How To Strengthen The Air Cargo Network

     Scott Dolan, President of United Airlines Cargo delivered the keynote address at CNS Las Vegas.
     Actually Scott came on board to pinch hit for Michael Wisbrun top cargo executive at KLM when Mr. Wisbrun backed out of the event at the last minute.
     Sources say KLM has been slapped with more than two dozen lawsuits connected to that joint EU/USA price-fixing investigation concerning fuel and security surcharges.
     Public speaking, without an attorney close at hand may become another aspect of public events in air cargo as the new century moves ahead.
     Scott Dolan delivered an excellent speech full of the stuff that has made this hard-driving executive something of a phenom in the air cargo business right now.
     United, and as a matter of fact American, both came up strong at CNS Partnership this year.
     Shortly after this talk ended, American treated the conference to a luncheon and later Monday evening, United hosted a poolside party.
     But things may be about to change.
     CNS Chairman Guenter Rohrmann has stepped down as CNS President Tony Calabrese has announced his retirement.
     The elevated presence of IATA Head of Cargo Aleks Popovich at this year’s Partnership led some to wonder if a new era is beginning at CNS that might even include the organization being folded further into IATA.
     But beyond speculation and poolside conversation there was plenty of high-powered business done at CNS Partnership this year.
     But at the top of the gathering the mood and direction for the air cargo meetings to come was set by Scott Dolan.

     “More than ever, collaboration is vital to keep supply chains reliable and resilient.
     “Working in partnership, the air cargo community must continue to meet demanding service expectations and competitive pressures. The network through which goods and information are moved requires continual realignment and innovation in response to global manufacturing and market shifts, serious threats, and new ways of doing business.
     “Using the network efficiently and effectively to attract business and deliver what is promised requires connection, collaboration, and commitment to keep it strong and aligned with the times.
     “We've laid out plans and initiatives as an industry to survive in this changing business -- and now we have to execute, as an industry, on this strategy, in order to survive.
     “The fact that the world is "becoming a smaller place" has an acute affect on the cargo industry. “Global reach is becoming essential.
     “Partner networks are forming, and there is continued pressure for profitability across the industry.
     “More organizations are competing for a slightly increased amount of business as well as trying to unearth new business opportunities, which can intensify turf wars to capture certain markets and routes.

     “Integrators are growing.
     “Their end-to-end service model poses a serious threat to the businesses of carriers, forwarders, specialized service providers and trucking companies.
     “Meanwhile, a slowdown in market growth is affecting all players involved, as are fuel price increases and more stringent security requirements.
     “Alliances are naturally forming as a product of globalization.
     “Consolidation across the industry at many levels is having a significant effect on how we all do business.
     “The idea of forming alliances to build capacity, attract customers, enhance service and drive growth and profitability is resulting in more mergers and acquisitions.
     “Some forwarders are getting larger and larger, and their control over total spend is increasing with their size.
     “On the other hand, some local forwarders are willing to pay more per kilo to get their cargo on a specific flight.
     “Balancing our business from these two types of forwarders is a challenge we all face.
     “We have to analyze when it makes sense to accept a multi-national forwarder's business -- which can help build that relationship over the longer term, open business in weaker lanes, and ensure future business -- and when we should work with the local forwarder to maximize our one-time revenue.
     “In addition there may be overhead cost implications with this decision as well as a revenue impact.
     “Service-level agreements have added another dimension to the daily business of the industry. “Customer SLAs demand precise expectations and requirements of us -- as they should.
     “But the industry as a whole is still adjusting to this additional level of accountability.
     “Cost management is another major industry concern.
     “We all face the rising price of fuel, as well as our own fixed costs and the need to drive for continual cost reduction and efficiency

     “Technology is advancing around this industry at a rapid clip -- and we all need to catch up. Improved technology solutions in data management, documentation and distribution will facilitate the way we meet the challenges we face together as members of this industry.
     “Finally, in the last few years, we have all had to adjust to a world where security is now a primary concern. September 11th forced new requirements and processes which change the way we do business each day and add additional cost and time.
     “In addition it requires a great deal of manpower at all levels within the organization to examine, provide input, and then comply with the requirements.
     “All of these factors are forcing each of us to rethink how we do business.
     “Why hasn't the industry been able to deal with the challenges it faces?
     “With that said, any single organization can only go so far alone.
     “This truth applies to United Cargo just as it does to any of us in this industry.
     “To really move forward, the industry, as a whole, needs to be mutually supporting.
     “Now is the time for each of us as industry members to come together as one network and fortify each of our roles in that network.
     “Strategy is one important piece of running a successful business and translating this success to the broader network.
     “But the other critical component for success is execution.
     “Together, we must be able to execute against the strategy we've laid out for ourselves as an industry, if we expect to move toward success and establish a well-functioning network system.
     “Each member needs to turn plans into action and be accountable for executing on the plan we've laid out over the last few years.
     “The initiatives we have on the table now are those we have been discussing for several years now.
     “We have made some progress on each of them, but that work is inching along.
     “It is time for all of us to get serious about this necessary change and commit resources to each process.

