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Aircargopedia Newsblast: August 2022! |
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| 16th August 2022 |
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Dear Air Cargo Professional:
The lack of workers is further fueling supply chain woes - by Pat from SUNTEC.
Read more about major worldwide geopolitical and natural disruptions spur a rethink of the
“Low Cost, All-the-Time” business model in this article by Peter Canellis, Professor of Management, Vaughn College.
In more World Air Cargo news, Atlas Air to be acquired by private equity firm Apollo.
Azul awards ULD management agreement to Unilode. Pet transport during crises. |
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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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Lack of workers is further fueling supply chain woes
These days, everything from the seemingly random shortages of items in the grocery store to the small-print warnings that your online purchases could experience shipping delays can all be traced back to a woefully out-of-whack supply chain.
The everyday items and services we’ve all come to take for granted — buying half-and-half, getting the kitchen repainted, buying a new couch — have been disrupted by the Covid-19 pandemic, and more specifically, the unpredictable delta variant. As we’ve all been forced to acknowledge over the past 18 months, when one point in the supply chain gets disrupted or delayed, the reverberations are felt down the line. More than 70 container ships unable to unload goods at ports in Los Angeles and Long Beach isn’t just a nightly news story. It’s the reason why the patio furniture you ordered in June still hasn’t arrived.
Fixing what ails the supply chain won’t be easy or quick, experts say. At its core, the problems plaguing nearly every disruption along this globally interconnected network is a lack of labor. The container ships off the coast of California don’t have the longshoreman to unload them. A shortage of truck drivers — a problem that existed pre-pandemic, but one that has only worsened since — means goods can’t get from the ports to warehouses to then find their way to retailers and consumers.
One Seafood company says the pandemic has been a bit of a “double-edged sword” for his company. In 2020, demand for products soared, with 6 million new customers trying the company’s shelf-stable offerings as the pandemic unfolded.
However, a spike in the delta variant in some of the countries where it sources goods is now forcing companies to look for different suppliers. “We have all this renewed interest in our products, but we have all this disruption in the supply chain,” they say. “It’s so integrated globally that any one issue has an impact on everything downstream.”
As companies experience increases in demand, they’re also having to contend with rising transportation costs and longer delivery times because of labor shortages. They have seen four- and five-fold increases in shipping costs. “Our typical truck shipment was between $4,000 and $5,000 before the pandemic,” the say. “Now we’re seeing upwards of $19,000.” They also say the transit of goods is taking three- to four-times longer than usual.
Labor shortages at every part of the supply chain are having an impact on companies of all stripes. It’s also affecting economic growth. A survey of local chamber of commerce leaders by the U.S. Chamber reveals that 90% of these leaders say that labor shortages are limiting economic growth in local areas.
Customer demand adding to supply chain woes. Dick’s Sporting Goods, has been riding a wave of increased demand throughout the pandemic. As gyms closed last year, people ordered more outdoor equipment and fitness gear, driving sales to rise faster than ever in the company’s history.
The company reports demand has stayed strong this year, but supply chain disruptions, especially those now hitting factories in Vietnam, are making it harder for the retailer to stock all it needs. Because of this, it has warned analysts that shipping issues in Asia could impact costs and sales growth during the all-important holiday season.
Sneaker giant Nike, a big supplier to Dick’s, is having supply chain headaches of its own. Last week, the company lowered its fiscal 2022 outlook due to longer transit times, labor shortages and prolonged production shutdowns in Vietnam. In a recent conference call, Nike chief financial officer Matt Friend said the company anticipates its entire business will see short-term inventory shortages over the next few quarters.
Meanwhile, membership-only warehouse chain Costco recently announced that shipping delays and labor shortages have prompted the company to bring back purchase limits on essentials like toilet paper, bottled water, and cleaning supplies. Unlike in the earliest days of the pandemic when demand outstripped supply, the reason now has more to do with delays in getting these goods onto store shelves in a timely way.
And FedEx last week cut its financial outlook because labor shortages caused expenses to increase in the latest quarter, while supply chain problems put a dent in shipping demand. FedEx reported that it spent an additional $450 million in the quarter to cover costs associated with increased overtime, higher wages to attract more workers and increased transportation costs.
While an easing of the delta variant and its oversize impact on every part of the supply chain will help smooth out the flow of goods, so too will technology solutions. Better deployment of automation at ports, in factories and within warehouses needs to be part of the answer.
“The pandemic has caused operations that were already inefficient to become even more inefficient,” they say. “Supply chain technology start-ups that have created solutions to help companies manage their supply chains more effectively are going to do well in the years ahead.”
In the meantime, companies are coming to terms with fact that the pandemic will have long-lasting implications for how supply chains function. Technology-led platforms that utilize advanced technologies such as artificial intelligence and machine learning will help companies identify potential problems before they disrupt the flow of goods.
