Who needs e-freight?

Kurzfassung

In recent years, especially following the economic crisis of 2008, air cargo has experienced turbulent times. The reduced amounts of traffic observed in 2009 not only affected the air cargo carrying airlines, but the entire transportation industry. At the same time, it is striking, that, despite the fact that we are living in the age of digitalisation where real-time information on a global scale has become a basic commodity, most information processes related to air cargo are still exchanged in printed format with an average air freight shipment generating more than thirty different documents. So the question is: are these paper–intense processes and procedures related to the turbulences experienced by the air cargo industry? Can a move to electronic documentation – or “e-freight” - solve the central challenges experienced by the industry? And just because e-freight results in an improvement for air cargo carriers, why should anybody else care? For being able to answer these questions, it is important to look back in time at how “air cargo” developed and what “air cargo” is today. When the first official goods-flight through the air took place, on 18th February 1911, the French pilot Henri Péquet transported 15 kg of mail between Allahabad and Naini junction in India, flying a distance of 6 miles (10 km), at a speed of 38 mph (60 km/h), at an altitude of 40 to 50 metres (Allaz 2004). In October 1929 the so-called “Warsaw Convention”, the first international convention on transport documentation and civil liabilities of air carriers, was signed. With this convention, the “Air Consignment Note” (ACN) was introduced, a document that builds the framework for the contract between the consignor and the transport company. Though the ACN was replaced by the Air Way Bill by the members of IATA in 1931, the Warsaw Convention remained the basis for settling litigations between carriers and the consignors of goods by air until 2003, by when it was replaced by the Montreal convention The main structures of air cargo remained unchanged until the beginning of the 1970’s, even if aircraft had been further improved from a technical perspective, more freedom of the air had been established, and the quantity of flown cargo (and passengers) had multiplied. In the late 1970’s the whole air cargo business process was a lengthy and complicated construction: it consisted of up to 40 individual stages, generating up to 30 different documents and its structure typically involved the following key stakeholders. • shippers • origin freight forwarders • export customs • air carriers • import customs • destination freight forwarders • consignees Then, by the end of the 70’s, the market for air cargo experienced some fundamentally new developments, which changed our expectations towards “fast international transportation”. In 1977 the air cargo market in the US was deregulated, followed by the deregulation of passenger airlines in 1978 and of trucking in 1980. This allowed cargo-carrying companies to offer integrated services, combining air transportation with road transportation (US Congress 1982). Based on these market structures, a new form of documentation transport service entered the market: the integrators. Whereas integrators focused on transporting mainly documents in the beginnings, they soon also offered door-to-door transportation of small parcels and packages, covering the entire transportation chain from shipper to consignee. With their new product, they redefined the product “air cargo”: no longer was this the transportation from airport to airport, as described above, but suddenly it was the transportation from sender to consignee, with a part of the route being covered by a transportation through the air. With this change, air cargo started to show all characteristics of a complex system (Vester 2001): • Involving freight forwarders, handling agents, truckers and air carriers, it is built of a variety of different parts; • All these players stand in a dynamic correlation and interrelated network to one another; • Any interference in this cooperation results in a change of the relationship of the parts to one another and a change of the character of the whole system; • The system is open and in constant exchange with its environment: there is a constant exchange with stakeholders from the air cargo systems environment, e.g. customs, shippers and consignees; • The whole is more than the sum of its parts; With its projects Cargo 2000 (C2K) and e-freight IATA has initiated approaches towards the development of shared values and processes for the entire air cargo system. C2K is an independent work group which focuses on establishing and monitoring shared quality standards for cargo documentation throughout the air cargo system. Related to this is IATA’s e-freight project, which promotes the introduction of electronic documentation for air cargo. Such an electronic documentation, based on shared quality standards, would allow the players of the air cargo system to offer to its customers a product comparable to that of integrators: a door-to-door track- and traceable transportation of goods. Furthermore, it would allow to separate the flow of information from the flow of goods, enabling a network structure for the exchange of data and documents. Such network structures would allow to speed up communication processes, especially at complex interfaces of the air cargo process. For example verification of information provided in the cargo’s documentation could easily be achieved between customs, handling agents and shippers. Network structure for the information exchange would therefore contribute to an increased efficiency of the entire air cargo process. Many players from the air cargo system – freight forwarders, handling agents, customs, air cargo carriers – have joined initiatives for the introduction of electronic documentation. It is interesting to observe though, that the initiators for the move to electronic documentation and for the development of a new structure of the air cargo process are stakeholders of the air cargo system’s environment: the NGO IATA with its projects C2K and e-freight, the integrators by setting a new benchmark for the product “fast and transparent transportation of goods”, customs organisations by pushing for electronic clearing processes. As interviews with key players of the air cargo system have confirmed though, a lot of players from within the system prefer this passive role to an active shaping of the air cargo system. Actively shaping the air cargo system is therefore a step that should to be taken jointly by all its players. Shared quality standards for documentation are an important first step. The move to electronic documentation, the offering of a seamless track and trace facility throughout the entire air cargo system from shipper to consignee is unavoidable and a shared vision for the future of air cargo would be desirable.