In the current business landscape, a large number of business enterprises are increasingly implementing global sourcing especially from low-cost countries. This sourcing strategy has helped many enterprises across a plethora of industries to achieve cost savings. But these benefits are usually offset by the numerous complexities associated with the management of global logistics. The effect of rise in transportation charges due to rising fuel prices, imbalances in transportation capacity and fundamental costs involved in long distance flow of goods can be mitigated through smart planning.
According to IATA, close to 9% of airlines revenue is generated by air cargo and is double the revenue obtained from first class segment. The global movement of goods involves multiple handoffs including numerous customs and port authorities, carriers and consolidators which drastically increase the probability of unexpected events. Severe port and customs congestion across North America and Europe are caused due to growing import volumes, especially from Asia, as well as security concerns. An efficient air freight logistics can help business enterprises save money through lesser factory processing times, faster client deliveries and exceptional inventory management. Business enterprises can drastically improve operational performance by following the best practices in air freight logistics.
Here are the Best Practices in Air Freight Logistics:
Partner with the Most Reliable Carriers:
Table of Contents
A large percentage of air cargo around the world is managed through freight intermediaries. Therefore a robust relationship between business enterprises and air cargo providers is extremely important. The high importance given to timely delivery of goods around the world means that air freight providers are financially secure and have a stable workforce. An airline’s brand and operational capabilities can be severely damaged by unhappy employees. A service failure is unacceptable as goods that are transported might have perishable cargo.
Sending goods from one international destination to another involves a multitude of carriers, legalities and requirements and therefore business enterprises must partner up with freight intermediaries only after making a check-list which makes sure that they meet the enterprise’s specific needs. The air freight provider must protect the enterprise’s brand as well. When launching a new product or while entering a new market, enterprises must choose a freight provider who can ensure proper management of licenses. Slow response to custom officials and badly calculated taxes are some of the pitfalls of air freight providers but addressing these concerns can add significant value to their services.
Manage Air Freight Costs:
The various cost factors involved in air freight are surcharges and fees, movement rates and fuel and security charges. Only few of the charges involved in most shipments are controllable. The ever increasing fuel price, due to both demand and geopolitical factors, is the number one issue faced by air cargo industry. Years ago, fuel formed only a small part of air cargo provider’s direct operating costs but today, with bigger planes a larger catalogue of goods being transported, fuel represents a bigger percentage of overall operating costs.
Research conducted by the International Air Transport Association (IATA) has revealed that container air cargo volume has decreased from 3.1% in 2000 to 1.7% in 2013. Costs can be managed effectively by using a network based approach to sourcing goods. In addition, implementation of better and streamlined processes can also provide a way to control costs. This would include outsourcing of non-core tasks. For sourcing global airfreight capacity successfully, commitment, participation, alignment and willingness to take sound decisions for the betterment of the enterprise from all the stakeholders are a must. In a market where cost of providing service is quite expensive, air freight spending has to be managed effectively.
Use Document Digitization and Technology to Improve Performance:
Business enterprises need to effectively manage logistics operations to ensure business success. This can be achieved by enabling measures which enable enhanced document processing efficiency. Digitization of documents so as to enable them to be stored, retrieved and transferred safely and securely is a major way to boost logistics operational efficiency. Incorporation of technology would enable business enterprises to avail information in real time and effortlessly coordinate activities to manage the timely delivery of the goods.
Integrating technology with various operations can provide a competitive advantage to the business enterprise by reducing cycle time and the implementation of cross-functional processes. Implementation of data quality management approaches would boost the accuracy and enhance business performance. Increased low cost sourcing and rising sales to customers situated in different countries have pushed enterprises to come up with innovative methods to manage costs, uncertainties and complexities of moving products across borders. Operational performance and customer service can be improved by finding the best possible combination of carriers, routes and modes.
Improving Inventory Accuracy:
Inventory is one of business enterprise’s largest physical assets. Not tracking inventory can spell disaster for the enterprise’s finances. Not tracking inventory properly can result in bad consequences such as shortages and surpluses, employee theft and poor customer service. The challenge faced by various business enterprises is achieving inventory accuracy. Out-of-stock items cause huge losses to the profit but the bottom line is also impacted by inventory storage and transportation costs.
Business enterprise can adopt inventory quality programs such as ISO, Six Sigma, lean manufacturing and Total Quality Management in addition to making sure that everyone in the enterprise supports and uses the program. A ‘perfect order’ metric must be created and measured from the exact point of origin to its final destination. This allows the business enterprise to track the performance of the inventory across the entire network so that the accuracy can be improved throughout. These successes must be duplicated and the improvement strategies must be shared so that all areas of the enterprise can benefit.
A de facto part of international logistics is the need to declare the goods with the respective governments of the country for safety, security and commercial reasons. Regulatory compliance must be electronically integrated with logistics operations, failing which can lead to costly fines and slower performance. As different countries have different rules and methods of paper work related to goods as well as transportation modes and types such as export, import, customs declaration and in-transit, an in-depth understanding of local requirements is extremely necessary.
The rising challenge of countering global terrorism has heightened the security consciousness of countries across their various entry points which have presented business enterprises with myriad challenges when it comes to clearing goods at their international borders or at the customs inspection at the airports. Failing to comply with customs and security requirements can cost business enterprises serious time and money.
When it comes to logistics, time is of the essence. Customers want the products that they order as soon as possible irrespective of which part of the world they stay in. Air freight logistics has made this easier but business enterprises still face many challenges which can be overcome by following few best practices. Business enterprises can achieve process efficiency by outsourcing to an Air Freight Logistics service provider. People all around the world have become accustomed to receiving goods just with the click of a button without having a clear understanding of the myriad processes that lies beneath. In domestic markets, logistics efficiency is easy to achieve but it is the complete opposite when it comes to international logistics.
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