Transformation process

posted on 7th June 2018
Applying ‘lean’ principles and C2K measurements can lead to significant productivity improvements for an airline’s in-house and outsourced handling, explains Thilo Schäfer, head of global handling management at Lufthansa Cargo.  

Thilo Schäfer is such an advocate of digitising air cargo handling processes that when he goes to meetings he doesn’t carry paper, he only carries his iPad. As Lufthansa Cargo’s representative for e-freight, the e-air waybill (eAWB), and digitising the whole business, he feels it is useful if he acts as a digital role model. “It is kind of a symbol of the fact that things can work without paper,” he says.

Schäfer believes digitising all processes is now “the name of the game”, in order to achieve transparency throughout the whole logistics chain – to create better customer service, but also to improve accountability to customs, security and other regulatory authorities. Although there is still some way to go to change the mind-set and processes of all of the partners in the air logistics chain, progress is being made.

Lufthansa Cargo has just initiated a programme in Munich where it no longer requires customers to maintain two different processes, paper and electronic. Instead, it is just asking for eAWB, and in markets where regulatory authorities need a paper version, Lufthansa Cargo will print it out for them.

“The programme launched in June, with the aim that by the end of the year all customers in Munich will be transferred to the eAWB. In the next step it goes to Frankfurt, and then the whole home market of Germany, and then a worldwide rollout by the end of 2015, to meet the targets of IATA.”

He says the response from forwarders has been increasingly positive and that the main reason the response had been lukewarm initially, back in 2010 and 2011, was because many in the industry, including the big forwarders and Lufthansa itself, needed to upgrade their IT systems.

Most have now upgraded or are about to. “So, I think the industry is now much better prepared than one or two years ago,” he says.

Indeed, Schäfer believes the first two years of e-freight was just preparation work enabling forwarders and airlines to identify what their respective IT systems needed to get ready for EAP and EAW messaging. “The benefits on both sides are only starting now, with the digitising of the physical paper,” he says.

Another key milestone was FIATA earlier this year accepting multilateral eAWB agreements, and the endorsement of these by airlines.

But message and data quality remains a major challenge – both in terms of format quality and content quality, and this is why the eAWB programme can only be rolled out gradually, starting with the airline’s home market, and in the smaller hub of Munich.

Schäfer describes the company’s approach to managing the quality of physical handling as twofold: “First, you have to have clearly defined processes, for your own staff and also for any handling agent who works for you; and secondly you have to have a measurement system in place that measures the quality of these processes.”

There is also a twofold approach towards the actual operation, in terms of how Lufthansa Cargo (LC) manages the 30 or so stations where it self-handles and the remainder of its the 309 stations worldwide. “In all locations where we have our own operation, we started two and a half years ago with lean logistics and the application of ‘lean’ management philosophy, which means we get the processes right and get rid of any process that is not necessary.”

The company has now completed 20 “transformation projects” using this lean approach, including several at its home base Frankfurt and self-handled stations such as JFK and Johannesburg. But it has also shared the experience of its in-house lean consultants with some outsourced handling stations, such as Dusseldorf, Vienna and Amsterdam.

“Where we have done this with a handling agent, we have an agreement at the start that if there are savings, then we share those benefits. There has to be something for both sides.”

He says it is possible to quantify the level of improvements in efficiency and productivity, thanks to the measurements within Cargo 2000 (C2K). “One of the minimum targets is to improve quality by a minimum of 5 percentage points, so for example a 2.5 percentage point improvement in the NFD [On-time Notification (to the consignee’s forwarder) of Freight & Documents Availability] and a 2.5 percentage point improvement in the FAP [Flown as Planned].”

He continues: “So we have a sustainable increase of the quality, the C2K quality, and regarding productivity we see personnel productivity gains of between 10 and 15%, and we have had 40% reductions of space needed, just by leaving out processes that are not necessary and bringing the warehousing to a real order – to make clear where cargo needs to sit, where it is processed, and by bringing order by applying ‘kanban’ systems. So the productivity gains are very significant.”

There has been strong demand from LC’s own stations for these transformation projects, thanks to the success of an initial a ‘lighthouse project’ at one station. “We now have more demand then we are currently able to deliver, which is perfect,” says Schäfer.

He says these kinds of efficiency and productivity gains can also be achieved at third-party stations, and raises an eyebrow when asked whether they are easier to achieve with independents or multinationals.

“Is there a multinational?” he asks. “There is no such thing as a partner with which you can do this on a global scale; it just does not exist. Many of the so-called global players have a franchise system where they work together with local heroes, and our experience is that we fly best with the best local package, and the best local package means who is best in class at that location, and who offers the best price and value combination at that location.”

He feels that there is no point in making an agreement with a multi-station handler such as Swissport “to become our handler worldwide, because they are not present at 309 stations, and at many stations they are not present as Swissport but as co-operation partners”.

His experience is also that there is no standardisation of quality across these so-called multinational players. “For the time being I don’t see this; but in a couple of years that might change,” he observes.

“For me there is only one entity standardising the whole measurement and that is IATA, with its C2K measurements, and then it doesn’t matter whether the service provider is called A, B, or C and whether they are different in location A, B, or C, if all apply the same rules. And we make sure that with our standardised processes that they will follow this standard. C2K is the tool that we have right now that provides the best transparency about quality in the industry.”

For LC, one of the few ‘Platinum’ C2K members, all handlers have to follow C2K measurements; it is a minimum requirement.

“We would not even consider someone who cannot follow these rules,” Schäfer says. “There are some smaller stations where the handler may not have their own system, and in these cases we will provide the IT system. All our stations worldwide are measured against C2K; there is no handler worldwide where we don’t have transparency of our quality.”