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Forward thinking

Cargo airlines may be increasingly tempted to trim costs by trying to cut out the freight forwarder ‘middleman’. But is this really a viable strategy when seeking to apply easy theory to a complex real world? Stan Abbott seeks out the forwarders’ perspective
What may look deceptively simple on the accountant’s books may be somewhat more complex in reality – and that’s often the case when it comes to cutting out a key element in any supply chain. Leading freight forwarders suspect that the temptation for specialist cargo and bellyhold carriers to deal directly with cargo shippers has been driven by the advent of digital booking platforms.
But they warn that, in a world in which human cargo has travelled seamlessly for more than a decade, the airlines should prioritise bringing their own cargo-handling systems into the 21st century before looking for ‘easy fixes’. Among those delivering that message is Panalpina, among the leading quartet of world freight forwarders, with 4,000 air freight staff across 70 countries and a presence in a further 100.
Lucas Kuehner, the company’s Global Head of Air Freight, sees current moves by some airlines to cut out the forwarder as no more than a repetition of similar largely unsuccessful attempts in the mid-2000s. The big potential difference now, however, is the arrival of new technology booking platforms.“The carriers don’t want to miss a bit of the market that’s opening up, and if there is a way to cut out the middle man, they will try and do that,” he says.
“There might be a market for some business there,” he continues. “However, in air freight, I would say it’s less than 5% that carriers get direct from shippers.” This compares, he says, with a figure closer to 80% when making a direct comparison ith ocean-borne freight. And therein lies the fundamental difference.“Air carriers see this comparison and they may want to work towards the ocean model, but I don’t think it’s realistic for them. The real world is very much more complicated than the digital one because of exceptions, challenges and special cargoes.”
Not only does it complete the chain between the customer and the aircraft door, but the forwarder is also there to ensure optimum service to the customer, rather than simply build business for a particular airline.“The key element that we bring to the table is the customer service aspect,” says Kuehner. “That’s what we focus on as a forwarder, and I think that’s a tall order for an airline to achieve to a level that the shippers are demanding. And the other area – which is often overlooked but is the essence of what the forwarder does – is that we take tremendous costs out of the equation.
“The forwarder does this by consolidating cargo, and by mixing different commodities and different customers together. This is something the airline simply can’t achieve.
“We are staffed to look after consignments, and so – if things are late, for example – we will look at how we can reroute. And that could be by another airline.  In another example, each shipment could be split into different flights by a carrier, however we need to retrieve the freight in one load. So, it may take two or three ‘goes’. It’s a very different perspective to simply looking at the same cargo.”
Kuehner would like to see cargo airlines getting their digital house in order before picking a fight with freight forwarders: “The basics are not in place – digital direct shipper platforms can only really work for airlines if they first bring the e-AWB (electronic air waybill) adoption rate into the high 90s” – referring to the percentage of shipments handled via an electronic waybill.  “In fact, less paper would benefit the entire industry,” he says. 
It’s an analysis echoed by Keith Andrey, Vice President, Global Freight Forwarding at US giant, UPS, which boasts around 300 cargo facilities in 155 countries. He says: “Shippers work with forwarders to give them options and choices. This provides the shippers with flexibility in reducing the risk associated with committing to only one asset provider.” UPS has embarked on a growth trajectory in recent months, which has seen it add 14 new country stations across four continents, alongside working to improve time-in-transit in 24 countries – as well as adding Saturday deliveries.
The company is further cementing its role in the cargo supply chain through a raft of customer service improvements, including its new ‘Flex Global View’ and ‘Order Watch’ technologies, so customers can get a comprehensive view of their supply chain right down to the order level. Andrey understands the motivation of airlines in seeking to cut out the forwarder role: “Cargo airlines need to optimise their assets and generate a reasonable return for their stakeholders,” he says. 
“With a forwarder they need to share the margin allowed in the market, but avoid higher operating expenses related to value-added service.” But he issues this warning: “If the airlines want to work with shippers directly, they need to provide additional overhead, technology investment and support expense to replace the value the forwarder is committed to provide. >>

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