Tight capacity and service disruptions have some shippers rethinking their mix of air and surface modes. Analytics is helping them make the right decisions.
Several key themes that have characterized the airfreight industry in recent years reappeared in 2014 as the cargo sector confronted the challenges posed by the combination of growing capacity and shrinking demand.
Air carriers and freight forwarders did get a temporary respite from those difficulties at the end of the year, when they were able to pass along rate increases during the peak season. These increases were supported not only by traditional seasonal demand, but also, at least in the United States, by unexpected demand from importers and exporters that had been negatively impacted when U.S. West Coast ports experienced congestion and work slowdowns.
Since the recession began nearly a decade ago, many shippers have taken great pains to reduce or even eliminate their spending on air transportation—undoubtedly one reason air cargo's share of trade has dropped. (See Figure 1.) Does this mean we are about to see a new chapter in the use of air freight, in which volumes decline significantly and permanently? Probably not. In fact, now that the West Coast port situation is returning to normal, shippers are taking a fresh look at the role air freight plays in their global supply chains, and many have rediscovered the strategic value of air shipments.
Here are three factors that are leading some shippers to reconsider their use of air transportation:
Inventory reduction. The opportunity to reduce inventory and related holding costs is an obvious benefit of the shorter lead times and increased service reliability that air freight offers. For example, when inventory costs are taken into consideration, air freight can actually be the low-cost decision for perishable or high-value products.
More shippers are recognizing this opportunity and are factoring it into their mode-selection decisions. Unfortunately, many still optimize their transportation costs within the silo of a transportation budget, without having visibility of the total cost of ownership of their products. As a result, they often base their decision on freight costs alone and overlook the true total cost of using air rather than surface modes.
Flexibility. Shippers want more flexibility because it allows them to position their products in the right location from the beginning, a capability that is key to promoting inventory reduction. Moreover, as demand data become more granular and real-time, having the ability to defer decisions about inventory quantity and physical placement until closer to the time of consumption creates a business advantage. Air freight's flexibility, speed, and shorter lead times help to make all this possible. This has many shippers rethinking mode-selection strategies that predate the arrival of social media.
Networks in place, just in case. A third aspect of air transportation that shippers are rediscovering is the value of having an air network in place for contingencies. Many shippers that had a "zero-tolerance" policy that forbade air shipments on the grounds that they were too expensive had to scramble to get air capacity in the fourth quarter of last year, when capacity was unusually tight and their usual modes of transportation were unavailable or insufficient. Some of those shippers are now rebuilding their relationships with air carriers and freight forwarders—something they'll need if they're to be prepared with alternative transportation options when faced with another disruption to their global supply chains.
Analytics support more informed choices
Advanced modeling tools have been used for decades to identify the best location for supply chain nodes. Now similar tools are available to help shippers develop an optimized logistics strategy. This includes factoring the total cost of ownership into selection strategies for air and surface modes.
Shippers are becoming more sophisticated about using such analytics to influence their mode-selection strategies and execute them in real time. Indeed, analytics has changed the way many shippers view the way they manage their relationships with transportation service providers. Rather than relying on simple lane-rate negotiations every few years, for instance, they are now leveraging their freight forwarders' abilities to find synergies across modes. For example, some that are using global air forwarders also use the same providers for ocean forwarding and warehousing services within the same geographical theaters. In doing so, they are able to work with their freight forwarders to optimize their supply chains through complex strategies like merge-in-transit, deferring ownership of components later in the value chain, and so forth. Shippers are also using optimization technology to collaboratively identify mode-shift opportunities with their carrier and forwarder base. Negotiating multiple modes simultaneously increases the complexity of negotiations, but it also creates opportunities for step-change reductions in total cost.
Leaders in transportation execution are applying analytics in their day-to-day management of global freight flows. Many have designed more advanced metrics dashboards that enable real-time decision making across their supply chains. These metrics are more and more often cross-functional, and they allow decision makers to see the total impact of those metrics on cost and capital. In addition, transportation management systems (TMS) increasingly are being used across modes and geographies. When set up properly, this automates decision making and ensures greater adoption of proper mode-selection strategies.
These trends are unlikely to shake up the fundamental misalignment between supply and demand in the air transportation industry, as air freight will always be multiple times as expensive as the alternative modes. However, as more shippers evaluate total cost impacts across the supply chain, they are seeing value in air freight that they may have overlooked in the past. This trend will drive incremental demand for air cargo services while increasing the efficiency of supply chains.
Artificial intelligence (AI) tools can help users build “smart and responsive supply chains” by increasing workforce productivity, expanding visibility, accelerating processes, and prioritizing the next best action to drive results, according to business software vendor Oracle.
To help reach that goal, the Texas company last week released software upgrades including user experience (UX) enhancements to its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) suite.
