21 April 2014

[210414.EN.BIZ] Innovation Needed in Air Freight Industry to Reverse Falling Yields

FORWARDERS are demanding innovation in air freight to prevent it becoming commoditised and producing low yields, as shippers centralise buying organisations and seek simplified and instant pricing. 

The industry is being urged to offer innovations or "risk becoming commoditised by the procurement people [within shippers]," global head of network carrier management at DHL Global Forwarding Peter Penseel said at last week's Nordic Air Cargo Symposium. 

"If they commoditise our industry, we will then only be talking about cents and dimes. So we need to quantify the value of what we are doing."

Mr Penseel said air freight's leaders have failed to seek innovation over the last two decades, and the sector was making slow progress with initiatives such as Cargo 2000 launched 14 years ago.

The shippers also called for simplified pricing structures and instant pricing from air freight providers, and for providers to do a better job of demonstrating how air freight can provide "value" to cargo owners, said a report from Lloyd's Loading List.

CEO of Scan Global Logistics Henrik von Sydow said forwarders should listen carefully to their customers and design solutions around their needs.

"And we should deliver quality, not excuses," he said. Forwarders ought to be able to provide security and comfort to customers, "so that they can rely on their LSP taking care of their needs."

Executive vice-president of Geodis Wilson's Global Freight Forwarding Division Kim Pedersen commented, "It is clear that shippers are decreasing the number of their suppliers in order to increase their buying power, and that drives competition."

Mr von Sydow said he has experienced yield decline in air freight throughout his 36 years in the forwarding business, while there had been a tenfold increase in general pricing.

"We have shippers complaining air freight prices are too high," he said.

"I am seriously worried about where freight forwarding is going; there is a sense that we will do anything for the shipper," including passing on rate cuts to airlines, which he said was "a dangerous scenario."

Source : HKSG.

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