Air cargo is a profitable US$ 40 billion industry. Its customer time-definite delivery and information transparency can be improved if air cargo supply chain participants including shippers, forwarders, customs, and carriers, join together to simplify industry processes and eliminate the long standing dependency on paper across the cargo supply chain.
This is a message that is being strongly driven by Aleksander Popovich, IATA’s Global Head of Cargo and Guenter Rohrmann, Member of the DHL Board, DHL-Danzas.
Responding to a request from IATA’s Board of Governors, late last year IATA launched a global cargo paperless environment programme - IATA e-freight - designed to implement simpler, electronic, paper-free air cargo shipping worldwide by 2010, with a fast track capability for stakeholders that can do so, by 2007.
The case for IATA e-freight is clear as the industry moves to simplify its complex processes to reduce cost, and seek to compete more effectively with other modes of transport by increasing information transparency and reducing time needed to move cargo to its destination.
One of the major causes of complexity is that air cargo processes are highly paper dependent. An average cargo consolidation shipment travels with up to 38 documents per master Air WayBill at a cost of US$30. Over the course of the year, the industry ships the equivalent of 39 747-400s full of paper. While electronic records for a paper air waybill have been accepted as a legal substitution since 1988 (Montreal Protocol No 4), only 15% of today’s AWBs are electronic.
On top of that, IATA research conducted in 1972 showed that the average end-to-end transport time for a consignment was 6.5 days (excluding flight time). Nearly a quarter of a century later, based on a Unisys commissioned study that analyzed 2,000 international shipments, transport time remains at about 6 days.
IATA e-freight will reduce costs for the industry, an estimated US$1.2 billion per year when fully implemented, by eliminating duplication, accelerating processing times and improving overall data quality. This in turn will expedite security and customs’ compliance. Sub-projects will tackle messaging standards, legal protocols and common data exchange. Critically, the program will extend beyond the airline community to all stakeholders involved in the movements of goods by air.
The time is ripe for IATA e-freight
The timing is perfect in that there is an acute need to get costs down, with Customs authorities (e.g. USA and Canada) increasingly requiring carriers to transmit advance electronic manifest data for security review prior to flight arrival. This data has to be electronic, timely, and accurate, and there is a significant penalty cost for not complying.
Such security driven change is appropriate but will be costly to the industry if it is not embraced as part of a well coordinated industry drive for business process simplification. The US General Accounting Office estimates the total annual cost to USA air carriers of advanced electronic presentation of cargo information, is anywhere between US$422 million and US$ 2.2 billion.
The force for change is also coming from customers who want easy electronic access to timely, accurate and seamless information, from supply chain partners for end-to-end tracking and cost control.
Involving and aligning the energies of key stakeholders is critical
Both Popovich and Rohrmann see the industry task as a major challenge.
“The task is enormous, and to deliver we must align existing energy in the industry, engaging many industry players including shippers, forwarders, carriers, airports, governments, and regulatory authorities,” said Popovich.
Indeed, fully recognizing investment and resource constraints, they are both taking action to ensure that existing forwarder and carrier industry energies are aligned to achieve shared objectives. One significant example is the increasingly active cooperation between IATA e-freight and Cargo 2000.
“There is a strong and natural