Getting ULDs back into circulation after their often one-way deployment, has always been tricky: a situation that has worsened with the pandemic. Frank Hung, VP Sales and Marketing at Descartes, shares his views on the topic for CargoForwarder Global, in his opinion piece: “Two Technologies to Help Combat the ULD Shortage in Air Cargo.”
As the air freight industry continues to grapple with the acute global shortage of unit load devices (ULD), airlines are finding that it is taking much longer for these assets to be delivered back to warehouses after collection by the consignee. With leasing companies charging record rates for ULDs — both pallets and containers — and lead times for new assets of at least four to six months from manufacturers, technology can provide a path to help air cargo stakeholders ameliorate immediate concerns and enhance asset management over the long-term.
Why the shortage?
A number of major factors have contributed to the strain on global inventories of ULDs for the air cargo industry, particularly in the transpacific trade. The dramatic increase in ecommerce and the scale of supply chain disruption created by the pandemic, including transportation issues like driver shortages, capacity constraints, and significant backlogs in warehouse operations for airlines, cargo terminal operators/ground handing agents (CTO/GHA), and freight forwarders, have slowed down the processes for returning these assets to their owners. Some freight forwarders are even running out of warehouse space and keeping ULDs as supplementary storage.
The current level of disruption and delays are creating intense demand for these assets. Airlines are trying to overcome the challenge by leasing more units, offering incentives for faster turnarounds, and expediting repairs. Leasing companies are charging record-high rates but are themselves running out of inventory. Similarly, container and pallet manufacturers are running at maximum capacity, but they still cannot fulfill the current demand in short order. With the recent holiday season crunch, the rush in Asian factories to have shipments out before Chinese New Year on February 1st, and an unprecedented level of global disruption due to the Omicron variant, the need for ULDs shows little sign of diminishing and it remains extremely difficult to predict how long shortages will persist.
The complexities of demurrage penalties
In the maritime industry, demurrage has been charged for many years to help ocean carriers recover their container assets, but air carriers have not often taken this step. As ULD owners struggle, however, with the widespread habit of third parties picking up, retaining, moving, and sharing assets without returning them, demurrage is emerging as an option.
From the forwarder’s point of view, it is all about convenience — it is more efficient to hold onto assets than to spend time and effort to return them. In some cases, it may require a few hours lining up at the airport for a return. It is also handy to have assets on hand for the next shipment, instead of needing to travel to the airport to pick up equipment. What is also in the mix is that there is currently no “real” pressure to return them. While some airlines have demurrage policies in place whereby third parties may incur penalties of US$30.00 – $50.00 per day (depending on the type of ULD) when assets are not returned on time, penalties are seldom levied. In one respect, airlines would, in effect, be penalizing their customers — a potentially detrimental move to the business relationship. Additionally, many airlines do not have the systems in place to monitor, manage, calculate, and collect demurrage fees — or the human resources required to administer demurrage workflows (e.g., issuing invoices).
Two technologies optimize asset use and return
Two technologies can help airlines maximize the use of the ULDs they do have and simplify return practices by changing the behavior of agents, so that they return assets on time: Bluetooth® Low Energy (BLE)-enabled ULD tracking, and demurrage automation. With BLE tracking, BLE readers capture the movement of ULDs that have BLE tags attached. Assets, and the shipments bundled inside them, can be tracked whether in the air or on the ground. In addition to location, other sensor-based, condition-related information can be monitored for shipments, such as precise temperature, movement, and humidity.
BLE tracking provides real-time visibility into the exact location of ULDs, whose custody they are in at a given time, and traces asset movements easily to clarify any discrepancies between stakeholders. While this technology tells you where your assets are, it does not know when demurrage is going to start and stop, or when assets are to be returned. By integrating demurrage capabilities with BLE tracking, however, companies have a single platform to automate the release and return of ULDs, capture the image of assets to record any damage, calculate demurrage fees, generate invoices, and reconcile billing, as well as send return and overdue alerts to forwarders or ground handlers. Technology also drives better forecasting and planning so that airlines can identify asset shortages before they occur and take proactive action as necessary, such as leasing or purchasing new assets.
Understanding exactly where ULDs are in real-time is instrumental in getting them back from third parties. Automating demurrage processes will help enforce asset turnaround and better asset utilization for all stakeholders.
Combining demurrage automation and BLE tracking technologies will provide the maximum commercial benefit associated with fulfilling air cargo shipments (i.e., protecting and earning revenue), as there will be no business loss due to the shortage of shipping assets. The solutions also help carriers reduce asset losses, better match capacity with asset inventory, and reduce the costs associated with misplaced equipment or the requirement to lease additional assets.
Frank Hung, VP Sales and Marketing at Descartes
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