Air carriers enjoyed a strong recovery in 2010 and early 2011. But oil price volatility and a looming supply/demand imbalance mean there could be some rate turbulence in the next year or two.
The year 2011 began auspiciously for the heavyweight air cargo market, which had recovered much of the volume it had lost and the rate concessions it had made during the 2009 freight depression.
During the economic downturn, air carriers focused on improving their operational efficiency in an effort to stem losses in a very tough market. They re-examined everything from baggage and cargo handling processes to maximum take-off mass (MTOM). As a result, carriers were well poised for a return to profitability in 2010. Things certainly were looking up from the carriers' point of view: The International Air Transport Association (IATA) reported a new high in demand for cargo services on both freighters and passenger aircraft in the second quarter of 2010, and many of them did in fact have banner years. At the same time, market conditions for transport and fuel had driven airfreight rates higher than they were before the 2009 collapse.
Although 2010 and the first part of 2011 brought good news for the carriers, the outlook for the rest of 2011 appears mixed for several reasons. For one thing, the rate at which new aircraft are entering into service is greater than the projected increases in airfreight demand. As a result, rates generally are declining in most markets relative to where they started in 2011. But that is likely to be temporary. While inflationary factors (mostly fuel) have eased somewhat in June, where they go from here is uncertain. In addition, global political uncertainty arising from such events as the revolutions in the Middle East could generate large price shocks in oil markets. Further clouding the airline industry's overall financial picture are variable exchange rates; sovereign debt default in the countries like Portugal, Ireland, Greece, and Spain; and unclear patterns in consumer demand.
Carriers invest in capacity
Despite all that uncertainty, airlines are lining up to invest in new aircraft. Equipment makers Boeing and Airbus have delivered a combined 480 aircraft to their customers in the first half of 2011, including 97 new widebody planes. Their order books are expanding, with new orders for 948 more aircraft on the way. While most of these aircraft will be entering passenger service, their entry will impact air cargo capacity as well.
This level of investment suggests that carriers will soon encounter some economic turbulence, as the rate of aircraft delivery is outpacing projections for near-term growth in the airfreight market. In May 2011, for instance, capacity grew by 2.8 percent over the prior year while demand declined by 4 percent.
Given this discrepancy between the growth in supply and demand, load factors (the percentage of an aircraft's payload capacity that is actually filled) will decrease until the world economy starts to expand again. International freight load factors have already begun declining year-on-year, and that trend is expected to continue for some time. Moreover, with consumer confidence down over the past few months and gross domestic product (GDP) growth in developed countries predicted to be in the 2-percent range, there should be plenty of capacity through the rest of 2011.
How will all that affect freight rates? With base rates for cargo under pressure for economic reasons and capacity increasing, airfreight rates are unlikely to spike in the short term. But higher rates are likely over the next few years as stronger demand and fuel-price pressures will more than offset increases in cargo capacity. Increased demand for fuel due to a recovering global economy is expected to push energy prices higher. The U.S. Department of Energy, in fact, currently predicts that the price of crude oil will average more than US $100 per barrel in 2012. Higher fuel surcharges, therefore, will be a primary driver of rising airfreight rates over the next one to two years.
The upside of expansion
From the shipper's standpoint, the addition of so many new aircraft will bring a number of benefits. For example, the expansion of airline fleets will allow carriers to increase their service offerings. Understandably, they are expanding them faster in their growth markets. For instance, Delta Airlines went from 28 weekly departures from the United States to China in 2008 to 47 weekly departures in July 2011. The deployment of additional aircraft on more routes will have a positive impact on lead times and space availability. Furthermore, the resulting competitive pressure should keep base freight rates in check. Better service and competitive rates will, in turn, improve the value proposition of air freight relative to surface modes. As the economy improves in 2012-13, air transport will become more costeffective for some shippers. One reason why is that a rise in consumer demand will renew the need for inventory replenishment. When it comes to quickly replenishing inventory, shippers of fast-moving consumer goods will be much more likely to choose air versus ocean.
Additionally those shippers that have taken a totalcost approach to supply chain management may find it beneficial to use more air freight in certain cases. For example, shifting from air to ocean will reduce transportation costs, but when inventory carrying costs are taken into account the overall cost picture may change. The total supply chain cost for highvalue shipments will actually be lower if they are shipped by air than if they are shipped by the much slower ocean route. The cost difference may especially be noticeable in situations where ocean carriers have increased their use of slow-steaming practices and thus lengthened their transit times.
To sum up, the current supply-and-demand relationship does not presage a run-up in airfreight pricing for the remainder of 2011. The rate picture for next few years, however, is less certain as higher fuel prices and growing demand will likely tip the balance toward higher prices for air cargo, despite increases in capacity.
On the plus side, increased capacity will lead to more service and routing options for shippers, making air freight a more attractive option compared to surface transport modes.
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.