Cargo’s digital transformation
Leading air freight stakeholders discuss key elements of the industry’s digital journey, including the development and implementation of ‘third-generation’ cargo community systems and IATA’s One Record standard
Consistent with this year’s conference theme, ‘The Changing World of Air Logistics’, the conference sessions from ACHL 2023 included a review of the key goals from last year’s event – notably for companies to implement or adopt digitalisation and digitised solutions within their processes to circa 60-70% of company activity – and identify barriers preventing these goals.Panellists from across air cargo handling, technology and drone developments highlighted some of the many initiatives they have undertaken to push digitalisation forward. Vivien Lau, CEO of Jardine Aviation Services, said her company had launched a transformation programme, initially involving some external consultants using Six Sigma principles, noting: “We do need to build a culture that starts with digitalised data for all the third parties. The key thing is how we build an environment to encourage staff to build digital processes.”One positive is that it is now easier to get approval for IT expenses and investments, she noted.Peter Hewett, director of global cargo, security and network operations at drone developer Dronamics, believes the motivation for companies to continue modernising and digitalising needs to be a combination of government and commercial. He said these don’t necessarily need to be directly financial – for example, it may just be from efficiency improvements.Lau said it needs to be a combination of regulation and standardisation to avoid the current situation where “airport A is doing all the automation, but customs in B is still requiring paper”.Sean Tinney, VP for global enterprise computing solutions at Unisys, noted that standardisation was important, “but also costs going down and down; as more and more GHAs put in (digital solutions) as standard, it is going to become ubiquitous”.
Digital transformation Air cargo’s digitalisation was explored further in a session on ‘Cargo’s Digital & Environmental Transformation’ in which airline, technology and airport cargo specialists discussed how there are still considerable financial and other benefits to be realised from further digitalisation – notably reducing costs, cutting companies’ CO2 footprints, improving quality, achieving compliance, and increasing customer satisfaction.Session moderator Janet Wallace, MD for cargo operations and transformation at Air Canada, described technology as “the overlooked element in environmental objectives, cost reduction, staffing concerns, marketing support for airlines in developing high-value products”, as well as in “compliance with directives to come from the UN, ICAO, and governments worldwide – re digitisation and Data Corridor mandates”.Jan-Wilhelm Breithaupt, VP for global fulfilment management at Lufthansa Cargo, highlighted key elements of the airline’s and the industry’s digital journey, leading towards implementation of IATA’s One Record standard. He said Lufthansa’s digital transformation started 12 years ago or even longer, with the introduction of the e-air waybill (e-AWB), although he described it as “an uphill battle for years to convince all parties in the supply chain” to implement that.“In 2018, we came to the conclusion that the critical mass already has been reached at Lufthansa, and we decided we wanted to completely decouple the documentation and the information flow from the physical handling – similar to the passenger business, when the whole check-in went off airport,” Breithaupt noted. “And this is also our vision for cargo: to have the documentation off airport. So, we need a fully digitised documentation acceptance with all documents.“And if you’re able to have a digital flow, you can start with all these technology things like robot process automation, AI, and accelerate the process significantly – and also be compatible to the e-commerce provider who has a huge amount of data.”
Data overload He continued: “And this is the next problem: the (amount of) data which will be transported in the future is (far greater) – at least by a multiplier of 100. So if you have an e-commerce shipment, you have 10,000, 15,000 20,000 parcels, with all the information – not only one AWB with three houses (house AWBs); you have 15, 20, 30… and how to manage all these…”The launch of the IATA-led e-freight initiative led to a decade of “good competition” with other forward-facing carriers that culminated in 2022 with Lufthansa Cargo becoming “the first carrier in the world having 100% e-AWB, based on the IATA statistics on a global scale on every station”.But there are a lot of other essential air freight documents that also needed digitalisation including “the dangerous goods declaration, consignment security declaration, house manifests – these are already possible in a digital way, but there are dozens of other documents. So, we had to push forward the usage of these other documents, to think about other documents to be digitised and that we want to further push forward”. Lufthansa Cargo created a pre-check centre in Bangalore, with “almost every shipment pre-checked there – but only to a certain extent, because there are still some documents missing. So, we cannot have a full documentation process offsite airport.”Breithaupt added “the only solution we see at the moment is One Record. We have to completely overcome the old messaging system – developed by our grandparents 50 years ago, based on textual transmission of data. And on that level, we only have messages for the house AWB, the AWB, the DG declaration, and the consignment security declaration.”To go forward from that challenge required “a lot of other work in IATA working groups for years to jointly agree on certain messaging standards”.
