Picture credit: Euroavia
We are living in the middle of a Harvard Business School case study, Steve Townes, CEO of ACL Airshop told the audience as he started his presentation at the Caspian Air Cargo Summit.
The entire industry is digitalising, a word he claimed many struggled to say ten years ago but now transformation is happening so fast, it is like a case study at the world-famous business school.
“Things are moving quickly and they’re going to get faster,” he advised the audience.
He gave a few examples of how things have changed such as Henry Ford’s famous quote about the Ford Model T that customers can have it in any colour they want as long as it’s black, and look where cars are today.
Another example was the Sopwith Camel from World War One compared with the latest Eurofighters, with Townes pointing out that head-up displays in cars were pioneered in fighter jets.
Saying he could cite so many examples of technological change, Townes said, “It’s a tsunami, it’s a tidal wave of technological change and those of us who are trying to keep up with it are being successful but if you don’t keep up, it will go right past you. Every company that wants to be a technology leader and market leader has to invest a lot of money to keep up with the pace of what is going on.”
What will happen in the future is impossible to know, with Townes bringing up Boeing’s plans for blended wing cargo aircraft, which could have the capacity of a 747. Time will tell if that becomes a reality.
Bringing it to ULDs, ACL Airshop’s area of expertise, 10 years ago tracking involved pen and paper, and hopefully staff writing information down correctly. This was cumbersome and not always accurate, and today all ULD companies are investing heavily in technology.
ACL Airshop was a first mover with Townes telling the audience how at the IATA World Cargo Symposium in Abu Dhabi in 2017 he had a meeting with a small company based in New Zealand who offered tracking solutions using Bluetooth technology. Millions of dollars have been invested in the technology and it has been a worthwhile investment.
A typical technology package starts with a good ERP system and ULD control system, said Townes, and a smart tracking system. There needs to be an aggregator, FindMyULD in the case of ACL Airshop, providing instant information in the palm of the user’s hand. Townes said the dream in Abu Dhabi was to tie the air way bill to the ULD serial number and provide end-to-end visibility.
Recently, a customer came to ACL Airshop and when they were asked to name their number one pain point, the customer named a major North American hub.
The problem was the ecosystem of small companies losing assets, which was resulting in over $250,000 of demurrage charges.
Working with the customer and main handling agent, the ACL Airshop team demonstrated the benefits of FindMyULD and they recovered around $200,000.
Ending his presentation, Townes shared a secret which he asked not to be shared, the dream of tying the air waybill to serial numbers to give customers the same end-to-end visibility as providers such as FedEx has passed beta tests and it will go to market once successful test have been conducted with another major airline customer.
This is top secret, promise not to share it with anyone.
Unlocking value with AI
Sofiane Dehar, Expert at McKinsey & Company was the next speaker, who discussed the expectations of technology, especially AI, sharing the figure that it could unlock $1.8 trillion of benefits for the travel, transport and logistics industries.
“If you think about it, within the air cargo sector, we are at the intersection of travel, transport and logistics, which means that we are part of the revolution. We have the most to gain from AI, there are a lot of inefficiencies along the chain, a lot of manual processes that could be unlocked with artificial intelligence,” Dehar told the audience.
Investments in AI and advanced automation have risen from around $1 billion a year to $25 billion in 2021 with a small slowdown in 2022 but there is momentum for logistics start-ups.
A lot of the investment is in first-mile and last-mile services, warehousing and distribution services.
Not as much comes from the middle section occupied by air and ocean freight so Dehar told the audience that established players need to make investments.
Dehar gave an example of an airline benefiting from AI to manage capacity better. They were facing cancellations, weight reductions and no-shows a few days before the flight, which affects how much capacity they can sell.
Using AI meant they could predict behaviour on certain flights with higher levels of cancellations so they could overbook to offset the changes, which resulted in higher load factors and the amount of capacity the airline could sell.
On the demand side, AI can help improve forecasting by looking at patterns not detectable with the naked eye to better predict demand, finding patterns in global trade, which could not have been predicted.
