Cargo is undergoing a digital revolution affecting all players along the air cargo logistics supply chain and challenging long-established processes based on paper and protocol.
Digitalization offers opportunities, process efficiencies, and is positively disrupting the way we work. In our "CargoDigital" series, CFG talks to those at the forefront of digital
transformation to discover what is possible, hear how challenges are being mastered, and get behind-the-scenes information.
Digitalization has gone from being a buzzword to crucial for business survival – something that the air cargo industry was beginning to grasp pre-Covid-19, and which has been neon-highlighted by the pandemic. Companies able to easily interface with the other stakeholders in the supply chain have a definite advantage. Yet, digitalization as a topic conjures up stereotypes: expensive, complicated, difficult to implement, and the ever-present fear of something going wrong if the existing IT-structure is changed in some way. Preconceptions that CargoAi decided to address in its first-ever, 3-day Tech Summer event 03-05AUG21. Its mission: to bring a basic understanding of technology to everyone in the air cargo industry and encourage exchange. CFG spoke with the CargoAi experts to find out more.
The Tech Summer was attended by circa 150 representatives from 39 countries. Participants were airlines (one-third), freight forwarders (almost one-third) and IT suppliers. The 3-day event
ambitiously tackled three main areas in the space of 45 minutes each: Day 1 focused on Tech “Get behind the cloud and the hottest 3-letter code – API”, Day 2’s topic was Product: “The best way to
build a product in unchartered skies”, and Day 3 concluded with the best approach to Sales & Marketing: “The power to make waves (the good ones) for your business.”
CFG: So that we are all on the same page regarding “the hottest 3-letter code”: What are APIs and how do they function?
Francois-Xavier Gsell, CTO CargoAi: An API (application programming interface) is software that defines an interface for a system. There are many types of APIs, like those that allow software developers to use features provided by Windows. But in recent years, we often talk about Web APIs which enable companies to define interaction with their systems and data. An example here is Google Maps which provides an API to calculate your itinerary. These Web APIs are generally supported by a middleware called proxy or gateway, that implements a specification defining what the request and responses should look like. And it can validate things like authentication, format, or throughput before the request reaches your system.
CFG: Most airlines have very complex digital structures, and believe that revamping their digital IT landscape is costly, difficult, and time-consuming. Does this still hold true in today's IT world? Are APIs the answer?
Markus Flacke, Industry Expert: Looking at any global organization operating in highly regulated environments, I am of the opinion that this still holds true. I refer to environments on purpose, since it is very often national agencies defining the regulatory framework, e.g. the EU is still not the monolithic organization it intends to be when you look at preload information requirements. Hence, I believe that APIs are one of the many answers required in order to allow for the easy exchange of data. If you think of each application in any ecosystem as a service, then clearly APIs are a relatively easy way to address many of the industry’s issues. Besides the booking process, you also need to consider the information flow and information exchange that happens around any shipment, and thus, an organization as we know it from the internet will certainly create benefits.
CFG: There is much talk of IT ecosystems – what are these and how is CargoAi involved?
Matthieu PETOT CEO of CargoAi: The air cargo industry has been working together for a very long time, using EDI messaging with Cargo IMP and XML standards. This was the start of an IT ecosystem, but we see now, with the use of APIs, that we can take it to the next level and have much greater data exchange between all the players. Airlines, forwarders, and system providers have or are creating their APIs, and we are connecting to all our partners. Being connected means that users on CargoAi can access a range of airlines to make spot requests or bookings, and we can also connect them directly to their TMS via APIs to make the whole distribution process much smoother.
CFG: How does CargoAi differ from its competitors?
Magali BEAUREGARD, Chief Commercial Officer CargoAi: CargoAi prides itself on being hungry and humble. Hungry, because we are driven by our vision for the industry and we believe CargoAi has a unique blend of skills that allows us to understand and solve some of the industry's headaches when it comes to distribution. We remain humble, though, and are well aware of our position within the industry ecosystem. The industry will remain a sort of magical puzzle with a wide variety of pieces and players. We're not trying to replace any of these players, but we're convinced that the true benefit of digitalization can only be unlocked once everyone is onboard. As an example: we do not seek exclusivity with our partners as this would not be aligned with our vision for a truly digital ecosystem. Our goal is to contribute to the industry, whether it's in the IATA One Record working group, or with this Tech Summer, or with any other exchange that we may have with our partners.
CFG: There is much talk of the industry collaborating more closely since the pandemic - is this also the case amongst Log-Tech startups?