Chinese whispers But the second problem with the old linear messaging system is “Chinese whispers”, where some digital data being exchanged between the various parties is lost if they are using different versions of the messaging technology. “If I’m working with FWB standard 19, Cargo-IMP, and I send it to a ground handling agent with an old system that is version 13, information is missing. And especially the free text sending comments; maybe the UN numbers. And this is unacceptable in the digital world,” Breithaupt said.“So, we need something different so we can always retrieve the original data from the party who produced the data – immediately, when we need the data. And last but not least, certificates. To send a certificate would be easy, to make a scan and then send the scan. But to transmit a PDF with our messaging system is impossible – or IoT data, or maybe a video of a damaged cargo piece, or some photos. This is the reason IATA had an idea three or four years ago to introduce One Record, which is more or less based on internet technology. And this when we started to also investigate that topic, together with other leading carriers and forwarders.”Breithaupt said that because participants can access the data centrally via URLs, “the master data remains in the owner system. So, any anytime you want to retrieve the data again, you get the original data. So, the risks that that data is lacking is more or less zero. You have an open, decentral organisation.”He said participation was “basically free”, although “of course there will be service providers to help those parties not able to build their own system or own server. And it’s relatively easy to jump in; once you are compatible to that system you can connect to more or less anymore.”
Piece-level dataOne major advantage is the ability to share or access piece-level data, which has been a problem for air freight until now “because the piece level has to be defined by the shipper; and IATA was not able to define piece level from a carrier’s perspective”. But under the One Record process, that lack of definition or standard “doesn’t matter, because it’s just a link. The only rule that has to be followed is that this link is in accordance with the rules of the internet,” and it must be unique on the server of the customer. But it can be any kind of URL that the customer wants to create.“So, piece level – and below that,” Breithaupt notes. “And this is important for e-commerce; parcel level? No problem: Another link, you follow the link with a piece and then it can have however many parcels you want: 1,000; 5,000; 10,000 parcels below that, all clearly directed with a link and individual parcel number defined by (the customer).”Breithaupt said One Record, and Lufthansa Cargo’s implementation of it, was more or less ready. “Of course, there is still some work to do, but basically, it’s working. And LC introduced a One Record server which is open source and open for anyone to get over a digital test feed. It’s up and running since June. And in a couple of months, we connect this server with our production system. And at the end of the year, we will be ready to connect to transport management platforms almost directly, or also to CHAMP; but the good thing is that you also can have direct connections and interchange data between the partners.”Air Canada’s Janet Wallace said One Record “can enhance security, transparency, and provide a permanent record of transactions. But airlines cannot collect this alone; in order for us to transition from paper to electronic formats, we need to work together.”So, she asked, how can airlines participate in the community to move forward with digitization efforts?Amar More, co-founder and CEO of cargo IT and community system specialist Kale Logistics, said a community system “is essentially an electronic platform that facilitates digital interactions between all the different stakeholders of the supply chain. It’s not just the airline with the forwarders and customs, but importers, exporters, freight forwarders, brokers, truckers, carriers, terminal operators, chambers of commerce, the government”.
Third-generation cargo community systemsMore, who is also a domain co-ordinator specialising in cross-border management for the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), said cargo community systems “have moved (forward) a few generations in last four or five years. The first set of common community systems were essentially either simple airport portals or point-to-point EDIs for air waybills, house air waybills, moving data between the airline and forwarders, and maybe between customs and forwarders.“Then there was a second generation of cargo community systems, especially addressing gate condition issues, or having a better truck dock management,” he noted. “Now is the time for the third generation of cargo community systems. And that is really becoming a single window from an airport perspective (for) anybody who is coming to the airport with cargo, instead of using multiple platforms, multiple systems.”He said the digitalisation of air cargo processes promised to unlock billions in savings and efficiency improvements, as well as speeding up processes and improving sustainability. For example, “the cargo handling efficiency at an airport is measured in tonnes per square metre. The global average is 8 to 10 tonnes per square metre (annually). And if you implement digital platforms at the airport, this number can go to as high as 22 tonnes per square metre. That’s not a 10% improvement or a 50% improvement, it is 250%.”
