Responding to the e-revolution

posted on 9th April 2019
Responding to the e-revolution

Collaboration is crucial for air cargo to get up to speed on e-commerce, speakers at WCS say

Collaboration among members of the air logistics chain is crucial if the air freight sector is to get up to speed and take advantage of the opportunities presented by rapidly growing cross-border e-commerce traffic, according to speakers at the 2019 World Cargo Symposium (WCS).

“The digital train has left the station – most of the economy will be ‘e’ very soon and that impacts everyone,” says Wolfgang Lehmacher, a senior supply chain executive who was head of supply chain and transport industries at the World Economic Forum and a former CEO of GeoPost Intercontinental.

Saying that it is becoming harder and harder to distinguish traditional commerce from e-commerce, Lehmacher says the air cargo industry must think more about digitalisation.

While e-commerce is a hot topic and clearly inspires excitement among the air cargo supply chain, Michael Steen, EVP and chief commercial officer at Atlas Air Worldwide cautions that while e-commerce currently represents 10-12% of total global commerce, a good chunk of that figure is pure digital, like streaming for instance, and not carried on aircraft. “But if we think about the addition of 2 billion more middle class consumers by 2025, it’s a massive amount of people entering the consuming class,” he adds.

Moderating the session, Glyn Hughes, global head of cargo at IATA, highlights that if you take out the streaming portion, the percentage of physical goods moving as a result of e-commerce becomes only single digits.

Growth challenge

“But already it is having a major impact on supply chains,” he says, pointing to Amazon’s Prime Air as an example. With this in mind, Hughes points to the elephant in the room asking: “Will the industry be able to handle the potential volumes?”

For Steen, it’s not going to be an exponential growth, but something more gradual. “There are still many issues like taxation, customs, financial deregulation, infrastructure – obstacles that need to be overcome,” he notes.

But overall, Steen feels the industry is not in a place to cater to future e-commerce growth. “On the asset side, we are lagging behind; on the digitalisation side, we are a lot behind. We need to think about this and figure out how to be relevant to these e-commerce platforms,” Steen adds, highlighting that some 800 freighters will be retired in the next 10 years.

Ground infrastructure

Infrastructure on the ground also varies widely. Using southeast Asia as an example, Singapore is very good, but Indonesia has some way to go, he says. In the Indonesian example, “geography lends itself to e-commerce, so this will revolutionise infrastructure there”.

Among the challenges the air cargo supply chain faces in being a true player in the e-commerce space, Lehmacher says integrating digitally is one of the major prerequisites to be a good player.

He notes: “I’m not so worried about capacity, but digtalisation in order to plug into all the platforms is crucial.” He highlights that two-thirds of the value global business creates is via platform transactions. “This means the industry has to support this,” he says, adding that some are more ready than others. “As an industry, work must be done to build platforms and standards to support them.”

The issue for Steen, is less about insufficient investment and more about how the industry views these investments. “There are far too many unilateral investments – we should look at it as an integrated industry,” he says

While noting that the ability to have complete visibility through entire supply chain is absolutely possible today in technological terms, “it can’t be done without alignment, harmonization and collaboration between the various players in the fragmented industry”.

The way integrators came about disrupted the general cargo industry; we now see e-commerce platforms doing same thing, Steen adds.

For Lehmacher, it’s important that the industry changes the way it looks at the business. “Will technology revolutionise the logistics industry? Amazon already has,” he emphasizes.

“I don’t believe individual players alone are capable of setting up what is needed to bring the industry up to speed,” he says. “There has to be a new model of looking at industry and it’s about collaboration. It is about learning across the supply chain, learning in the ecosystem.”

Lehmacher adds: “The bottleneck is not money but imagination.” It’s the tech talent that can build the solutions and this industry is competing with every other in the world for talent, he cautions. “We can learn from other industries, but we must build capacity within the industry and within the companies themselves.”