He said, “For instance, electricity consumption in southern China will tell you something about how many exports you can expect out of Hong Kong a few months later or exports from Malaysia to China of semiconductors will indicate mobile phone exports out of China a few months later.”
Looking to the next decade, Generative AI can create opportunities such as automated booking where customers tell the Chatbot their booking requirements and it offers a suitable proposal.
Documentation is a major pain point so Generative AI can go through past documentation and create content to pre-fill documents, which the customer reviews and verifies is correct.
Dehar said, “This is not for today or tomorrow but we have to set a vision that these things are possible and of course the way to get there is not easy but we have to have the ambition.”
Embracing change
15 years since launching his company, Vitaly Smilianets, Founder and CEO of Awery Aviation Software sees the industry can see the benefits of digitalisation and manual processes such as booking are using digital tools.
Though stakeholders talk about connectivity, the industry is still very fragmented and there is a lack of standards or openness among airlines to share information between other logistics companies. Supply chains would be more efficient if everyone embraced these changes, believes Smilianets.
In the next 5-10 years, everything will move on to mobile devices and digital services with users completing transactions, changing the status of their shipment or other changes from their mobile.
Smilianets said, “What we are trying to offer is to eradicate double- or triple-entry of data, which is still happening a lot in the supply chain.”
In this transition period, a lot of business is still done on email. Even with Awery’s CargoBooking platform, freight forwarders are sending airlines too many emails so its eMagic solution can be integrated into Microsoft Outlook.
It reads the email, picks out information such as origin and destination, connects with the host system to check availability and gives the sales person options how to proceed. The technology is designed to make people more efficient and help them make better decisions, said Smilianets.
Data is the next trend, with Smilianets saying, “The more data you have, the better use AI can be because not only can you analyse the history of bookings and cancellations, the new technology can analyse the quoting process, what rates were accepted or not, combining all the data with other sources to make better predictions and sales.”
Smilianets believes AI is just at the beginning of becoming useful, saying it is helping with dynamic pricing and customer experience. It will also make jobs more interesting, with Smilianets saying, “We think using this new technology will improve employee retention because we see people are hard to find with proper experience and if we make their work more efficient, it makes them more creative and they love what they do.”
Innovate to survive
Innovation is not a choice, according to Wilson Kwong, Chief Executive of Hong Kong Air Cargo Terminals (Hactl), the world’s largest independent cargo terminal, which can handle up to 3.5 million tonnes of cargo a year. If Hactl were an airport, it would be a top 20 cargo hub.
Starting operations when the new Hong Kong airport opened in 1998, the shareholders of the time invested US$1 billion into the facility, which Kwong proudly told the audience was designed by renowned British designer and architect Norman Foster. Millions of dollars is invested every year on both the infrastructure and IT systems at the facility up to date.
Cargo spends most of its time on the ground, said Kwong, so efficiency and consistency are key because they can make or break a service. Visibility and flexibility are two features people want, which can be achieved by going digital.
Automation is not new for cargo terminals, with Kwong saying Hactl has operated a container storage system and box storage system since the terminal opened in 1998.
Hactl also has its own system it calls COSAC, which was in operation at the old airport, integrating the cargo community. COSAC has been upgraded to COSAC-PLUS and the Hactl team are always thinking about the next steps.
“Having your own system is costly, it is increasingly difficult to find IT people but having your own system creates additional flexibility as you try to modernise and upgrade your operations,” said Kwong.
In many parts of the world, older staff are retiring and it is hard to recruit new talent, Kwong said, so people need to be made more efficient. Innovations include deploying security robots, which are not to get rid of security staff but to bolster security.
Hactl has several projects, some of which will be more successful than others, admitted Kwong. Some projects are challenging such as the build-up of pallets due to sizes and shapes, late arriving cargo and regulations stating what can be together or not.
Hactl is still trying to solve this problem and will get there eventually. Hactl is also trialling autonomous tractors, implementing AI, using ChatGPT and AI is already being used in certain roles.
The industry talks about innovation and digitalisation, and Hactl is investing heavily in these areas, with Kwong saying, “We are working in partnerships with many people but it is a journey which will take time and there will be trial and error but eventually we will get there.”