Big benefitsBenefits include reduced truck congestion, greater efficiency of drivers and vehicles, lower emissions, faster and more accurate processing of paperwork, and advance information to cargo handlers so that they can plan their resources more effectively. That’s in addition to a single point of data exchange with government agencies, including those responsible for cargo security.But the improvements also include greater “transparency or visibility for exporters and importers of where exactly their shipment is, because if the exporters or importers don’t have that visibility, they end up stacking more inventory in their demand chains or supply chains, and that increases product costs and makes them uncompetitive”.Kales “sees cargo community systems being built all over the world, whether it is the United States, Europe or Middle East, Asia Pacific, and we are working with close to 46 airports. And what we see for the future is these different communities becoming linked to what we call digital corridors. And we at United Nations are setting standards for these digital corridors – and how we connect different communities together globally”.More said cargo community platforms “are not something that sprung from nowhere, it is a recommendation from the United Nations – a path for trade facilitation that is removing barriers to trade. The first thing is paperless customs – most customs are automated globally; they have their own system. The second step is having a regulatory single window –customs, plant quarantine, animal quarantine, drug regulators, etc., all linked to one common platform. Most governments have this regulatory single window.”
UN recommendationsMore continued: “The third phase that is prescribed in the United Nations recommendation 33 is the port and airport community systems, where you move from regulators to the private sector, and get all these different stakeholders connected onto a common platform. Imagine a community like Dubai or Mumbai where you have 2000 customers and 600 trucking companies, 100 airlines, all on a common platform, it becomes a natural infrastructure for a marketplace.“So, a truck coming to an airport with cargo that doesn’t have anything to go back, you can market its capacity. Or an airline that’s going light from that airport, they can market their capacity. And that’s the fourth layer – which is an e-logistics platform, a marketplace. And the fifth layer is a regional single window, like an EU single window or a North American single window or an ASEAN single window, where multiple countries will link their communities together. So that’s the context. These are different drivers for growth.”More concludes: “The World Trade Organization’s trade facilitation agreement is signed by 150-plus countries, which means that airports and ports have to implement these kinds of systems. The World Bank is pushing and funding this kind of single window system globally. On the maritime side, there is a regulation by the International Maritime Organization that mandates all ports have a port Community System by the next year, year and a half. And I think we need that on the air cargo side as well.”
One Record vs Single WindowStan Wraight from air freight consultancy SASI asked why IATA and airlines were developing their own data-sharing model, One Record, whereas most other trade and customs and government bodies appeared to be focusing on Single Window concepts.LC’s Breithaupt said airlines need a solution that will cover their entire network of 300 or 400 stations, and cannot rely on a series of community systems around the world all developing at the same speed as leading carriers.“I don’t believe that in a network of 300 stations, I’ll be able to connect to cargo community systems that would be as advanced as Lufthansa Cargo in terms of digitalisation,” he noted. “And the second thing is, what is the alternative?”Breithaupt continued: “I would say that already 10% to 20% of our business is e-commerce. How shall we cope with the new business of e-commerce with the old messaging system? To give you an example, we tried to find an easy way: I said every parcel is a house AWB. However, that means that one AWB has 15,000 house AWBs. Our iCargo system would crash completely; it would take three hours to transmit one single shipment by sending one AWB and then 15,000 house AWBs. It is completely outdated.”
Maritime overlapHe added: “Also, in the maritime industry, I’m in contact with the DCSA – Digital Container Shipping Association. They are working on an electronic bill of lading, and they have also started to look at One Record. So, I believe there will be also an initiative in the sea freight industry in the coming years.”Asked about synergies between One Record and CCSs, Kale’s Amar More said the conversations so far “are not so active between these initiatives”. But speaking on behalf of Kale, he noted: “If there is a One Record solution that we can connect to that, let’s say, retrieves the status of the shipment or data that already exists in the One Record infrastructure, that should be supported by the community system, and vice versa. The One Record infrastructure can also draw data from the local community platforms. But this is a conversation that needs to carry on as things crystallise.”LC’s Breithaupt commented: “We’re already going that direction. We founded the ‘Digital Test Field Air Cargo’ in Germany, and especially in Frankfurt, and the partners are working very closely together – Fraport, CHI, and other partners around the community. So, the race is on. And One Record is an open-source standard, so anyone can participate.”
Source: https://caasint.com/issue-article/cargos-digital-transformation/