February 2002

At first glance, the e-commerce revolution might seem to have missed the often traditional freight forwarding fraternity, but Chris N Lewis says new practices are slipping in almost unacknowledged

According to the prophesies of all those bullish Internet soothsayers a couple of years ago, the telephone by now should be gathering dust alongside the telex, the telegram and the fax machine in the Museum of Yesterday's Technology.

So far, the death of the phone as a means of routine communication in the international freight industry appears to have been greatly exaggerated - although you perhaps need to look beyond the inevitable scepticism to judge the true picture.

 

As a means of booking freight, John O'Connell, the British International Freight Association's trades manager, reckons that the phone or fax is still dominant - somewhere "in the high nineties" in percentage terms. "My impression," he says, "is that Internet use is still quite limited."

Don Armour of freight forwarder WTA says that customers rarely if ever book freight through its Web site, although its "frequently asked freight industry questions" section is proving very popular. Tracking and tracing of consignments over the Web is also done quite routinely, though customers' first reaction on reading on their screens that something has gone awry is still to pick up the phone.

On the other hand, you need to weight this view against that of Air Menzies director Paul Williams, who has found online booking increasing by leaps and bounds (see panel on page 34).

WTA has certainly asked customers and potential customers whether they want a Web booking facility, but Don Armour is, frankly, "quite amazed at how few people are looking for it." This may however be because much of WTA's business is at the smaller to medium end of the market; by and large, its customers don't make hundreds of individual bookings a day. So far, the GF-X airline industry Web-based freight system has made little impact on the day-to-day workings of the industry, he says.

But another reason for shippers' lack of interest may be a feeling that air freight is simply too complicated for the Internet, at its current state of development at least. Filling an air freight pallet or container effectively is as much an art as a science, involving complex calculations of weight, volume and revenue-maximisation; it's a bit like trying to build a complex Lego model in your head. However sophisticated the algorithms used, the human brain can still outscore the most powerful computers in such situations, Don Armour believes.

As BIFA's John O'Connell puts it, "air freight is a very 'live' situation. There is finite space, and how it is sold depends on weight, volume and many other factors." Airlines are still very heterogeneous, says O'Connell, in terms of both the planes they operate and the type of service they offer - and even more so in their IT systems.

It's also very difficult to engage in the rapid-fire question-and-answer session of a typical freight phone conversation with a computer. Is there a cheaper deferred service? How much will that save and how much longer will it take? What if I send half of it express and the rest deferred?

Issues of cost

However, the complexity argument may have been somewhat overstated. After all, if a computer can crack the genetic code, it should be able to cope with filling a pallet. But there remains the cost issue. ediTRACK, a sister-company to freight carrier Allport, produces software designed to improve collaboration in a wide range of industries. According to Scott Storey, commercial director: "I don't think any of these issues is too complex to reproduce on the Web, but the cost might be too much for a small forwarder." One factor that is making technology more affordable, he adds, is in fact the existence of the Internet itself, which can bring the cost of solutions down to a more reasonable level.

Another point about air freight is that it frequently goes wrong, often in quite unexpected ways. A change of wind direction, a sudden last-minute rush of passengers each with 20 kilos of excess baggage, can drastically cut available freight capacity (and most cargo nowadays travels in the bellyholds of passenger planes). In developing countries, flights are frequently cancelled altogether.

It can seem a bit pointless developing a Web site that will hone and refine your space utilisation or revenue maximisation if half the cargo ends up getting pulled off the plane at the last minute - usually under circumstances bordering on the chaotic - and hastily rebooked on the next available flight. Most airline systems are not particularly good at tracing consignments (or for that matter, passenger baggage) under these circumstances.

One activity where the Web has made some inroads is in the routine tracking and tracing of consignments, though here again, if someone discovers that something isn't where it should be, the first reaction is often to pick up the phone and ask someone at the airline.

And another area where it is beginning to make inroads at the booking level is among the express parcels operators, though here the complexity of the shipping process has been greatly simplified.

A further good reason why a lot of freight booking is still done by phone is that the shipping booking process may be a prelude to a much more wide-ranging conversation on subjects as divergent as Chinese import licences or dangerous goods regulations (not to mention last Saturday's football results).

Arm's length

The Internet's slow progress in taking the freighting world by storm can be attributed to several factors, according to Exel's European sales and marketing director Geoffrey Corpe. "We would like to build more visibility within the 'greater' enterprise of customer, forwarder and carrier in order to exchange increased levels of information across the whole supply chain. But we still have a tendency in this industry to keep each other at arm's length. The passenger side of the airline industry is prepared to put 'vital' information, such as availability, online for anyone with a Web browser to see, so it's disappointing that those responsible for filling the bottom part of the plane feel the need to be more cautious. And in any case, there are ways of building in safeguards to protect the availability of online cargo inventory being abused."

