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   Vol. 16 No. 78
Wednesday October 4, 2017

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Algorithms And People

      As long as man is unable to beam a piece of freight from one end of the world to another, the essence of knowledge and physical maneuvering is as important as the technological application.
      Technology is one side of the coin and skills is another.

Working Hand In Hand

      The two concepts go hand in hand, exerting complementary pressure. Experience has shown us that in any business cycle the organization must be agile. There needs to be a focus on customer service, and lastly but equally crucial is talent development.
      Technological advancement must be complemented with training & education of humans.
      So, no beaming of freight means skills are here to stay—at least through my lifetime!

The Human Factor

      One final point on this—the best & worst asset remains the human element.
      It is humans that make or break organizations.
      I see no change to this narrative.
      I recall that the popularized “y2k”did not stop the world.
      Having said this, there is adequate space for virtual forwarders (VF), but only those that will base their offering with complementary skills—this will be crucial in the long run.

The Technology Burden

      If the VFs rely purely on technology, the disruption will hit them and wipe them out with one swoop.
      In a perfect world where there are no surprises of irregularities of weight, dimensions, storms, and bad weather, technical or mechanical hiccups of transportation conveyance, this would be heaven for the virtual forwarders. But any of these disruptions, and others not specified, can cause havoc to the system and this is where the skills of an international freight forwarder shine brightly.

Ponder Yonder Brexit

      Another point to stress is the real impact of Brexit.
      Brexit could take the world to the reverse of globalization in some respects.
      The consequence, even slight, means more border crossing, etc., but by any measure a change is occurring in what used to be routine.
      Like it or not, Brexit adds up to another area that very much needs human intervention application skills.
      This is change in the broader sense.

Credit Worth Applause

      The virtual forwarder has indeed streamlined the processes and made “donkey work” palatable.
      No doubt this is remarkable, impressive, clever, and essential for modernization. And it is a track that that will continue with the use of robotics, drones, and artificial intelligence.
      I have learned to embrace this thinking.
      My concern and at times disappointment is with colleagues in the sector that dismiss human skills.

Traditional Forwarders Playbook

      We should make no mistake, the traditional forwarder, if one does not embark on innovation, will be wiped out.  
      There is a process that demands that everyone get on board, catch up, and embrace the new thinking of this modern age.
      What suffices today is outdated tomorrow. Those that are content with today’s deliverables are in for a surprise.
      The emergence of virtual forwarders is all because the traditional forwarders have left all the windows of innovation wide open for newcomers to jump in.
      So better think of what the customers of tomorrow want, while keeping innovation and talent development moving forward on a priority basis.
      All effort must be raised toward more investment and forward-looking activities.
Issa Baluch

Issa Baluch     Issa Baluch launched his career as a tally clerk in Dubai at the Swedish-owned Gulf Agency Company in 1973.
     He was general manager of the supply chain department where he helped initiate sea-air multimodal transport between Asia, Europe, and North America before he established his own business Swift Group in 1989.
     By 2008, when Baluch sold Swift Group to South African-owned Barloworld Logistics and retired, Swift Group had expanded to 24 countries –16 in Africa –and 49 branches.
     Mr. Baluch had, also among other things, served as the founding President of the first Freight Logistics Association formed on the Arabian Gulf Peninsula in Dubai, the National Association of Freight Logistics (NAFL).
     Today Mr. Baluch serves as Senior Advanced Leadership Fellow at Harvard University. In addition to addressing strategies that would allow logistics to help reverse trade imbalances, Mr. Baluch has also been involved in agriculture projects in Africa aimed at addressing food shortages.

Summer Biz A Beauty

     Did the peak season start in August? One forwarder believes it did…
      The latest air cargo data reaffirmed that demand was strong throughout the summer. More of the same is to be expected through the end of the year.
      The Confucius Temple in Nanking was busy last Saturday, October 2, during the start of National Day Golden Week in China.
      The celebration, which continues through October 8, sees the Chinese people spend a record high sum of money on shopping and food during a glorious, weeklong, countrywide event.
      Last year "Golden Week" in China registered over one trillion Yuan spending in retail and catering consumption.
      This year is expected to top that.

      The latest raft of air freight stats reaffirmed what most in the industry already knew—the summer of 2017 was a beauty. IATA recorded that air freight demand in July measured in freight ton kilometers (FTKs) increased by 11.4 percent year-on-year, the fourth time in five months that double-digit annual growth was recorded.

Four Times Higher Than Norm

      Moreover, July's year-on-year increase in demand was nearly four times higher than the ten-year average growth rate of 3.1 percent. “Demand growth continues to significantly outstrip capacity growth, which is positive for airline yields and the industry's financial performance,” said IATA. “The robust growth in air cargo demand is consistent with an uptick in global trade, rising export orders, and upbeat business confidence indicators.”