Matthieu PETOT, CEO of CargoAi: We see that the industry is working closely together, and we are connected to a number of providers such as Champ or IBS even if there are sometimes overlaps in term of products or services. This is great for our customers, who see real benefits from that collaboration. We see interest from a lot of new Log-Tech startups or scale ups, who would like to benefit from our connections to accelerate.
CFG: Where do you see the biggest challenges that airlines/forwarders have when it comes digitalization?
Markus Flacke, Industry Expert: The biggest challenge is this attitude that there will be a single technology answering all of the industry's questions. This is not going to happen. First of all, it is old thinking to wait for a single technology that every single stakeholder will implement and, by some miracle, all pain points will disappear. Secondly, although there is much to be learned from the digitalization of the passenger business, fundamental differences exist in B2B markets like air cargo. Your cargo shipment will unfortunately not present itself to customs, nor will it register itself for pre-arrival. So the task is really to address the issues that will allow for easy data exchange, and to define which integration method will serve which purpose.
Ricardo Pilon, Industry Expert: Airlines and freight forwarders are not necessarily equipped to digitalize and transform the entire workflow simultaneously. We are talking about upskilling and implementing a learning organization to continuously improve new business models for different customer segments. This requires a new philosophy (aggregating data) and practice (digitizing the workflow), so that the commercial function can steer the optimization of the results of the business operation.
I see these challenges in my work today: the challenge of building strategic competencies in human capital that can accelerate the harmonization of new workflows on the one hand, and the application of supporting technology on the other.
Secondly, even though cargo proved its value during the COVID-19 pandemic, it is still a challenge to get investment in technology on the corporate priority agenda. While strategy is ultimately about capital allocation, it remains challenging to demonstrate that while we have the skills to improve, we need modern technology to capitalize on all potential. And, because air cargo and freight is a people business, that psychological barrier has to be overcome, both within organizations and between business partners.
CFG: Where do you see the air cargo industry in 5 years' time in terms of digitalization?
Ricardo Pilon, Industry Expert: Since air cargo represents derived demand, megatrends that influence end-consumers' purchasing and business procurement behavior, drive shifts towards more air cargo. This is contrary to what we believed ten years ago, but the composition of goods flown continues to change, plus air cargo has traditionally grown in times of disruption. We are now seeing a more permanent component in air cargo growth which, to a large extent, has been accelerated by more online shopping and digital procurement, and is, in turn, encouraging accelerated digitalization in air cargo.
The digital economy dictates service levels and delivery times that require industrial automation, much like what happened in manufacturing: Faster, real time, and based on better data to offer competitive rates and improve the workflows of sales people, as well as transactional platforms that can better deal with the volumes and dynamic changes than fax, email, and phone methods. Because of these improvements, digitalization is, in fact, further enabling air cargo growth due to improved service levels.
So, I see the industry rapidly adopting digital platforms to distribute spot capacity with more dynamic pricing (by incorporating new competitive rate analysis, among other data), and driving higher penetration by offering smaller forwarders to participate. However, it will also rapidly evolve toward digital B2B platforms (on a 1-to-1 as well as a multilateral basis) where contracts (allotments) and product differentiation can be optimized around specific B2B relationships and their loyalty performance. That will require an more integrated approach to data-centric business model management using artificial intelligence, as this simply cannot be done with manual insights.
For freight forwarders, this is even more complex and urgent, since they require real-time updates on capacities and rates on all modes of transport (truck, sea, combination). Digital procurement and dynamic offer management is a prerequisite to building customized solutions, personalized offers, and bundled services at optimal rates. Yet, the freight forwarding community needs its business partners to digitalize, too, to enable this value chain. And we are witnessing a divergent trend in freight forwarding between consolidation and fragmentation, plus the added element of new digital entrants using modern platforms.
CFG: What was the idea behind Day 2’s title "The best way to build a product in unchartered skies" in a nutshell?
Elena Volkova, Chief Product Officer CargoAi: Our mission at CargoAi is to disrupt the industry in a positive way. What we're building now are solutions which are non-existent yet. In this respect it is important to ensure we have the right methodology in place to ensure we get the right features on our roadmap and that we steer our product development in the right direction. Which tools do you use to navigate in unchartered territories? That was our agenda for Day 2.
Thank you, CargoAi Experts, for your insights! So, APIs are the key to connecting the very varied stakeholders across our complex air cargo industry, since there will never be a one-size-fits-all IT mega-solution. The industry needs to be open in its communication structure both on an IT level as well as on a partner level. As you stated in your presentation on Day 1, Francois-Xavier Gsell, working with cloud technologies differs from traditional IT in its two-pronged approach: tools and teams. I conclude that with the right team culture in the industry, along with improved tools, business success is a given. In other words, API: A Progressive Industry!
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