Descartes Interview: E-commerce challenges in air cargo sector

Two executives from Descartes – an import/export trade database provider – recently shared their views on the current state of air cargo.

Scott Sangster, Vice President, Global Logistics Network and Jos Nuijten, Vice President, Network Integration Strategy, participate in this exclusive SCMR interview.

Supply Chain Management Review: Can you provide an assessment of global e-commerce airfreight volumes and reflect on The “Amazon Air” effect?

Descartes: The “Amazon Effect” has had two definite impacts on the air cargo industry – increased package volumes and changing customer expectations. According to the Parcel Shipping Index from Pitney Bowes, global shipping volumes are expected to surpass 100 billion parcels in 2020, which represents an 11% increase over 2016. These larger volumes have increased demands and costs in some trade lanes and spurred new service providers to enter the ecommerce and package distribution markets. It has also caused some ecommerce companies and retailers to review and reorganize their supply chains to allow products to be closer to the end consumer or enable them to move more rapidly to the end consumer through new transportation providers. The “Amazon Effect” has also changed customer expectations on shipment visibility and delivery timelines, which has caused traditional logistics service providers to have to review their delivery operations, system capabilities and customer-facing operations, as the end consumer is starting to expect the same shipping experience that they receive from Amazon today.

SCMR: How will shippers and carriers overcoming global cross-border e-commerce impediments?

Descartes: Shippers today have started to work more closely with their logistics service providers to develop supply chains that allow them to deliver to end customers in a timelier fashion for international shipments. Some shippers have done this by deploying goods in distribution centers closer to end consumer markets or by evaluating additional distribution channels to avoid cross-border declarations on all shipments, which can delay and add to costs on individual transactions. However, these are sometimes offset by the cost of staging additional inventory. Other shippers have also worked with their logistics service providers to better streamline the declaration process for the export and import of goods across borders. This streamlining has often been in the form of better integration of data surrounding the shipment from purchase orders, origin of goods, goods classifications etc., along with enhanced declaration systems to process cargo security and customs brokerage declarations with minimal or no data input. This has allowed the entire supply chain to operate more efficiently and allow shippers and their logistics service providers to focus on exceptions, all while processing the vast majority of transactions in significantly less time than it took previously.

SCMR: What is the impact of ecommerce on cargo?

Descartes: A lot of ecommerce shipments are currently sent as mail. At this moment, many carriers handle mail through systems separate from cargo. With the growing volume in ecommerce, there is a need to make the volume/weight information from mail systems available to “Weight and Balance” and other flight-related systems. At the same time, mail is also losing its exemption related to security filings, making it even more important to combine cargo and mail.

SCMR: What is the impact of the United States leaving the Universal Postal Union (UPU)?

Descartes: The U.S. has announced its intent to leave the UPU by October 2019 if treaty arrangements cannot be renegotiated. One possible consequence could be that, instead of shipping ecommerce parcels directly from China to the U.S., postal consolidators will see an opportunity to move ecommerce shipments as cargo into the U.S. where they would be deconsolidated and distributed domestically.