AAPA Word Up Healthy

      The Association of Asia Pacific Airlines’ August figures revealed a similarly healthy picture. The region’s carriers saw a 12.2 percent year-on-year increase in air cargo demand measured in FTKs, gains made possible by “firm demand for manufactured products, particularly pharmaceutical goods and technological equipment.”

What Is Next?

      But where next? The view from forwarders interviewed by your correspondent in recent weeks revealed a clear consensus—volumes in September remained healthy and most expect demand to hold up through to the end of the year and, possibly, into 2018. Indeed, some suggest the peak season may in fact have started in August and demand could remain strong through to Chinese New Year next February.

All That Glitters Is Not Gold

      However, one blip could come in the first week of October, when many factories in China will close for Golden Week. This could impact October’s figures. It is also worth noting that year-on-year gains might be less impressive in Q4 than thus far in 2017, but only because Q4 2016 saw a substantial surge in demand.

Paul TsuiMarket Focus

      However, the overall picture is one of a resurgent market starting to experience notable pressure on capacity and prices. For example, according to the TAC Index, on the Hong Kong-U.S. lane prices rose from USD $2.1 per kg in February to USD $3.98 per kg on September 25.
      A spokesman for the Hong Kong Association of Freight Forwarding and Logistics (Haffa) told FlyingTypers that HK-U.S. lanes were now seeing space shortages and this had prompted a rush for charters. He also predicted rates would rise through Q4. “We hope the market will keep this momentum until Chinese New Year in mid-February 2018,” he added.
      Echoing Haffa, Paul Tsui, managing director of Hong Kong-based forwarding and logistics operator Janel Group, said ex-HKIA volumes were strong and carriers were doing their best to increase uplift capacity.

Taking A Bite From Apple

      He also said that while most of Apple’s new product launches had been flown direct from Chengzhou, the supply chain complexity of the product’s components had had a wider impact on capacity out of Asia and could further fuel demand in the weeks ahead. “We’ll be back to normal on October 9 after the holidays and I expect demand will drive up for some time depending on the sales of iPhone X,” he said. “The iPhone 8 should not influence the market so much, I don’t think.”

Global Air Cargo August Double Digit Expansion     WorldACD’s latest report into the state of health of the air freight sector was highly upbeat, mirroring the positivity of analysts throughout much of the year.
    It revealed that global air freight volumes soared 12.9% year-on-year in August. Moreover, year-on-year growth in Direct Ton Kilometers (DTKs) rose 14.6% in the month.
    It also shed light on a key driver of the market, “namely that the average distance between point of origin and point of destination of air cargo shipments keeps growing, just like the average shipment size”, said the analyst.
    Revenues in Greenback terms increased 23% year-on-year in August, helped by an average YoY yield increase of 15 USD-cents and driven by the strength of the Euro against the dollar.
    In terms of origins, the Asia Pacific and Europe have outperformed other regions consistently during 2017 but in August, robust growth in North America also returned. “These three regions each posted more than 15% YoY volume growth,” said World ACD. “In North America, the only 'outlier' was domestic air cargo, which hardly grew, another quite persistent trend.
    “From the origin Africa, we noted a YoY volume contraction (-4%), caused purely by declining business to its main markets Europe and the Middle East.”
    However, southern hemisphere markets like South America and Indonesia, both origins that have thus far barely contributed to this year's growth spurt, turned the tables in August by recording expansion in volume of 11% and 21%, respectively.
    “Most of the top air cargo origins in the world, such as Hong Kong, Germany, parts of China, Japan, Korea, the United Kingdom and the Netherlands, contributed to the booming air cargo market as one would expect from these markets,” said the analyst.
    “France, Australia and the United Arab Emirates, however, are performing well below the average for 2017, thus seeing their relative position under some threat.
    “With a growth of more than 25% for the year up till now, Vietnam and Belgium are moving up in the rankings, Vietnam showing growth across the board and Belgium clearly profiting from its focus on improving its pharma transport infrastructure.”
    WorldACD has now reformed its analysis of specific product data by recognizing eleven different product categories instead of the previous six. The analyst said the greater insight this enabled illustrated that growth in the transport of high tech & other vulnerable goods was outpacing the year-to-date growth in general cargo by 18% vs. 12.4%, while pharmaceuticals was the only other category growing faster than general cargo.
    “Of all specific cargo products, 25% of the volume originates in Asia Pacific, but 30% of the revenues in USD$,” said the report. “In the transport of perishables in 2017 compared to 2016, the following picture emerged: growth was mainly driven by the flower markets, which increased by 9.9%, and thus did much better than the markets in Fruits & Vegetables (+5.9%) and Fish & Seafood (+4.9%).”
    However, the analyst found that the two most important flower markets have performed markedly different during 2017. While flower transport in the Colombia-USA market has increased by 18% YoY during 2017, the market from Kenya to The Netherlands contracted by 1.6% and yields are down slightly in both markets.

