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.
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.