Advertisement

Blog

Air Cargo Has a Place in Your Supply Strategy

Companies responded to the recession of the mid-2000s with an ever-vigilant focus on saving on transportation fuel costs, and they made it a priority to look at sea and land shipping instead of air to save on spending. Since then, new supply chain strategies, such as in-sourcing manufacturing and locating goods production closer to large consumer bases, have also reduced reliance on air cargo. As a result, air cargo traffic slowed in 2011 and experienced further contraction worldwide in 2012 of around 2 percent.

But for the electronics industry, air cargo continues to play a vital niche role — not as the transportation mode of choice for most shipments, but as a transportation option that makes sense in certain situations, such as:

  • Shortened times to order fulfillment or inventory replenishment. You might ship your electronics products and components primarily by sea, where freight is least expensive, but in a high-demand situation like the holidays, it can make sense to complement your ocean shipping strategy with air cargo if you have to rush inventory replenishments to keep pace with unplanned, surging demand; or if there is a desire to get initial product offerings (such as smartphones or tablets) into the market quickly to establish their brand presence for consumers.
  • Logistics diversification that delivers “best speed.” Strategically, air cargo should stay on the list of transportation options when time to market is of the essence.
  • Rapid delivery of prototypes. Air cargo is the best choice of transport when it is necessary to quickly route product prototypes or redesigns to their manufacturing destinations.
  • Serving new and emerging markets. Gartner research estimates that emerging markets are a $30 trillion opportunity for companies, and that they are the primary business growth area in this century. Gartner says that supply chain leaders will be held responsible for the success or failure of business growth in these markets, based upon the capabilities they put in place. These emerging markets include both BRIC (Brazil, Russia, India, China) and MINT (Mexico, Indonesia, Nigeria, Turkey) countries as well as Vietnam, Egypt, and South Africa. Many of these countries lack a well developed internal infrastructure that will support full truck and rail logistics, and some are not readily accessible by sea.
Still Vital to International Trade

Air cargo plays a vital role in these markets as a way to overcome shipping and logistics complications. It can ensure that goods reach these new markets and establish brand footprints in these markets before competitors' products make inroads. How important is time-to-market in these areas? With a rising middle class taking root in countries like Indonesia and India, Gartner projects that the fastest rate of growth of mobile electronic devices will be in these markets. Getting to emerging markets first will be important, even if it means that more expensive air cargo is needed to deliver the goods.

“In my opinion, what is needed is a paradigm shift in the way in which the industry looks at air cargo,” said Radharamanan Panicker, group CEO, Cargo Service Center India, in a blog. “Perhaps we already witnessed a mindset change at Air Cargo India this year. It was heartening to see stakeholders such as shippers wanting to play a more integral role in the air cargo supply chain. Air cargo is the catalyst for fast economic growth and sustainable development. The road to the future of air cargo may be long and winding, but there is light at the end of the tunnel.”

The International Air Transport Association (IATA) talked about the air cargo advantage in May 2014, when it reported that air carriers saw their capacities rise 8.1 percent. IATA attributed the increase to an upswing of activity in developed economies, and increased volumes of sales in emerging Asian and African markets.

For electronics manufacturers, the key now may well be to ensure that air cargo is strategically integrated into both the supply chain and the transportation mode choices that are made, and which also should be premised on time-to-market and the risks of not getting to market, as well as on pure cost.

18 comments on “Air Cargo Has a Place in Your Supply Strategy

  1. Daniel
    July 9, 2014

    “Companies responded to the recession of the mid-2000s with an ever-vigilant focus on saving on transportation fuel costs, and they made it a priority to look at sea and land shipping instead of air to save on spending.”

    Mary, the mode of transportation depends up on urgency and cost. Air transportation is not cheaper when compare with shipping, but economical if we are planning well in advance. Air transporting is good for speedy delivery. That's the reason Amazon plans to introduce Drone for commercial delivery.

