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  1. Analysis
August 31, 2006

Making Savings via Paperless Shipping and Automated Product Tracking

The airline industry could make savings and facilitate cargo handling through paperless shipping and product tracking. However, such an undertaking will require the engagement of all elements of the business. Jim Banks reports.

By cms admin

Automated product tracking and inventory technologies have been hot topics for the retail and logistics industries in recent years. Suppliers and shippers attempting to increase efficiency are embracing new systems. The airline industry, equally desperate to improve performance and cut costs, is now looking to apply similar principles to its cargo handling facilities.

THE PAPER TRAIL

Cargo handling is a complex process and the industry believes that moving to a paperless environment is a priority. The IATA launched the Global Cargo Paperless Environment project, now known as IATA e-freight, in late 2005 as part of its Simplifying the Business initiative, which aims to generate savings of up to $1.2bn per annum and reduce shipping times by up to 25%.

"Our mission is to take the paper out of cargo by the end of 2010," said IATA director general and CEO Giovanni Bisignani at the launch of the initiative. "This is more than just a change, it is a revolution."

"The air cargo business is drowning in paper," said Bisignani. "Every cargo shipment travels with up to 38 documents. Each year we could fill 39 747 freighters with the paper. And we are slow; shipping times have not changed despite advances in technology. In 1972 the average time for an air cargo shipment was 6.5 days. In 33 years we have only reduced that by 12 hours to six days."

SIMPLIFYING THE SYSTEM

"Every cargo shipment travels with up to 38 documents. Each year we could fill 39 747 freighters with the paper."

The potential for error and delay in cargo handling is often due to the number of participants. The cargo handling facility passes items to the outbound freight forwarder, which may need to repack them for flight and consolidate them with other items for the same destination. They are then handed to the airline’s cargo facility, then to trucks, then to customs before finally leaving on the flight.

Recognising the advantages of a paperless environment, where data would be handled 100% digitally, the IATA hopes to remove all paper from air cargo transportation for all stakeholders by 2010, with some entities able to go paperless by 2007. These early adopters could, according to the IATA, realise savings of up to $800m per annum.

The e-freight process comes in two stages. Firstly, by the end of 2007, e-freight should be implemented for some key, targeted trade routes. Then, by the end of 2010, it is hoped that 95% of all air cargo will be paperless.

From then on, it will be a question of converting the entire multi-modal supply chain to e-freight. This will be underpinned by the backing of the UN, which is promoting paperless trade in international supply chains to enhance efficiency and security.

The IATA expects e-freight to reduce manual errors, provide a more accurate and faster information flow, shorten delivery times, decrease levels of inventory in the supply chain and cut costs. Standardised communication and data transfer should also improve cash flows and improve customer satisfaction.

TAKING THE NEXT STEP

The IATA has held a number of business process workshops with industry representatives, including forwarders, carriers and customs, and it has produced a roadmap of the e-freight environment. The technical cargo industry systems audit has also been completed.

Now, the organisation has to involve all industry stakeholders in the migration process. With over 15,000 stakeholders, including 270 air carriers, 200 national customs organisations and over 10,000 freight forwarders, this will not be simple.

The IATA has formed the Industry Action Group, consisting of representatives from airlines, technology developers, the World Customs Organisation and Freight Forward International, which it hopes will build momentum for change.

The IATA will take a role in developing e-freight industry standards and addressing legal and regulatory issues. However, it recognises that industry buy-in is essential. One common data exchange would be the preferred solution, but this requires change in the way cargo business is done, and, therefore, all entities need to embrace the move and all its implications.

The buy-in from airlines and industry associations around the world has been good. The Federation of Asia Pacific Aircargo Associations, for instance, has voiced its support for the e-freight initiative, though it, too, recognises that change must take place in the industry and at government level.

"The IATA will take a role in developing e-freight industry standards and addressing legal and regulatory issues."

Many shippers, a significant number of which were already prioritising a shift to paperless processes, share the enthusiasm of airlines and industry associations. In the USA, for instance, the cargo industry is piloting the Automated Commercial Environment (ACE) between the USA and Canada. The intentions of ACE are the use of ‘next generation technology designed to enhance national border security and expedite lawful trade’, by automating and consolidating border processing.

The project is based on the ACE Secure Data Portal, which consolidates data from and for border patrol authorities, the trading community and government agencies though a single, online portal.

Furthermore, IATA’s e-freight initiative is urgent because it allows the airline industry to take control of its move to paperless cargo processing rather than waiting until an outside agency imposes standards and processes. The industry hopes that the early adopters of e-freight will pull the rest of the industry along on the back of positive experiences of lower costs, improved delivery times and ease of migration.

CHALLENGES AND OPPORTUNITIES

Though the industry may buy into the principles of e-freight there remain differences of opinion over issues such as data standardisation. Some airlines and cargo shippers have already made investments in automated processes, which would be threatened if their standards were not interoperable with the e-freight platform. In 2005, for instance, Emirates announced that it would deploy radio frequency identification (RFID) tags to improve the flow of cargo through Dubai.

Part of IATA’s technology strategy for e-freight has been a close cooperation with Cargo 2000, developer of an international, domestic and transborder freight forwarding and export management system. Cargo 2000’s aim is to automate documentation processes to speed up shipments by air, sea and land.

In many ways, the IATA and Cargo 2000 share the same goals, including the generation of common industry standards, and their cooperation is broadly welcomed. However, other developers are hoping to be considered as a vendor for the e-freight project, including, for instance, Traxon, which is already a leading supplier of communication and services to the airfreight industry.

"There is much to be achieved, but airlines and the IATA cannot do it alone. We need a common vision with our partners and with governments," said Bisignani recently of the organisation’s Simplifying the Business initiative.

The support from industry for e-freight, based on a clear understanding of both the benefits and the urgency of the situation, will be crucial to the project’s success, but now the IATA and its partners will be concerned with ironing out the details, of which there are many.

The losses the airline industry has suffered in recent years cannot be ignored, and e-freight could be an important part of the solution.

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