Commercial airlines have long been a staple in long-distance shipping, with half of air-shipped cargo transported in the bellies of passenger planes. And they’ve done a great job of rebalancing passenger volumes as needed to maintain stable capacity in the cargo hold, even when fuel costs would rise. However, the pandemic has changed the economics, and many airlines are cancelling flights on undersold international routes. Though it should be good news for air freight carriers like yourself given the opportunity to take on that revenue, we all know these grounded passenger planes haven’t been the stroke of luck you needed – at least not yet.
With air shipping capacity cut in half overnight, the burden flows on you to maintain on-time deliveries for double the package volume – especially now that container ships are being logjammed for weeks, unable to get to ports, and there’s no other way to get goods across bodies of water.
Except you probably don’t have any more capacity than you did a year ago, right?
This is a tough position to be in. You’re in the business of moving goods fast. It’s your entire value proposition. So, if more customers start turning to you hoping you’ll be their salvation from this global shipping crisis and you start turning them away because you can’t accommodate any more packages for weeks or months out, you could set yourself back years from a financial perspective.
You could add capacity by adding planes and pilots, but that costs money you may not have right now. And with fuel prices doubling earlier this year, and labor wages rising, you may find it hard to justify the expense of fleet expansion even if you have the financial resources. It’s quite a predicament. But one that you can get out of, perhaps easier than you think.
Let me explain…
Clear Visibility Starting at the Loading Station
My team and I spoke with several carriers earlier this year that were still shipping a lot of air. Unit load devices (ULDs) were not being effectively utilized, with space going unused. Now, some are working with us to enhance utilization so they can load more packages onto each plane and manage higher shipping volumes without having to add flights or expand their fleets.
They’ve been implementing the Zebra SmartPack™ Container solution at their air cargo hubs and sorting centers to help workers better stack packages into each ULD. Similar to the Zebra SmartPack Trailer solution used at warehouses and cross-docks, SmartPack Container uses 3D sensing technology to gauge load efficiency and construction quality. The data provided helps decision-makers better adapt the organization’s overall ULD strategy to current conditions. For example, they may decide to increase the use of smaller ULDs at certain hubs rather than bigger ones for several months, reevaluating requirements on an annual or biannual bases. It also gives logistics managers and supervisors a line of sight into container utilization, enabling them to coach teams on how to adjust their individual “build” strategies on a near-real time basis so more packages can fit in each container. Less air is shipped, and more revenue is generated with each ULD.
In fact, we recently helped one major carrier achieve 5% more fullness on average in its ULDs at an air cargo hub in Europe. And it wasn’t a one-time gain. It has proven sustainable through the continued use of SmartPack Container.
For years, logistics supervisors were relying on package volumes from the carrier’s warehouse management system (WMS) to estimate fullness of the ULDs, the number one key performance indicator (KPI) for its hubs. The problem is that this information could take a week to generate in the system, and it wasn’t 100% accurate or complete when it arrived. Because it was pure package volume data, the reports didn’t offer insights into how each ULD was actually utilized. So, supervisors didn’t know how to improve load construction or workflows each day – much less in near-real time – to increase ULD utilization.
So, the carrier wanted to test the SmartPack Container solution to see if it could help. For four weeks, we trained a load team at the air cargo hub on how to use the system. Supervisors were able to learn how to adjust certain processes to achieve better utilization. They were also able to advise their employees when something was not being done optimally so they could act before the load was closed.
Just as importantly, supervisors and other stakeholders were able to review the loads that didn’t meet certain KPIs so they could transfer and apply lessons learned to others within the organization.
As a result, load construction improved, and the customer managed to increase the efficiency of its loading processes to a level that was sustainable over time, reaching KPI values that were not previously possible. In fact, the switch from reactive to real-time analytics was huge, as it enhanced the very metric the customer set to define success during the SmartPack evaluation trial.