  2. Daniel
    July 9, 2014

    “Air cargo plays a vital role in these markets as a way to overcome shipping and logistics complications. It can ensure that goods reach these new markets and establish brand footprints in these markets before competitors' products make inroads.”

    Mary, if time is major factor then Air shipping always has an edge over other mode of transportation. This speed can achieve only if both receiving and sending facilities are located close to the Air strips. If its long way to travel towards the air strip then at the same time it can be transported to the destination through surface (Road and within same state)

  3. Mary E. Shacklett
    July 9, 2014

    An excellent point, Jacob–because so many high-growth markets have infrastructure issues that go beyond  getting the goods in to an airport!

  4. Mary E. Shacklett
    July 9, 2014

    Exactly–and this is why companies shoudl be open minded about turning to air when the circumstances demand it.

  5. Daniel
    July 10, 2014

    “An excellent point, Jacob–because so many high-growth markets have infrastructure issues that go beyond  getting the goods in to an airport!”

    You are very right MARY. Approach to this infrastructure facility is the key.

  6. Daniel
    July 10, 2014

    “Exactly–and this is why companies shoudl be open minded about turning to air when the circumstances demand it.”

    Mary, cost is also a factor. The best option is stock it well in advance. This type of planning will help them to avoid a last minute rush and can negotiate for a better price.

  7. SP
    July 10, 2014

    Air cargo will always have an important place in supply chain startegy. But with fuel prices going up and air being a costly medium, the cost factor will always come in when talking about this medium. But less time taken and less risk always works in its favor.

  8. Mary E. Shacklett
    July 10, 2014

    Good comic relief!

  9. Mary E. Shacklett
    July 10, 2014

    Many companies are choosingto operate with scant inventories, Jacob–a vestige of the mid-2000s recession. I agree that they should reconsider. You can actually save money (and improve service)  if you project where a little extra inventory may be needed–and have it there.

  10. Daniel
    July 10, 2014

    “Many companies are choosingto operate with scant inventories, Jacob–a vestige of the mid-2000s recession. I agree that they should reconsider. You can actually save money (and improve service)  if you project where a little extra inventory may be needed–and have it there.”

    Mary, scant inventories means? You mean stocking less than actual requirement.

  11. Daniel
    July 11, 2014

    “Air cargo will always have an important place in supply chain startegy. But with fuel prices going up and air being a costly medium, the cost factor will always come in when talking about this medium. But less time taken and less risk always works in its favor.”

    SP, you are right about costing. There is no doubt that air cargo services are very costly when compare with other shipping modes.

  12. Mary E. Shacklett
    July 11, 2014

    What I was actually thinking of was putting in a little inventory over requirements by using preditive analytics to anticipate demand spikes.

    A good example is a smart phone manufacturer who plans to launch a new version of a product right before the holidays–and puts in a little inventory above requirement that anticipates aggressive sales in certain targeted areas.

     

  13. Daniel
    July 14, 2014

    “What I was actually thinking of was putting in a little inventory over requirements by using preditive analytics to anticipate demand spikes.”

    Mary, you may add additional stock. It's a good option but for companies it's like a dead investment till the time it gets enchased. For them rotation of money is important than investments.

  14. Mary E. Shacklett
    July 14, 2014

    This is a calculated risk and depends on how much companies believe in their predictive analytics. No one want to increase carrying costs.

  15. Adeniji Kayode
    July 14, 2014

    @Jacob, I agree with you on that but then in what ways is air transportation economical when its not cheap.

  16. Daniel
    July 15, 2014

    “This is a calculated risk and depends on how much companies believe in their predictive analytics. No one want to increase carrying costs”

    Mary, exactly and depends on reserve cash.

  17. Daniel
    July 15, 2014

    “I agree with you on that but then in what ways is air transportation economical when its not cheap.”

    Adeniji, no way it's cheaper but if time is a critical factor it can help you a lot in saving it.

  18. Faustine
    September 19, 2017

    Very nice post. I just stumbled upon your blog and wanted to say that I have really enjoyed browsing your blog posts.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.