Inbound Logistics interviews Andreas Pohl, Senior Vice President of Air Freight in the Americas, DB Schenker on new services entering the global air freight market.
New research by SandlerResearch.org has predicted that the worldwide air cargo logistics market will experience a 5.97% compounded annual growth rate (CAGR) from 2014 to 2019. Increased research into this market is welcome, but this report attributes most of the annual growth to an increase in online retail store sales.
Consumers are ordering more products online. They want their purchases as soon as possible and are willing to pay a premium to get them quickly. As air transport is the fastest mode for consumable products, the market has seen some growth due to online sales, but this is hardly the only trend playing out in air cargo logistics.
It is true that certain products such as designer fashions and accessories, as well as high-end electronics and parts, make up a good percentage of air cargo. These are very time-sensitive and therefore well suited to air transport, but this has been the reality for some time now.
More to the point, as certain geographic markets and therefore air cargo lanes mature, air service starts to become a commodity. Logistics companies begin to realize smaller margins and they must look harder for benefits that add higher value to their service offerings. In the examples of high-end fashion and electronics, these luxury goods are not only attractive to end-users, they are also cherished by thieves.
Security issues for high-end manufacturers are very important, opening the door of a secondary trend. Logistics companies are working more closely with their customers, taking time to learn and understand their production and supply chain processes to ensure that their products arrive on time and undamaged. Every step and every process has to be reviewed to minimize loss. Every customer has different processes and different needs. As their logistics provider, we have to work with them on a custom solution that best fits their exacting requirements.
In some cases, the logistics provider will supplement the commercial lift provided by carriers with a dedicated flight operation that puts the logistics provider in control of the routing and capacity. This allows for a more customized solution for shippers to address their security demands and quality processes. In the case of the pharmaceutical industry, the provider can offer temperature-controlled solutions. For customers with special handling requirements or expedited needs, this represents a great alternative to using commercial carriers.
Another trend is the creation of dealer-direct-ship programs that allow customers to bulk ship into a hub location. From there, product is distributed directly from the point of entry to various final points of delivery (dealers, retailers and end-consumers), by-passing the need for distribution centers, and saving time and handling fees. These programs originated in the automotive industry and are now an established component of supply chain options for other vertical markets such as electronics and e-commerce.
As the world economy slows, so too do certain mature air cargo lanes. Although routes from the Americas to Europe will remain steady or may slow, there are increasing opportunities in the Asia Pacific region.
The TransPacific Partnership Agreement is still to be ratified, but free trade agreements benefit the logistics market in general and the air cargo market along with it. With freer trade comes the need for more timely air traffic.
There are many trends shaping the air cargo industry. The key differential when selecting the right air logistics supplier is their willingness to work with you to come up with the best solution that suits your needs and those of your end customers.
Source: Inbound Logistics/LOGISTICS Knowledgebase Andreas Pohl • 630-235-40130 • andreas.pohl@dbschenker.com