“Organizations are under pressure to create efficient and resilient supply chains that can quickly adapt to economic conditions, control costs, and protect margins,” Chris Leone, executive vice president, Applications Development, Oracle, said in a release. “The latest enhancements to Oracle Cloud SCM help customers create a smarter, more responsive supply chain by enabling them to optimize planning and execution and improve the speed and accuracy of processes.”
According to Oracle, specific upgrades feature changes to its:
Production Supervisor Workbench, which helps organizations improve manufacturing performance by providing real-time insight into work orders and generative AI-powered shift reporting.
Maintenance Supervisor Workbench, which helps organizations increase productivity and reduce asset downtime by resolving maintenance issues faster.
Order Management Enhancements, which help organizations increase operational performance by enabling users to quickly create and find orders, take actions, and engage customers.
Product Lifecycle Management (PLM) Enhancements, which help organizations accelerate product development and go-to-market by enabling users to quickly find items and configure critical objects and navigation paths to meet business-critical priorities.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Businesses were preparing to deal with the effects of the latest major storm of the 2024 hurricane season as Francine barreled toward the Gulf Coast Wednesday.
Louisiana was experiencing heavy rain and wind gusts at midday as the storm moved northeast through the Gulf and was expected to pick up speed. The state will bear the brunt of Francine’s wind, rain, and storm damage, according to forecasters at weather service provider AccuWeather.
“AccuWeather meteorologists are projecting a storm surge of 6-10 feet along much of the Louisiana coast with a pocket of 10-15 feet on some of the inland bays in south-central Louisiana,” the company reported in an afternoon update Wednesday.
Businesses and supply chains were prepping for delays and disruptions from the storm earlier this week. Supply chain mapping and monitoring firm Resilinc said the storm will have a “significant impact” on a wide range of industries along the Gulf Coast, including aerospace, life sciences, manufacturing, oil and gas, and high-tech, among others. In a statement, Resilinc said energy companies had evacuated personnel and suspended operations on oil platforms as of Tuesday. In addition, the firm said its proprietary data showed the storm could affect nearly 11,000 manufacturing, warehousing, distribution, fabrication, and testing sites across the region, putting at risk more than 57,000 parts used in everyday items and the manufacture of more than 4,000 products.
Francine, which was expected to make landfall as a category 2 hurricane, according to AccuWeather, follows the devastating effects of two storms earlier this summer: Hurricane Beryl, which hit the Texas coast in July, and Hurricane Debby, which caused $28 billion in damage and economic loss after hitting the Southeast on August 5.
The Raymond Corp. has expanded its energy storage solutions business with the opening of a manufacturing plant that will produce lithium-ion and thin plate pure lead (TPPL) batteries for its forklifts and other material handling equipment. Located in Binghamton, N.Y., Raymond’s Energy Solutions Manufacturing Center of Excellence adds to the more than 100-year-old company’s commitment to supporting the local economy and reinvigorating Upstate New York as an innovation hub, according to company officials and local government and business leaders who gathered for a ribbon cutting and grand opening this week.
“This region has a rich history of innovation,” Jennifer Lupo, Raymond’s vice president of energy solutions, supply chain, and leasing, said in welcoming attendees to the ribbon cutting ceremony Monday.
Lupo referred to the new factory as an “exciting milestone” in Raymond’s history and described it as the next step in the company’s energy storage solutions business, which began nearly 10 years ago with the development of a lithium-ion battery to power its “walkie” pallet jack. That work has expanded to include larger batteries and other technologies to support battery-electric equipment.
“We’re not just keeping up with the electrification movement,” Lupo said. “We’re leading it.”
Raymond, a business unit of Toyota Material Handling, has been building forklifts, pallet jacks, and other material handling equipment at its nearby Greene, New York, headquarters since 1922. The Binghamton factory supports local efforts to boost manufacturing and innovation in New York’s Southern Tier, which was recently designated as a regional technology and innovation hub by the Biden Administration.
Raymond is leasing the 124,000 square foot facility at 196 Corporate Drive, situated in an established industrial park. The manufacturer is currently utilizing just 10,000 square feet of the space to produce its 8250 lithium-ion battery, which can power Raymond’s class 1 and class 2 fork trucks, as well as a smaller TPPL battery for powering pallet jacks.
The Binghamton factory employs 15 people, but the company expects to scale up quickly in space and personnel, adding 12 to 25 employees next year and ramping up to 60 employees by 2027, according to Jim Priestly, battery manufacturing manager for energy solutions at Raymond.
The Binghamton facility also represents Raymond’s larger commitment to helping develop greener, more sustainable supply chains, according to company President and CEO Michael Field.
“We recognize energy’s critical role in shaping our future,” Field told attendees at the grand opening, adding that Raymond is seizing the opportunity to participate in the clean energy transition locally and beyond.
“This facility is just the beginning,” Field said.