to cargo owners – like Cargo 2000, which supposedly creates a measurement of performance of an airline or an airline-forwarder partnership. But at the moment those are not in a format where shippers can use them? “You are not even allowed to see them,” he says.

Ultimately, he says the shipper should really be able to trust the choices of his freight forwarder, but they should give shippers options: “For example, do you want to use a cheap carrier, a medium carrier, or an expensive carrier – but one that is really clearly much better? And show them the figures, and then also explain why it is more expensive,” he says.

“Now shippers only have one set of criteria where they can select their freight forwarding on, and that is price. And if the shippers are not willing to pay, [because] they cannot find out what is the better freight forwarder, then the shippers will only pay such a low amount that freight forwarders are also forced to go to the cheapest, so they will also start the race to the bottom from the carrier perspective.”

Van Doesburg continues: “And in that way, the better carriers do not get what they deserve. Transparency should open up the market.”

He observes that shippers do not always need their goods to go as fast as possible and would be happy to trade an extra day for a more cost-effective price. But they want to be able to make that choice, and that is currently not possible, in most cases.

“So you need to create an option palette, where things are going very fast from A to B or in a slow way from A to B, or in a very high quality way from A to B, or in a regular quality way from A to B. It should be all transparent options, as we all have in passenger. And we should also be much more based in our industry on really delivered as promised.”

Product confusion

He says some airlines do offer premium products, but cargo owners do not always get what they pay for. And some forwarders do have a kind of product range, where they offer, say, a consolidated air freight product or an expedited air freight product.

“But many of these special products are not as good as they look,” he observes. “Sometimes, and it is even a big scandal in my eyes, a shipper buys a special product and then the freight forwarder does not book the special product at the airline.”

Another area where air freight can learn from passenger is in terms of how customers are paying for air cargo services. “We see that freight forwarders often wait until the last moment to book their cargo, and pay much less than freight forwarders or shippers that are willing to promise that they will use, every Wednesday for the next coming years, a certain amount of space,” can Doesbrg observes. “If you as a passenger want to have a cheap ticket, you need to buy as early as possible, and the later you buy the more expensive it will get. But in the air cargo industry, it is just the other way around.”

This undermines the idea of partnership. “I really believe that you should try to create partnerships, and you can only create partnerships and stable flow of goods when you really can count on each other,” he continues. “And the shipper plays a crucial role in that, so that you can really start work together on building a better supply chain, instead of every day the freight forwarder going to the market and trying to get the cheapest rates from the 10 airlines that are offering a certain service. And so the flows are not reliable, and there is no partnership and reliability – because sometimes a plane is overloaded for this reason as a result – instead of improving quality.”

But van Doesburg admits that shippers also need to be trained. “For example, for many shippers, Friday is still export day. Why? The shippers do not know the answer to this question themselves.

“But really also offering them information that flying on Wednesday is cheaper than flying on Friday, and in this way creates the most stable flow of goods – it is good for the freight forwarder, it is good for the handlers, for the airlines, because stability means also something that you can build on.”

He acknowledges that in some cases, that kind of communication takes place, but perhaps not in a very structured way. “It is more of an exception. And also, here is a little criticism of my members: they know that if you deliver cargo to a freight forwarding company, you don’t need to take much care about the information that you provide them, because the freight forwarder will find out himself.

“But the same shippers are also using the integrators, and they know that they need to walk the line in relation to information provided to the integrators. If there the information is not right, your cargo will stay on the ground,” he says.

“And of course, with the integrators, the shipper is responsible for their own data entries, and so the responsibility is really clear for the shippers. Now, nobody really takes responsibility in air freight.”

This results in inefficiency and sometimes inaccurate information. Van Doesburg adds: “And I really believe in stable trade lanes, where the shipper, forwarder, and airline will talk together and really agree that for a certain amount of money, for a certain trade lane, a certain amount of goods using a freight forwarder and the specific carrier, so that we are much more based on long-term contracts rather than day trading.”

He believes e-freight and digitalisation can help significantly with improving many of these things, ensuring that it is possible for more data to be provided earlier and more accurately. “I really think that e-freight is a friend of us, but at the moment I think it is too focused on airport-to-airport documents, rather than consignor-to-consignee documents,” he adds. “We have already had the technology for maybe more than 10 years, but the transport sector is not using this technology. And of course e-freight is not going that fast either.”

Imprisoned by old patterns

He agrees that what is delaying air freight is lot of old mindsets and attitudes of “you go first” in many cases, which has meant that nothing much has changed in the last 25 years.

“Yes, old men, imprisoned by old patterns,” he adds. “Last month I received an invitation from a flower freight forwarder for an event, and they sent it to me by fax. That for me was a great way of getting an invitation, because it was my second fax in my life!

“That is an indication of the kind of industry we are working in. I still have a fax number on my business card, but I did not know where the fax machine was in our building…”

He does believe that change will come through… eventually. But it seems to be more a process of gradual erosion than revolution.

“Definitely,” he agrees. “But things need to change and things need to speed up.”