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Aircargopedia Newsblast: August 2020! |
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| 20th August 2020 |
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Dear Air Cargo Professional:
Read to find out how Air Cargo industry rebounds after COVID-19 effects die down.
Learn more about Global Sourcing with this informative article written by Peter Canellis, PhD, PE, Professor of Management.
In more World Air Cargo news, Atlas Air Reports Strong Earnings for Q2 2020.
Air China Cargo & Cainiao increase presence at Liege Airport and Unilode equips all dnata warehouses with digital readers to enhance ULD operations. |
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D.J. Ghosh
President & Publisher
AIRCARGOPEDIA
WWW.AIRCARGOPEDIA.COM
”The Complete Encyclopedia for the Air Cargo Professional & Investor”
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Air Cargo rebounds after COVID-19 effects die down
Compiled by Aircargopedia
AIR CARGO capacity shortages caused by the COVID-19 global travel bans, along with a spike in global demand for urgent personal protective equipment (PPE) and other medical equipment, increased logistics airfreight yields in the first half of 2020.
Although many air cargo carriers saw their airfreight net revenues increase by 17 per cent in comparison with the same period last year – unlike ocean freight revenue which declined by 16 per cent – the overall COVID effect on air cargo business has been severe. The global logistics providers’ overall figures for the first six months of this year crashed by as much as 40 per cent. In the six-month period, things started to get back on track.
Unsurprisingly, volumes were down by 23.6 and 14.8 per cent respectively in both the air cargo and ocean freight sectors in the first half of this year. This is due to the COVID-19 impact on demand due to lockdowns, production stoppages, and economic contraction across industries and geographies.
Most of the companies acted immediately to protect employees, customers, and communities, including providing donated logistics support for local governments and non-governmental organisations (NGOs) around the world. They took steps to bring operating expenses and other costs in line with the new environment. In many instances, the companies experienced accelerated adoption of disruptive and emerging technologies related to the COVID-19 pandemic. Other areas of businesses, such as aviation and airport operations have been directly impacted by the decline in air travel and traffic and are now pivoting towards the development of pioneering new technologies that will be essential to the re-enablement of global travel. If the crisis has demonstrated anything, it is the essential value of logistics and supply chain providers in times of severe disruption. The full impact of COVID-19 is not yet clear – there are many possible scenarios and many unknowns – but many are taking steps to weather the storm and emerge stronger.
Ultimately, the industry feels that the long-term vision of infrastructure growth in emerging markets, growing focus on disruptive technologies and digital enablement for logistics, and expansion into new market segments like e-commerce, is more important than ever.
For more news and information about the air cargo industry, please visit AIRCARGOPEDIA.COM.
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Global Sourcing: Know When (and How) to Do It
Peter Canellis, PhD, PE, Professor of Management
Done properly and for the right reasons, global sourcing can add
significant benefits to the bottom line
As manufacturers seek to improve their profit margins, many have turned to global
sourcing as a means of reducing their Cost of Goods Sold. However, sourcing your
costs abroad is not always the right route to take. For some, either producing the supply
inputs themselves or working with domestic rather than overseas suppliers may in fact
be the smarter option.
While global sourcing is a foregone conclusion for most manufacturers, there are ample
reasons to do things the “old-fashioned way”; that is, producing components in-house
and / or with domestic suppliers.
If an input to your final product is a critical source of sustainable competitive advantage,
or you have demonstrated superior competence in producing this input yourself, or there
is significant risk to quality and customer service to do it any other way, then producing
the input in-house domestically may be the best option. Under these conditions, you
have more oversight of the production processes and can better ensure the protection of
valuable intellectual property.
Even if, for whatever reason, a manufacturer doesn’t want to do things the old-fashioned
way, there are still good arguments for going abroad without outsourcing production.