If you find that hard to believe, I completely understand. You’re probably getting KPIs from your main hub once a week – and a week too late – right?
That’s a big reason why we created SmartPack in the first place. Transporters and logistics companies need a way to see and act on load-related data as soon as it’s captured in a homogenous way across all levels of the organization. So, we designed the system to flow data to senior managers, supervisors and other decision-makers daily and, in some cases, in real time.
In this particular air cargo hub deployment (and many others we’ve worked on lately), SmartPack enabled key stakeholders to see when performance was trending in the wrong direction. They would alert the senior manager who, in turn, spoke with supervisors about making immediate changes. The next day, performance would usually go up. SmartPack-informed change management had taken root.
“Okay. But was the performance gain sustainable long term?” you’re probably wondering.
Absolutely – and we proved it.
When the SmartPack-trained load team went on a one-week vacation, the carrier assessed the replacement crew to see how it performed without the system monitoring and guiding its actions. Its loads were suboptimal, and freight processing levels actually degraded back to historical lows.
Then, when the SmartPack-trained team returned from vacation, the performance was restored since they continued using the SmartPack insights to inform load strategies.
Once the carrier was able to see load utilization on a daily basis rather than on a week delay, it was able to make strategic and tactical changes to its operations to achieve – and sustain – its load KPI. Real-time (and even next day) insights gave them the performance lift needed to process more freight without needing more flights and fuel.
What This Means for You and the Future of Air Cargo
I personally think air freight could be on the same path as e-commerce.
Prior to the pandemic, online and mobile shopping were on a growth trajectory. But use was typically reserved for those who appreciated the convenience. Then shutdowns and social distancing happened, and people were forced to use those channels. Then they realized they liked them…a lot. They didn’t even mind paying a little bit extra for delivery or curbside pickup if needed. Now, the majority of people are shopping online as an everyday practice.
From a shipping perspective, people may have reserved the air option for time-sensitive situations – when they were trying to get perishable goods or a gift to someone hundreds or thousands of miles away in a day’s time. But now that it seems to be the only reliable way to get anything to anyone on time, especially when shipping overseas, it’s likely that planes will be the preferred way for packages to travel for the foreseeable future.
This is true of supply chain cargo as well.
It costs $6,000 USD more to ship a container across the ocean from Asia to Europe than it did in April. Tack on an extra 20% (at least) for those going to the western U.S. coast. In fact, I read the other day the average shipping rate is now at $20,000 per container and climbing. That’s nearly 500% higher than a year ago.
I realize already industry-high air freight rates have doubled in the last year, making the ocean still appear to be the best option for long-haul shipping – at least on paper. But vessels are only operating on schedule 35% of the time right now and port-to-port transit times have more than doubled in 12 months. Fireworks vendors in the U.S. literally didn’t have fireworks for New Year’s Eve and Fourth of July – the only time of year they can operate their businesses. And they’re not the only ones tired of telling customers there will be weeks or months-long delivery delays. I know we’re frustrated at Zebra. Who wants to let customers down? Or explain to shareholders that product launches will be delayed several quarters because they can’t get inventory to distribution centers, much less customer doorsteps?
Every business is trying to stay afloat right now (no pun intended), and the continued reliance on maritime channels is sinking many. So, they’re starting to see air cargo carriers as a stop-loss measure. The cost of shipping might still be higher, but what’s the alternative? A higher sales loss rate? Possibly. That’s precisely why some companies are moving their distribution centers (DC) closer to air cargo hubs. They are now making air a standard component of their transportation strategies. Being closer to airports with larger cargo fleets makes it easier to secure the space needed to get shipments out on time. It also reduces the lead time needed to get goods from the DC to the air cargo hub and reduces the risk of trucking or rail delays.
That leaves you with both an opportunity and a challenge.
