Date: Wednesday, 30 May 2012
Event: IATA Aviation Day Europe
Place: Maritim Hotel Frankfurt Messe
Speaker: Johannes Riege
People often wonder why electronic ticketing works in the field of passenger air transports but its cargo counterpart e-freight is still in its infancies. So the sober question to be raised is: Why does our industry not simply transfer the proven, tested, and commonly accepted etix tool into the global cargo world?
The answer is easily to be found when asking ourselves where etix would stand today, if a passenger would have to declare which different items his luggage contains, if he has got a dangerous goods declaration for his deodorant he’s carrying with him, etc. If these formalities would be required from each traveler etix would most likely still be in its preliminary phase.
The easy thing in electronic ticketing is that only two interacting agents are involved – the passenger and the airline. As far as data requirements are concerned only airline, flight details, payment specifics, and passenger data are needed to purchase a ticket and take off on board an aircraft.
In comparison our air freight business is much diverse: the processes are highly complex, the number of participants is by far greater, and the authorities – especially customs – are acting according to their state’s own rules and regulations.
So in short: e-freight cannot be compared with etix!
IATA has first taken up the e-freight issue at the World Cargo Symposium (WCS) in 2007 in Mexico City. There WCS presented e-freight as valuable contribution for Simplifying the Business (Stb). Ever since this Mexico gathering the e-freight topic stood on the agenda of each of the subsequent annual meetings organized by the WCS. To push this task forward IATA has worked with many regulatory authorities, especially customs administrations. Today’s result is that on a number of international trade lanes there is no more need for paper documents since customs authorities not only collaborate but are meanwhile part of the e-freight process.
Further achievements are in brief:
This illustrates the many efforts IATA has put and keeps on putting in e-freight. The promoting of this important and innovative tool by IATA I consider being of utmost relevance for our industry.
According to IATA’s May 2012 figures e-freight has gone live in 42 countries, at 429 airports, and 46 airlines as well as 2057 freight forwarders participate. That looks pretty impressive. So the question has to be raised how IATA achieved those figures?
The answer is rather simple - because only e-AWBs are counted in the IATA statistics (in conjunction with pdf-documents). The e-AWB scheme can be compared with etix® in passenger traffic. The sad conclusion reads: We are still very much in the infancy of e-freight, despite all efforts by IATA, industry participants and customs authorities.
So to me the core message must be that real benefits for the air cargo industry are only achieved, if all partners exchange data instead of documents.
Basically, there are two approaches of managing e-freight processes: the symmetric and the asymmetric solution. What do these models consist of and where do they differ?
To put it simple: the symmetric model treats all participants within a given supply chain from A to Z as being equal partners. Each of them – from a shipment‘s origin to it‘s final destination – act as equal peers. This is the currently deployed model: everybody, whether the shipper, trucker, forwarder, ground handling agent, customs agencies, consignee and last but not least the airlinee are deploying e-freight in the scope of their own possibilities and economic goals for the greater good. The result of this collective effort of equals is the successful paperless shipment – hopefully!
However, there is a trap: everybody relies on everybody else and all participants are responsible only for their own part of the transport chain. But no one takes control of and responsibility for the entire process. Nobody is sitting in the driver’s seat being formally in charge of managing the electronic flow of documents.
In contrast, the „asymmetric“ or „hierarchical“ version advocates a clear solution for directing, coordinating, orchestrating and controlling the processes. Looking at the various participants mentioned before and considering today’s situation, the party for steering the processes successfully should be the forwarding agent.
Why him and not the shipper or consignee?
Given today’s circumstances, the forwarder acts as the central „interface“ within the entire supply chain. It is the forwarder’s duty to organize the pickup, to make sure the cargo is properly declared as demanded by the authorities. He’s responsible for booking the airline’s transport capacity, he makes sure the shipments are delivered to the ground handler in a timely manner for ensuring that the shipment is flown as previously booked. In addition it is the forwarder’s duty to make sure that the import process is done correctly and that the goods arrive in time and on budget at the final destination.
The important prerequisite for getting the asymmetric approach off the ground is that the shipper must provide the forwarder with the relevant data concerning his particular shipment: the nature of goods, the weight, the price, whether there are Dangerous Goods and what they consist of - and so on. Only when being equipped with these specifics the agent can direct, coordinate and orchestrate the transport. Only than he is enabled to manage the entire process and data exchange according to paperless e-freight requirements.
If shippers do not pro-actively provide these data sets to their agents e-freight will still be implemented in some ways or others. But it will stay a piecemeal process with little or no coordination.
This has to be stressed once again: we need the data, not the documents. Only then transports can be speeded up and costs be reduced. Ideally we need the integration of all processes by directly linking the systems involved.
Instead, what we don‘t need is another „next portal“ where participants more or less manually up- and download the data. The key to success is a direct link between systems and processes. IATA has worked hard over the past years to make this linkage possible by defining a common set of messages. Given this everybody should now work hard to implement these messages and realize the links between the different systems.
The advantages are widely known, for example the reduction of errors, the speeding-up of processes and the subsequent savings in time and costs. This last mentioned point is convincingly illustrated in a study presented 2011 by the Civil Aviation of Singapore (CAAS). According to their analysis for compiling one manually processed House Air Waybill (HAWB) enterprises have to pay USD 2.70 per employee. In case of e-freight these costs are reduced to USD 1.60 per head, saving the firm USD 1.10. Which might not sound very impressive is in fact a lot of money at the end of the day, given the fact that the Singaporean study assumes an hourly wage of USD 8.00 per employee. In Europe or the U.S. no forwarding agent would be willing to work for this salary, I assume. Hence, the savings would even be more substantial.
Interesting is another comparison mentioned in the CAAS paper. According to the authors a staff member processes 24 HAWBs in average per day when exercising traditional paperwork documentation. In contrast, the same employee is able to process 41 HAWBs each day if facilitating e-freight. This is a remarkable increase of productivity and a clear proof of the many benefits e-freight is able to deliver when utilized by the industry.
The above mentioned example well illustrates one of the many benefits e-freight can deliver, in this case a remarkable increase of productivity for the cargo industry without loading more work on the employee’s shoulders.
As previously stressed e-freight reduces costs and increases the product quality. Therefore, it is one of the rare approaches in air freight that leads to innovating the business. Traditionally and unfortunately, this industry does not belong to the most progressive businesses despite the immense value it delivers day by day to the world economy by enabling the rapid flow of goods across the continents.
So, in theory e-freight works. But it requires a common effort. Everybody has to participate.
It’s like in soccer. Take my team, Borussia Dortmund, for example, this year’s German champion and national cup winner. Their basic philosophy is that the individual player is important, but it takes a strong and unified team to be successful. This simple conviction goes for e-freight as well. Required is a common effort with each player of the supply chain needed to participate actively.
What we need is an ‘e-freight community’ to achieve a broad and lasting success.