In certain cases, companies may want to pursue an in-house operation abroad,
something typically called “offshoring.” Opening an overseas operation may be
appropriate if a company needs supervision of the product input, yet needs to reduce
costs. When the local expertise has lower costs than the equivalent domestic input, and
companies are willing to commit to an operation for a reasonable period of time, this
offshoring may be the best tactical move. Additional benefits include closer proximity to
some markets and easier product ‘localization’, plus diversification of risk by adding new
sources of production.
A third approach is to out-source domestically. When the product or activity does not
require extensive oversight and there are limited savings in procurement abroad,
outsourcing domestically may be the best option. When a company’s principle
customers are located domestically, the reduced supply chain and logistics costs make
this an even more attractive option. There of course needs to be cost-effective local
capability available.
Lastly, we come to the procurement strategy that is sometimes mistaken for all of the
possibilities that comprise global sourcing. When is it appropriate to both off-shore and
out-source? This approach should be taken when an activity or product is not mission-
critical, proven suppliers are available abroad, internal improvement efforts have been
exhausted, and there is a low competitive risk. Figure 1 summarizes these sourcing
alternatives.
The element of risk has appeared a number of times in this discussion. A case can be
made that ‘risk’, in all its forms, is the major decision element in global sourcing.
Consider political risk. The figure below summarizes political and economic stability for
various countries in 2019
. Our knowledge of world events tells us that trends in stability
can be quickly reversed; in some cases for the better, and in some for the worse.
Consider the political events in Hong Kong during the past year. In some respects, they
are reminiscent of those events in 1999 that resulted in Venezuela becoming what it is
today
Product complexity is another important characteristic that must be factored into the
global sourcing decision. Relatively simple products sourced locally present minimal
problems, but control of the supply chain becomes more difficult (and more important) as
the source is moved away from the buyer.
Products of higher complexity require strict control of specifications regardless of the
location from which they are sourced. As the source is moved away from the buyer, the
combination of supply chain control and product quality control can produce some real
headaches. This is summarized in the figure below.
Being a large manufacturer is not a precondition for ‘going global’. Small and medium-
sized companies that see benefit from global sourcing can partner with established
global players in order to achieve their objectives, or use “matchmaking” services to find
potential suppliers.
Manufacturers may look at global sourcing for their business and think, “don’t source
domestically”, and “produce as little as possible in-house” (i.e. outsource as much as
possible). This all-or-nothing approach ignores the possibility that a company could still
produce some inputs in-house at an overseas location or outsource an input
domestically.
In other words, “Global Sourcing” is all of the above. It’s being flexible and responsive to
the dynamics of one’s business and finding a balance of the three main product
characteristics: cost, quality and customer service. Global sourcing can provide
significant rewards, but these rewards cannot be reaped without confronting and
overcoming new challenges.
Two unanticipated outcomes of the move to global sourcing help us to appreciate the
dynamism of this exciting commercial environment. The first is that global sourcing
actually provides domestic suppliers with a competitive advantage that derives from
cultural compatibility with the buyers and from closeness to domestic markets. These
advantages have come to be recognized by buyers who originally abandoned domestic
suppliers for pricing reasons, only to be disappointed by product quality and timeliness to
market. Domestic suppliers have come to recognize that, while they may be able to
command somewhat of a ‘proximity premium’, they must price more keenly in order to
remain competitive. The second is that, as a result of improved pricing that comes from
leaner operations, the best of the domestic suppliers turn into global suppliers as well.
From the buyers’ perspective then, ‘global sourcing’ means that no supplier is excluded
because of geography: all qualified suppliers have an ‘equal shot’ at the business. As
more business is awarded on the basis of providing the best balance of quality, service,
and cost, all of us as consumers benefit.
References
1. Adapted from: https://www.prsgroup.com/regional-political-risk-index/
Peter Canellis, PhD, PE
Professor of Management
Vaughn College of Aeronautics and Technology
peter.canellis@vaughn.edu
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Atlas Air Reports Strong Earnings for Q2 2020
August 19, 2020
Earlier this month, Atlas Air reported strong revenues and profits for the second quarter of 2020. Moreover, Atlas Air executives also offered an optimistic forecast for the next two quarters.
