Air Cargo and Supply Chain Management: Part II
March 12, 2014
Editor’s Note: When the Air Freight Forwarder’s Association (AfA) stages its annual conference later this month, the focus will be “closing the deal.” Here, in the second part of an exclusive interview with AfA president Brandon Fried, supply chain managers are given an overview of some of the main issues on the agenda.
SCMR: Do you see the greatest growth coming in “cold chain”?
Fried: While there are many areas of growth in forwarding, “cold chain” services are standing out in their rapidly growing popularity. This niche usually applies to several verticals including pharmaceuticals, bio-med, perishable foods and other items requiring constant temperature control and monitoring. While potentially lucrative, forwarders considering offering these services should remember that specialized expertise is essential. There may also be a need for technology such as refrigeration, monitoring systems and customized trucking suitable to handle these commodities. And of course, depending on the area of the world, additional education and licensing may be required.
SCMR: How about the so-called “emerging markets”?
Fried: As wage pressure in China increases, we are seeing a shift of manufacturing to countries including Vietnam, Indonesia and Cambodia to name a few. Of course, there are infrastructure issues surrounding the ability to move cargo quickly between manufacturing sites and ports, but we expect these issues to be addressed over time. We are also seeing an interesting shift of manufacturing back to North America to places like Mexico and even the United States. Lower transportation costs and quicker market access are certainly factors driving this change.
SCMR: Can you describe the worst-case scenario for a shipper just getting started in air cargo?
Fried: For a forwarder just getting started in the air cargo business, inadequate capitalization and the lack of essential knowledge are potential reasons for failure. Your carriers and vendors are going to demand fast payment, sometimes before shippers pay you. Not understanding essential regulations and cargo handling procedures could lead to delays that will cost you and your customer money and that will inevitably lead to losing the business.
SCMR: Finally, what are transport partners and middlemen doing to assure shippers of adequate risk management?
Fried: While forwarders are often considered the miracle workers of freight transportation, creating realistic expectations through customer education in a competitive market is key. If your forwarding company does not adequately understand how to handle a specific commodity to an obscure destination, perhaps additional education and experience is needed beforehand. If not, perhaps the forwarder may not be the best option for that shipment.
The forwarder also has an obligation to inform the shipper of ways to mitigate the risks of shipping including insurance coverage, packing requirements and security rules. Good forwarders not only provide this education but create opportunities for their customer as well, helping to deliver more success in the process.
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