Air cargo volume recently hit a four-year high, and industry analysts expect this growth to be sustained. As do I. Even if ocean and ground shipping networks were to expand and port processing speeds were to pick up to pre-pandemic levels – which some say won’t happen until at least 2023 – more shipping capacity is going to be needed. We’re on a long-term growth trajectory for e-commerce and commerce overall. The last 18 months proved that.
And even as demand drops back down a bit, there’s always a reason why air freight carriers need to improve ULD utilization. For example, regulatory mandates around carbon emissions will require you to pay close attention to fleet utilization in the coming years. If you can increase ULD utilization, perhaps you can deliver the same volume of goods with fewer flights. Worker safety is also an ongoing concern – and another regulatory focal point. SmartPack Container can help you train load teams on how to better utilize ULDs without risking injury, and more strategically planning each load can help reduce overexertion.
Something else we’re looking at right now with a few carriers is how this same technology can be used to improve the building of pallet ULDs, which are commonly referred to as cookie sheets. It’s not hard to stack packages in a perfect square. But it’s almost impossible for any human to eyeball the imaginary five-sided “envelope” that dictates how to stack the freight on the cookie sheet depending on where the cookie sheet is going to be located inside the aircraft. As a result, it’s hard to get each cookie sheet to fit perfectly in the nooks and crannies of the plane’s belly. And that, as you know, means you’re shipping air – air that could be filled by revenue-generating cargo.
I know I sound like a broken record, but “air” is ironically not something that works in favor of air freight carriers – at least not inside the hull.
The Route Forward
You have a rare opportunity right now to gain a competitive edge in the shipping economy and generate revenue that could make it more feasible to scale your fleet. All you have to do is create more capacity within your existing resources. Simple enough, right?
Actually, it is.
The process of digitalizing and automating your load workflow doesn’t have to be complicated. Zebra Customer Success Managers can lead you through each step of the journey. They’ll help you scope, plan, design, execute, and review the implementation – and refine as your operational scope changes. They’ll even help you train your team on how to use the system as they did for the carrier in Europe and assist with change management – which is mission critical.
As you go through this process to capture load data, validate performance proof points, and drive greater adoption throughout your organization, you’re going to start to build new load management capabilities. As they start to take root, you must do everything you can to manage the changes that will subsequently occur, especially as you start to reach the “nirvana” stage, which is accessibility to automation. If you can be proactive about change management, then those new operational capabilities will enable you to facilitate more consistent decision making and achieve trusted, sustainable outcomes that will reverberate far beyond the loading station. Demand forecasting will become second nature (and accurate), and there will be new mechanisms in place to improve inventory performance across multiple supply chain touchpoints. Of course, delivery and returns operations can be optimized if you have an idea of what is leaving or arriving in each ULD.
So, don’t wait until your load utilization levels drop below a recoverable threshold to investigate the source of the (revenue) leak. Though it might not be the biggest issue you have to contend with today, it could open up a floodgate of issues if left unchecked too long. Plus, plugging even little leaks can save you a lot of money. The SmartPack trial we just completed at the European air cargo hub was proof of that.
If you have a few minutes right now, or perhaps this week, I recommend you read my last blog post to learn more about how the SmartPack “system of intelligence” works from both a back-end perspective and in terms of the user experience:
Think You Know the Best Way to Load a Truck or Container? Let’s Put Your Theory to the Test.
I didn’t get too technical, but I did go more in depth about how the machine learning and prescriptive analytics work behind the scenes to assess the 3D sensor and camera data and help you both see and understand what’s happening in the ULD. That last part is important. Any camera can give you a line of sight inside the ULD. And you can track ULD utilization today. (That’s probably why you’re reading this, right? You’re trying to figure out how to improve utilization?)
Well, the whole point of SmartPack Container – which we actually developed in collaboration with a major global shipper – is to show you why ULDs aren’t being fully utilized. That’s the information that will help you:
- increase capacity without adding planes or round trips.
- ensure planes leave (and arrive) on time.
- comply with regulatory mandates.
- take advantage of growth opportunities with greater ease.