The company reported for Q2 2020 net income of $78.9 million and operating revenue of $825.3 million. Earnings Before Interest, Tax, and Amortization (“EBITA”), which is a key metric used by Wall Street analysts, came in at $247.0 million for Q2 2020 compared to $84.1 million for the same quarter of 2019.
Not surprisingly, shares in Atlas Air, which trade on the NASDAQ, have more than tripled this year, rallying from a low of around $16 a share in March of 2020 to a high of around $60 earlier this month.
During a conference call on August 6th with financial analysts who follow the company’s shares, Atlas Air President and C.E.O. John Dietrich stated that he believes the company has “a very favorable outlook for the remainder of 2020.”
Dietrich attributed the company’s success in the quarter to a number of factors, telling analysts that “the reduction in overall capacity in the market was a contributor. We're a strong player with the large wide-body aircraft we have in that market to begin with. So when you take the reduced capacity along with the schedule reliability that we have and the connectivity of our network, all those factors contributed to really strong yields for us and strong demand.”
It was also noted during the conference call that Atlas Air recently granted a 10% pay increase to its unionized workforce and also provides premium pay to employees who fly into virus hotspots.
Kevin Pflug
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Air China Cargo & Cainiao increase presence at Liege Airport
19 August 2020
Air China Cargo Airlines & Cainiao Smart Logistics Network, Alibaba Group’s logistics arm, have started a new international Cross-border e-commerce route to speed up average delivery times between China and Europe.
The first B777 Full Freighter flight landed at Belgium’s Liege Airport on Aug 13. Three flights will be operated each week from Hangzhou to Liege with final destination Madrid.
By establishing its eHub at Liege Airport, Cainiao aims to improve overall logistics efficiency and expand its line-haul network in a bid to deliver globally within 72 hours. For Air China Cargo, this is the first direct cooperation with a cross-border e-commerce player. Cainiao's rich experience in the field of cross-border e-commerce logistics is showing to be very complementarity with Air China Cargo's air freight network.
“Hangzhou-LGG is the next step of the expansion of the Air China Cargo operation. This cooperation will greatly benefit Cainiao Network to further bring down delivery times for Alibaba Group deliveries. Liege Airport Cargo community welcomes more #freightersfirst and connectivity,” wrote Steven Verhasselt, VP-Commercial at Liege Airport.
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Unilode equips all dnata warehouses with digital readers to enhance ULD operations
23 July 2020
Unilode Aviation Solutions, the global leader in outsourced Unit Load Device (ULD) management and repair solutions, and dnata, one of the world's leading providers of ground handling and air cargo services, have signed an agreement to equip all dnata warehouses with Unilode's Bluetooth® readers to enhance the efficiency of ULD operations in the global network of their customers.
Unilode's IATA award-winning digital solution transmits data on the geolocation of the ULDs and can also share other relevant information such as temperature, humidity, shock and light, using ULDs equipped with Bluetooth® digital tags and a network of Bluetooth® readers and mobile devices.
Guillaume Crozier, dnata's Divisional Vice President for Operations and Product Development, said: "We are delighted to partner with Unilode to deliver more value for our customers by taking advantage of the latest technologies. Unilode's innovative solutions will further increase our digital footprint and help us efficiently manage and track ULDs across our operations. We continue to enhance training, processes and technology to provide the best possible services to our customers."
Mr. Benoît Dumont, Unilode CEO, said: "Unilode is currently digitising its entire ULD fleet of 140,000 units with tags and is rolling out a Bluetooth® reader network infrastructure in over 250 locations worldwide. Our new agreement with dnata will help us accelerate the creation of Unilode's digital ecosystem and enable us to increase ULD visibility, data accuracy and asset stock control, in addition to providing our customers with important information on their cargo. We look forward to partnering with dnata in Unilode's innovative digital journey."
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