Pat Praveen
SUTEC LLC.
suntecrm.com
For any questions, please contact Pat at pat@suntecrm.com
For more info please visit www.suntecrm.com
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“Too Big to Fail”: Of Random Failures
and “Strategic Knock-Outs”
Major Worldwide Geopolitical and Natural Disruptions spur a rethink of the
“Low Cost, All-the-Time” Business Model
Imagine that you’re traveling by plane in the United States and BOTH Dallas /
DFW and Chicago / ORD are closed down due to bad weather.
Okay, you’d rather not imagine it: perfectly understandable and, besides, it
doesn’t happen all that often. This is true, but if you were one of the unfortunates
(among whom I count myself!) who happened to be connecting through DFW or
ORD when it DID HAPPEN (DFW in my case), it’s not an experience you easily
forget.
But what exactly was that unforgettable experience? The pandemonium? The
moans of exasperated travelers? The desperate scramble for alternative routing
and scheduling? For me, the unforgettable experience was something I never
expected: the surreal calm of so many people just resigned to their fate! There
we were, a dozen deep on each of five Customer Service lines at American
Airlines’ Frequent Flyer lounge (with more coming up the elevator) sucking up
what was today’s dose of our existential reality: out of luck, we couldn’t invoke
Plan B, because there was no Plan B to be had.
These many years later, I’ve come to understand that what we experienced that
day was what those who study and apply Complexity Science to their analysis of
systems call a “strategic knock-out”. This is the disabling of one or more nodes in
a network that will bring the network down. It contrasts with a “random failure” of
a node that can be tolerated via work-arounds until the node’s functionality can
be restored.
We last saw this phenomenon big-time in the Financial Crisis of 2007. While the
ORD / DFW situation described above was due to the vicissitudes of the
weather, the big financial institutions did it to themselves through aggressive
lending practices that were doomed to failure. Details of the debacle aren’t
important for this discussion but, if you’re interested, I suggest watching “The Big
Short” (great movie, and we watch it in all of my Economics classes!).
Today, we face a different network problem but one that can be discussed and
analyzed using the same “ random versus strategic” analytical framework.
A recent article in the Supply Chain Management Review
discusses how those
who manage supply networks are dealing with the fallout from geopolitical
perturbations involving China
1
. Further complications arise from price distortions
driven by inflation and the continuing supply disruptions created by the
pandemic.
With such a large reliance on China, supply network designers are changing the
number, locations, and throughput requirements of their network nodes. Among
the respondents to the survey, about half were increasing the number of nodes
(i.e., locations of suppliers, manufacturing sites, consolidation and
deconsolidation facilities, etc.) while about one quarter were reducing them. This
activity has been in progress over the past two years.
Another interesting finding was that there was no evidence of significant “near-
shoring” or “re-shoring” back into developed markets. Rather, the
reconfigurations remained in the same region. For example, reducing
dependence on Chinese sources has resulted in development of alternatives
within Asia.
This is the kind of stuff that makes network analysis people drool. Longer supply
chains with few, high-volume sources kept prices down with cheap labor and
economies of scale. Additionally, just-in-time inventory management contributed
to the potential instability that we see playing out now.
Yet another finding from the survey was that networks are developing “buffers” to
provide yet additional safety and agility to their network operations.
All this is encouraging news: smart people are learning from their errors.
Next time I’m travelling in the USA, I’m connecting through Charlotte / CLT.
Yours in Supply Chain,
Peter Canellis
Regards,
Peter Canellis
Professor of Management
Vaughn College of Aeronautics and Technology
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Atlas Air To Be Acquired By Private Equity Firm Apollo
On August 4, Atlas Air Worldwide announced that it had entered into a definitive agreement to be acquired by an investor group led by Apollo Global Management in an all-cash transaction valuing the company at approximately $5.2 billion.
Under the terms of the agreement, Atlas Air Worldwide shareholders will receive $102.50 per share in cash, representing a 57% premium to the 30-day volume-weighted average of Atlas Air Worldwide common stock. (By way of reference, in March of 2020 at the start of the pandemic the company’s shares traded as low as $17.90.)
Upon completion of the transaction, Atlas Air Worldwide will become a privately held company and shares of Atlas Air Worldwide common stock will no longer be listed on the Nasdaq stock exchange. Atlas Air Worldwide will continue operating under the Atlas Air Worldwide name and be led by John Dietrich, as well as the current executive team.
“We believe this transaction will deliver immediate and certain value to Atlas Air Worldwide shareholders at a substantial premium, and we are pleased to reach this agreement with the Consortium,” said Duncan McNabb, Chairman of the Atlas Air Worldwide Board of Directors. “The Board’s decision to unanimously approve this transaction follows a careful evaluation and thoughtful review of value creation opportunities for shareholders. We believe this transaction is the right next step to maximize value for our shareholders and the best path forward to accelerate the Company’s ability to execute its strategic plan and achieve its long-term growth objectives.”