There has already been one major initiative in the industry to address the issue of standards - namely Cargo 2000, which tried for a time to win a consensus on standards. Progress has been hampered because of a tendency for players to "sit on the fence", in Geoffrey Corpe's view. Meanwhile GF-X, the airline/forwarder exchange platform, currently lacks critical mass, he adds; only a limited number of airlines are on the system so far. And carriers such as Lufthansa and United Airlines have been tempted into setting up their own systems.

"Be patient." That's the message to the air freight industry from Lisa Thomas, GF-X's business director. There is a lot of work currently going on behind the scenes to iron out some of the glitches that users complain of, she says. "In terms of change management, we're still at the early stage of the 'S-curve', and it's not something that is going to change overnight." GF-X's booking volume is in fact growing at around 40 per cent a month, she adds.

The GF-X software is now basically complete in terms of services and functions. A permanent booking or "allotment" facility was added last year, and new releases will concentrate mainly on "tweaking" (small changes to screen designs and field positions, for example). Now GF-X is sitting down with freight forwarders and working its way through a whole series of practical problems.

Easy standardisation

As for the argument that air freight is "too complex" to lend itself to a Web exchange format, Lisa Thomas points out that GF-X is not about pallet-handling. In fact, the existing booking process between forwarder and airline is fairly easily standardised. There is complexity in the industry, she admits, but she points out that simplification of the estimated 20,000 cargo types, or the many types of aircraft pallets and containers, is desirable in any case. In fact, the advent of GF-X is a good opportunity to clear out some of this "dead wood" from the industry, she argues. "However, I wouldn't want to gloss over the complexity of the task," she says.

Sea freight is perhaps in a somewhat different situation from air freight. Weight and/or space are less critical - for full containerloads at least - and shipping schedules are generally more predictable than for many air freight services. Ocean portals such as GT Nexus and INTRRA are, arguably, at a higher stage of development than their air equivalents.

Another segment of the freight market where different rules seem to apply is the contract logistics market (as distinct from the "spot" market). Here electronic communications (in the shape of EDI) are thoroughly entrenched, and telephone and fax are now largely confined to non-standard tasks such as managing returns or dealing with the occasional spot load. Certainly that's the view of Tibbett & Britten, and would probably find general agreement in the industry.

P&O Trans European, which managing director Charles Rice places firmly in the contract logistics camp, says that EDI links (as opposed to the Internet per se) account for around 60 per cent of orders, "either on their system or ours. I think that reflects the general technology in this market." Fax or "standard" orders requiring no active intervention account for the remaining 40 per cent non-electronic orders.

That isn't to say that P&OTE hasn't invested heavily in its Polygon Internet portal, which offers a full range of consignment order tracking, performance reports and similar data.

As for P&OTE's own dealings with carriers such as subcontracted road hauliers, electronic methods account for a large percentage of the total. Again, many of these will be EDI- rather than Internet-based, "but where the Internet is becoming a really live issue for us is where you're doing pan-European fourth-party logistics contracts." In these operations, a lead contractor manages trucking and warehousing services provided by other companies on behalf of a customer such as a retailer or manufacturer. Many subcontractors will be small-scale operators, and would find it difficult to justify a full-blown EDI connection but could use Internet links.

"The Internet is very good at gathering information from a broad geographical range, where you need a way of gathering information from contractors such as 'How many domestic deliveries did we do in Spain today?'"

Broadband 'could change the picture'

Broadband Internet connections, usually mentioned in connection with streaming video or fast consumer Web access, could also prove the catalyst that opens up the Internet to the forwarding world.

Charles Rice, P&O Trans European managing director, points out that although broadband Internet technology is not yet developed around the Continent, "it's a reasonable assumption that eventually it will be."

As far as P&OTE is concerned, Rice sees broadband Internet as potentially the next big step in connectivity, "provided we can get the proper level of security." Advantages include much quicker downloads and switching between Web pages, and an always-on link that saves users the need to make a dial-up connection each time there's a need to access the Internet.

AMI taking one in four bookings online

One air freight specialist that is becoming increasingly enthusiastic about the Internet as a transaction medium is AMI. It reports that nearly a quarter of all bookings it takes are now placed online, and says the value of business transacted online over the past 12 months came to over £4million. Director Paul Williams says he is confident in raising the proportion to 35 per cent by the end of this year.

In the first week of December alone, he says 103 companies made 560 online bookings. On average, the AMI site receives 98,452 "hits" a week from customers booking or tracking freight shipments. Yet at the start of last year only 6 per cent of bookings were made online.

"We're keen get customers to book via the Web site because they will quickly recognise the time and cost benefits," Williams says. The company has been encouraging customers to book online with incentives such as a small discount on all US airport-to-airport bookings.

AMI lists 70 airlines on its site. It says the average time for each booking entry is just 30 seconds, and the booking is confirmed while the customer is still online (the process takes less than five seconds).