Airfreight management must strip the veils of illusion from their eyes in combating the worst recession since the industry began sixty years ago.
These illusions include the near obsession with China as the primary engine of growth.’ They also include offering complicated, expensive supply chain “solutions” to the shipper’rather than concentrating on fast, reliable transport of cargo. “Let’s stop adding layers of outside management like 4PLs which heighten the cost to the customer without comparable benefits,” stated Julian Keeling, speaking at the World Cargo Symposium 2009 in Bangkok, Thailand.’ “Also, let’s not indulge in the comfortable belief that air cargo will resume automatically the growth of past years once the downturn ends,” said the President & CEO at Consolidators International, Inc. (CII), a major airfreight wholesaling firm based in Los Angeles.
“Air cargo must face’the harsh realities of today.’ Unlike Salome, we cannot dance behind seven veils of illusion,” commented Keeling.
“In today’s environment, shippers by air opt overwhelmingly for the two basic qualities air cargo traditionally has offered; speed and reliability of delivery. Forwarders must satisfy these two demands as never before,” emphasized Keeling.’ He spoke before an audience of the international airline community, forwarding and shipping executives at the IATA-sponsored conference.
The CII chief executive warned “perhaps the most pernicious illusion is that air freight will spring back to its historic pattern of growth once the current worldwide recession ends.’ This illusion, unless corrected, is a recipe for disaster for our industry,” the’35-year veteran of the transportation wars stated.
“I’believe that world trade has changed in fundamental ways,” commented Keeling. “Even before the recession began, many air freight customers began shifting to ocean for reasons of cost. This trend has accelerated with the downturn of the world economy.’ While moving freight by sea has experienced a greater downturn in volume, percentage-wise, than air, the principal reason is the enormous overhang of new, mammoth 10,000 TEU container ships ordered by’the major shipping lines like Maersk, APL and Moeller,” continued the Los Angeles-based wholesaler.
Within the air cargo business itself, Keeling anticipates fundamental changes.’ “Air shippers are opting for less expensive time definite deliveries rather than’the dictum, ‘move the freight overnight whatever the cost.’’ The sharpest declines in FedEx and UPS volume are in their premium priced overnight package delivery services,” he averred.’ “Their strongest growth is in low priced ground services.”
“Just-In-Time, once considered reaching for the Holy Grail in moving cargo, now is seen as the weak link in the supply chain process,” commented Keeling. “Yes, J-I-T is very efficient in moving freight to the supplier’s assembly line at the last minute. What happens, however, when the supplier no longer is in business?” he asked.’ Keeling pointed out that thousands of suppliers in China alone have shuttered their doors, leaving American manufacturers without sufficient inventory to complete production and scrambling to find new sources of supply. “Delays in production and red ink spattered on their companies’ balance sheets is the inevitable result,” he said.
The CII head urged IATA, sponsors of the Bangkok event and official trade organization of the interntional airlines, to support the airfreight industry on two levels—public and private. “On the government level, IATA must bend every effort to ensure that carriers’ and forwarders’ interests are protected before pertinent government agencies. You, IATA, must present a united front, speaking with one voice, to those agencies who literally have the power of life and death over our industry.”
“On a private level, you must foster closer relationships between carriers and forwarders. The famous statement, ‘in unity there is strength,’ never has been more timely when directed to air cargo,” Julian Keeling concluded.