“Over our 30-year history, Atlas Air Worldwide has grown to become a global leader in airfreight, delivering high-quality services to our diverse roster of customers around the world,” said John Dietrich, President and Chief Executive Officer of Atlas Air Worldwide. “Following the closing of the sale to the Consortium, we will seek to leverage their resources, relationships and industry expertise to build on our strong financial and operational performance. Their investment in our company demonstrates their confidence in our people and our culture as we serve the growing needs of the global supply chain.”
“Atlas Air Worldwide is a market leader that continues to set higher standards for excellence within the airfreight industry,” said Apollo Partners Antoine Munfakh and Jason Scheir and J.F. Lehman & Company Partner Alex Harman on behalf of the Consortium. “With the strong market demand and long-term secular tailwinds for global air cargo services, Atlas is poised to capitalize on many opportunities for continued growth as a fund portfolio company of Apollo, J.F. Lehman and Hill City. We look forward to leveraging our resources, capital and experience in the sector to support the talented Atlas team, alongside our partners in this exciting next phase.”
Kevin Pflug
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Azul awards ULD management agreement to Unilode
11 August 2022
Azul Linhas Aéreas Brasileiras has awarded a full-service ULD (unit load device) management agreement to Unilode Aviation Solutions, the market leader in outsourced ULD management, repair and digital services.
Azul serves over 150 destinations worldwide and operates a fleet of more than 160 aircraft. Under the terms of the four-year agreement Unilode will supply digital containers and pallets in a hybrid ULD management model, where the containers are dedicated to the airline’s use and the pallets are provided from Unilode’s shared asset pool for highest efficiency and sustainability benefits.
Izabel Reis, Managing Director of Azul Cargo, said: “We are pleased to partner with Unilode for the full-service management and repair of our ULD fleet with significant digitalisation, sustainability and operational benefits. Unilode’s customer success-oriented approach gives us confidence that we will be able to focus on our core business of flying passengers and cargo whilst having peace of mind that we will have the right containers and pallets at the right time and in the right place. We have an ambitious growth plan for the next few years with over 90 aircraft on order and look forward to growing our operations with Unilode as our strategic partner for digital ULD management.”
Ross Marino, Chief Executive Officer Unilode, said: “We are delighted to enter into a full-service ULD management agreement with Azul, that builds upon our ULD repair and short-term leasing solutions, which we have provided to Azul over the past few years. Azul’s network provides a great overlap with a number of our other valued customers’ locations, especially in the Latin American market, which benefits all the participants of our shared asset pool. We look forward to building a successful partnership for many years to come with one of the most important airlines in the Americas market, and supporting its fleet expansion plans with ULD solutions that can flexibly be adapted to suit Azul’s requirements.”
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Pet transport during crises
International animal charity and global airline association publish guidance to
get cats and dogs to safety in times of crisis
BRUSSELS (August 2, 2022)
Animal protection organisation Humane Society International has
collaborated with the International Air Transport Association to publish a list of considerations for
governments and the air transport supply chain to facilitate the safe passage of pet cats and dogs in
times of crisis who are evacuating or taking refuge with their owners.
The considerations are based on the IATA Live Animals Regulations publication which is the global
standard for transporting animals by air in a safe and humane manner.
Considerations include:
• Introducing exibility in documentation requirements — governments relaxing
veterinary travel paperwork requirements for dogs, cats and other companion animals.
• Assessing ground storage facilities —airport communities identifying additional storage
facilities that are compliant with the requirement for the safety of live animals.
• Providing additional information —stakeholders evaluating communications materials to
provide clear and consistent information to pet owners across all customer service channels
including call centers, email, chat and social media channels.
• Collaborating with pet shipping companies and crate manufacturers —airport
communities seeking the help of these entities to make available additional live animal
transport containers (cabin and hold) at major departure points
Katherine Polak, vice president of companion animals and engagement at Humane Society
International and member of the IATA Companion Animal Temporary Task Force, said: “In times of
crisis, the importance of keeping pets and people together can't be understated. The special bond we
have with our much-loved animal companions is highly important, and during conicts and crises they
provide comfort and a sense of stability for those who have been through so much. HSI’s pet relief aid
work with Ukrainian refugees showed the lengths that people will go to in order to get their animals to
safety. So, we are incredibly proud to collaborate with IATA to help ensure refugees are able to take
their beloved four-legged family members with them, so that no matter what the conict or crisis,
wherever in the world, pets and their people can stay together.”
Brendan Sullivan, IATA’s global head of cargo said: “Aviation is a critical &rst responder in crises
situations. The humanitarian response to Russia’s invasion of Ukraine was no di(erent. Aviation helped
people ee to safety and delivered humanitarian aid, and airlines with operations on the front line of
the crisis recognized the importance of helping families stay united with their pets. Airlines on the
frontline of the crisis —KLM, LOT Polish Airlines and Bulgaria Air —were leaders among airlines
introducing measures to help those taking refuge bring their pets with them. The European Commission also addressed the issue by advising all EU member states to relax veterinary paperwork
requirements for the dogs, cats and other companion animals traveling with refugees. Through our
work with HSI we have learned from this experience and the industry will be even better prepared for
future crises.”
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