Ingo Rahn Brings It On

Ingo-Alexander Rahn      Ingo-Alexander Rahn, Global Head of Air Freight at DHL Global Forwarding, was also positive about the rest of 2017. “In contrast to past years, it is not only the technology sector driving the growth, but also engineering and manufacturing, retail, consumer goods, and chemicals as a result of a robust global economy,” he said. “At the end of the third quarter and beginning of the fourth quarter we see as usual also an increasing demand from the electronic sector as electronic companies are usually launching new devices and products during this time.
      “As we approach the Christmas season these new products have to be available in time. This is a regular pattern and the air freight market is well aware of this additional demand. We at DHL Global Forwarding have made all necessary preparations.”
      Rahn said this anticipated strong demand was already boosting demand for charters out of key hubs. As a result, DHL has secured more of its own capacity via charters and through block space agreements this year than in previous seasons.
      “We have increased our contracted capacity on the main routes and we have secured additional charters on the transpacific as well as European routes,” he added. “With this capacity preparation we are in the position to ensure a smooth service to our customers.”
      He was also positive that the 2017 peak season would be strong, as well as lasting longer than in recent years. “As usual the transpacific outbound Asia is strong as well as the trading between Asia and Europe and vice versa,” he added. “But we also observe strong trade between Europe and the U.S. as well as South America.
      “Furthermore, Intra-Asia is also performing well. This pattern is not much different—what is different this year is that we start from a higher base of demand and rate levels. Most of our customers understand this change.
      “Even in the typical slack months during the summer period the demand did not drop and we’ve seen a start of the peak season already in August.
     “A well performing world economy and in particular a strongly rising consumer confidence suggest that air freight growth will remain. We couldn’t observe any slowdown so far.”

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Bellinder Live At Five

     “Bodacious” Jim Bellinder, United Cargo’s VP Sales Americas, is in the news this week. “Live With Five” is a breezy but thoughtful set of answers to five questions about the “Billion Dollar Baby” that is United Worldwide Cargo today.
What is the top priority right now?

      “Customer service is always our top priority, of course, and the latest development is United Cargo’s initiative to be more customer-focused in applying our resources.
      “We are making limited strategic changes in our business to support our customers and our frontline cargo employees.
      “This includes enhancements to our Customer Contact Centers, Customer Solutions Team, Business Partner Program, and Inside Sales Representatives based in several worldwide locations.
      “We believe customers will benefit from this more skillful use of our resources.”
What's next?

      “We continue to make great progress on the development of our cargo joint ventures with Lufthansa and ANA.
      “This work is happening ‘behind the scenes’ and everyone familiar with this type of effort knows that careful attention to a vast number of details is necessary to deliver the potential customer benefits.
      “United remains positive about the benefits not only for customer satisfaction and business growth, but because these two JV partners both have great people that are committed to cargo, their customers, and our partnership.
      “I often say that ‘people like to do business with people they like and trust,’ and we all genuinely like, trust, and get along with each other.
      “I think that will contribute to the success of the ventures and help us better serve our joint customers.”
Why are you bullish on United?

      “United is a great company, and what makes it great are the people that care about our customers and each other.
      “I see my co-workers doing extraordinary things every day that make me proud to be here at United.
      “The company’s response to our employees and wider communities devastated by the recent natural disasters, evidenced by our relief efforts in Houston, Miami, San Juan, St. Maarten, Mexico, and elsewhere, has been emotional and at times overwhelming to witness.
      “There are literally hundreds of unbelievable stories of United’s efforts to help those in need, and of our employees helping their co-workers.”

How are you handling the capacity gains?

      “We’re gaining some capacity with the delivery of more 777-300 aircraft.
      “But since we’re also anticipating a spike in demand in Q4, we’re working to make sure we “under-promise and over-deliver” during the upcoming peak season.
      “United operations leadership has spent a lot of time in the field implementing changes in our EWR and SFO hubs to prepare for the seasonal volume surge.
      “I really can’t say enough about the high quality of service we deliver every day, and we expect these changes will improve our service offering even more.”

How are you thinking about tomorrow?

      “While we concentrate on delivering on our current commitments, a substantial portion of our energy is focused on envisioning the future of cargo.
      “We have really sharp people on our team who are incubating some revolutionary ideas with the potential to change the airline cargo business in exciting ways.
      “These are folks with no investment in the way our industry has done things in the past, and they also possess the technical expertise to make these innovations successful.”

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