Service Drive Increasing Market Competition

Nowhere has the influence of Information Technology on marketplace competition been more evident than in the air cargo business. After talking with executives at carriers, forwarders and integrators ACN found widespread agreement with this statement.

These executives also concluded that a fierce battle for market share is being fought between the traditional alliance of forwarders and carriers and their rivals the integrators. This battle take place alongside the rapid worldwide expansion of the air cargo business.

That information technology plays such a key role in the battlefield should not be a surprise. After all, IT was the founding premise of the first large integrator, Federal Express.

The company was based on quick response, overnight delivery, and pinpoint package tracking. It was assisted by the mobile computers carried by those ubiquitous drivers in their blue uniforms and a sophisticated, responsive IT network.

Ironically the rapid development and deployment of another technology, e-mail, once threatened a portion of the traditional integrator market. Kathleen Schemata, Vice President of Logistics for DLL, told ACN, “Look how our business has changed. Twenty years ago we were primarily carrying international documents and samples. Almost all product went with the forwarders.”

Today that situation is very different. E-mail and the increasing use of secure corporate internist have made much document transmission almost instantaneous, thus making a substantial part of the integrator market obsolete.

As their market changed the integrators found they could use their IT strategic advantage in another area, the delivery of product.

Sung Lee of Korean Air Cargo plainly stated the problem from the carriers’ point of view. In an interview with ACN he put the problem very simply, “The integrators have the Information Technology.

We have to learn to work more closely with the forwarders and agents to keep in communication with the shippers.”

READ  Computing Time-Definite Delivery

Lee noted that this presents a tricky problem for the carriers. They have to be careful not to insult their primary source of business, the forwarders. While the carrier wants to be active in forging close relationships with the shippers, it must also be careful to include the forwarder in that relationship.

This is a problem which the forwarders are well aware of. Elizabeth, New Jersey based forwarder Air Cargo International has spent the past 27 years developing its business. Company executive Oscar Rosin told ACN that the impact of the integrators on the cargo business has been “staggering”.

His feelings are very strong, “The air cargo industry will continue to change. There will be more mergers and acquisitions. The forwarders that are left will only succeed if we get cooperation from the airlines. We have been contacted in the past about being acquired, but it never worked out. Today, I would have to look at a possible acquisition if the right situation came along.”

Rosin pointed to increased lift capacity as one area where the airlines can help immediately. He also noted that the airlines are well aware of the need to build even closer partnerships with the forwarders.

The carriers, for example, have joined and become more active in the Air Forwarders Association.

In meeting the integrator challenge Air Cargo International has come to the same conclusion as most of its successful counterparts: get closer to the customer to provide superior service.

As Rosin put it, “We are doing everything we can do to better tailor daily operations to our customers’ needs. We are more hands-on, more personalized than the integrator. We provide late-night pickups, last run in the afternoon pickups for afternoon flights, and we offer warehousing services to help our customers when they need it.”

The carriers have been responding to the forwarders’ need for closer cooperation. They have also increased their efforts in upgrading their Information Technology systems.

READ  Freighter conversions

In February United Airlines announced that it was working with a dedicated IT company, SANS Systems, to provide customers with the ability to track cargo shipments over the Interment.