Industry fools itself on Asia Pac air future: wholesaler

AIR cargo management must strip the veils of illusion from their eyes in combating the worst recession since the industry began 60 years ago, according to industry veteran Julian Keeling.

Let's stop adding layers of outside management like 4PLs, which heighten the cost to the customer without comparable benefits, Mr Keeling told the World Cargo Symposium 2009 in Bangkok.

Air cargo must face harsh realities, said Keeling, CEO of Consolidators International, a Los Angeles air freight wholesaling company. Let's not indulge in the belief that air cargo will resume the growth of past years once the downturn ends.

Mr Keeling told the IATA conference that "perhaps the most pernicious illusion is that air freight will spring back to its historic pattern of growth once the current worldwide recession ends. This illusion, unless corrected, is a recipe for disaster.

World trade had changed in fundamental ways, he said. Even before the recession began, many air freight customers began shifting to ocean for reasons of cost. This trend has accelerated with the downturn of the world economy. While moving freight by sea has experienced a greater downturn in volume - percentage wise, than air - the principal reason is the enormous overhang of new, mammoth 10,000-TEU containerships ordered by the major shipping lines like Maersk, APL and Maersk.

Within the air cargo business itself, Mr Keeling anticipates fundamental changes. Air shippers are opting for less expensive time-definite deliveries, with the sharpest declines in FedEx and UPS volume being for their premium-priced overnight package delivery services. He noted that their strongest growth in the current climate has been for low-priced ground services.

He added that Just-In-Time (JIT) is now regarded as the weak link in he supply chain process.

Yes, JIT is very efficient in moving freight to the supplier's assembly line at the last minute. What happens, however, when the supplier no longer is in business? he asked. Mr Keeling pointed out that thousands of suppliers in China had closed down, leaving American manufacturers without sufficient inventory to complete production and scrambling to find new sources of supply.

Source: Schednet