December 26, 2016 | Industry Insights, Shipping

Airfreight Forwarders Flying Past Challenges to Move Cargo

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In the face of sluggish consumer demand, fewer airline routes, changing inventory strategies and other issues, shippers are increasingly looking to test out ocean transport in lieu of air carriers despite the fact it takes longer to deliver goods. Yet airfreight forwarders are stepping up to the challenge, working hard to manage these headwinds and leverage opportunities by increasingly offering integrated solutions, facilitating end-to-end cargo delivery processes, and enabling exporters to focus on their core competencies. This is according to research firm Technavio in a summary of its 2015 Global Airfreight Forwarding Market report.

The Airfreight Forwarding Landscape

The airfreight forwarding industry along with the rest of the U.S. economy between 2008 and 2014 experienced a severe decline. What’s more, although the overall economy bounced back, the air freight forwarding market continued to lag behind, due in part to a lack of consumer demand and over-capacity among ocean carriers, explained Brandon Fried, executive director with Washington, D.C.-based Airforwarders Association, in an article in “Inbound Logistics.”

In addition, one of the most significant factors impacting the air freight forwarding market is the growing need by shippers to pinpoint the least expensive way to move their goods and make deliveries on time. “Continued software advancements make it easier for freight forwarders to let shippers know where their goods are at all points during transit and offer alternatives when trouble—say, poor weather—is imminent. The solutions can help shippers make delivery commitments, without arriving so early they boost inventory-holding costs,” said Erez Agmoni, head of airfreight, Americas, with freight forwarding and supply chain management services firm Damco. What’s more, sophisticated scheduling and tracking software has more shippers using airfreight only for emergencies, rather than as the norm.

The shrinking number of wide-body planes by the airline industry has also impacted the shipment cargo by air. Freight forwarders are fighting for space in narrow-body planes. In addition, when shipping a large volume of goods, keeping all the units together is preferred, which becomes more difficult on narrow-body planes. Fewer routes as a result of air consolidation cuts down on cargo space, too. This has prompted some shippers and airfreight forwarders to rely on multiple carriers and stock inventory in different places, according to the “Inbound Logistics” article.

E-commerce growth, and particularly free shipping offers, is also on the radar of airfreight forwarders. Although “free shipping” isn’t actually free, it’s something that consumers expect. Forwarders, according to “Inbound Logistics,” can help shippers by providing “creative money-saving alternatives,” such as combining air and surface transport options to move goods quickly, yet at a reasonable cost.

Another concern is Amazon. In March 2016, Air Transport Services Group announced an agreement with Amazon Fulfillment Services, an affiliate of Amazon.com, to operate an air cargo network serving U.S. customers. As part of the agreement, Amazon is leasing 20 freighter aircraft. What does this portend? Will Amazon run its own airline down the road? Will this cut into the market share of forwarders or provide an opportunity to leverage Amazon’s capacity?

On the Horizon

While the air freight forwarding market faces definite challenges, there are some promising trends, as outlined by the “Inbound Logistics” article.  For example, increasingly complicated supply chains, with more materials and components from overseas, means airfreight likely will continue to play a role in the supply chains of companies. The growth of “fast fashion,” (think Zara) or the rapid turnover of apparel inventory so retailers can feature new styles, may cause more shippers to move to airfreight in order to ensure their goods quickly move to store shelves.

Many mission-critical components and parts, such as those needed to keep data centers humming or medical equipment operational, will continue to move as rapidly as possible. This means airfreight.

Airfreight forwarders can also leverage the challenges faced by alternate transport means, such as the port strikes in Los Angeles in 2015, or the 2016 bankruptcy of Hanjin Shipping Co. Both shifted some demand to airfreight. “The port issue created doubt and there was a bump in airfreight,” said Brandon Fried. “It taught shippers they need to have a hedge against adverse transport conditions when they ship on the ocean.”

About Roanoke Trade

Roanoke Trade specializes in insuring transportation and logistics service providers (LSPs), including customs brokers and freight forwarders. For a review of your insurance program and for more information about our solutions, please contact one of our professionals at 1-800-ROANOKE (800-762-6653).  

Source: Inbound Logistics

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