     “To do this, I think we can look to IATA and C2K on a broader level as an example.
     “After years of focusing more on passenger traffic, IATA has strengthened its role in the cargo industry.
     “IATA e-freight is really about simplicity.
     “It strives toward the delivery of a simple, electronic, paper-free air cargo industry by eliminating the need to produce and transport all paper documents for air cargo shipments. Mandated by IATA's Board of Governors, and involving carriers, forwarders, shippers customs, and other stakeholders, the project's goal is to reduce the cost of paperwork by 80 percent and save $1.2 billion a year, which is currently wasted in continued issuance, processing and double work resulting from paper-based processes.
     “We need to do everything we can to simplify it, wherever we can.
     “And with 35 million air waybills each year, and nearly 40 paper documents linked to each air waybill, we are nearly swimming in paper and its associated costs.
     “Now, the pilot e-freight program will be in place for industry members who are able to free their supply chains from paper from 2007 onwards. It has taken much work and many steps just to get to this point, and now that we are beginning to pilot the program, we're facing the next hurdle: streamlining all the disparate customs and legislative processes from various countries to make a more simplified business possible. Going forward, critical to e-freight success will be well-coordinated industry lobbying of governments and customs administrations.
     “Reliance on paper processing lends itself to problems with customs holds, sometimes incomplete documentation, and other country-specific, but global issues.
     “Getting the customs agencies of each participating country on board to streamline their processes and move towards a WCO-compliant "single window concept" -- and understanding and developing the legislative and regulatory environments necessary to do so -- is a formidable challenge for e-freight.
     “As we face this next challenge, it is critical for all industry members to keep our eyes on the ball and maintain our commitment to this process.
     “It will only work if we all attend the workshops and implement in our own companies the plans we have laid out on the industry level.
     “It is critical that all organizations understand the goals of e-freight and do a gap analysis of what it will take for their organizations to move to the next level.
     “We need CNS to align air cargo industry energies in delivering e-freight for the USA.

     “Another significant undertaking in which many of you are involved is Cargo 2000 or C2K that has reengineered the air cargo transportation process from shipper to consignee by creating a Master Operating Plan.
     “It provides increased transparency as shipments move through the supply chain, and results in improved quality and efficiency of each member's business from the quality data generated by the shared system.
     “The point of all of this, of course, is to improve service to the customer, to capture and maintain market share, and reduce costs.
     “So now, eight years later, we have made great progress -- but it didn't come as quickly as we had initially expected. C2K members contributed more than 3,000 man-days to develop the program's technical specifications. “On top of that, the IT providers involved with C2K invested more than 8,000 man-days to bring the system to life.
     “In March 2006, all of this work enabled more than 189,000 route maps to be created, with an average of 10 quality checks for each route map -- made as these shipments moved to their destinations.
     “This is an example of what I'm talking about today and what we need to focus on for the upcoming year: resource commitment.
     “C2K has made a great deal of progress over the last year as we are now publishing results with a commitment to publish many more metrics this year.
     “We need to build on this momentum and have more carriers and forwarders join to make this truly a quality standard for the industry.
     “For those already a member of C2K we need the same level of commitment that has been demonstrated over the last couple of years.
     “Its achievement will enable improvement for the industry as a whole in quality, performance and competitiveness.
     “IATA e-freight and Cargo 2000 are working closely together to align the initiatives -- especially as they complement and complete each other.
     “It is critical for a massive and challenging project such as e-freight to be backed by a quality system, to guarantee proper implementation and data accuracy.
     “Much of the work needed to make e-freight successful has already been done by the C2K team.
     “In addition C2K is going to benefit greatly from a paper-free environment in Phase III .
     “These initiatives -- and the others on the table related to cargo security and CASS -- are all aimed at ensuring business for us all.      “Integrators are growing at a rapid rate and becoming a more powerful force in the industry. “We need to ask ourselves why.
     “They are carving out an increasing share of the market by managing all points in the industry business chain, from start to finish.
     “They are better identifying what customers need, developing schedules to meet these needs, supplying critical data in a timely fashion and, overall, making things simple and straightforward for the customer.
     “This is precisely what the rest of the industry must do to not only stay in the game, but be successful at it.
     “Resource commitment is what is necessary to make our strategy for survival -- and success -- work.
     “This means everyone in this room should get involved in these two initiatives and ask themselves what it would take for their organization to become paper free and implement C2K.
     “This should be our focus over the next year, so that when we return to this conference next May in San Diego, we can meet about our significant progress on the initiatives we have discussed for several years running.
     “Supporting -- and then executing on -- a unified agenda of simplifying the business of air cargo should be our primary goal.
     “Looking ahead, I think we have a great opportunity to be honest with each other about the potential we have now to tighten not only our individual businesses, but strengthen our broader network.
     “It is about focusing on execution, which takes resources from every company here -- and not just talking about it as we have done in the past.”