CARGO CAPERS 7 November 2005
Talk about doom and gloom! You may have noticed some rather gloomy articles and news items in the October 2005 issue of Air Cargo World: •
Shifting Supply Chains: New market realities suggest the clock is ticking on the Just-In-Time supply chain strategies. This column discusses the trend back towards having inventories close to the customers and the use of slower and less expensive modes of transport.
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Britain’s Broader View: With U.K. air cargo in decline, British airlines and forwarders look for new ways to lure freight notes that with the migration of much of Britain’s manufacturing base to Asia, air cargo in the U.K. is in a nose-dive – and isn’t ever likely to get better.
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The Breaking News items U.S. Airlines Report Slow Cargo Traffic Growth and Airlines Hike Fuel Surcharges also are rather short on optimism.
Robert Andriulaitis Director, Transportation & Logistics Studies
Just-in-time (JIT) is not dead. The common view of
JIT has always seemed to encompass the concept of speed. In reality, JIT is focused on timeliness and consistency. It does not matter if the shipment left the supplier the day before and went by air or a week before and went by rail – what really matters is that the shipment is delivered when needed. Now while this might seem to work against air (if speed isn’t the key), when it comes to reliability, air certainly performs very well compared to the other modes. Furthermore, while the pure transport portion of air is certainly more expensive, when you take into consideration the broader picture, including shorter product lifetimes, less product damage and theft, and higher reliability, air continues to present a good business case. As JIT practices continue to evolve, the fundamentals suggest a role for air cargo will continue.
Shifts rather than declines. The problem cited for the U.K. is reflected to a greater or
lesser degree elsewhere. While large portions of the western manufacturing base have undoubtedly moved, significant manufacturing still takes place in the western economies. We obviously will not compete with Latin America and Asia on the basis of labour costs – thus productivity, investment and a highly educated and motivated workforce will be keys for value-added activities here. While some of Canada’s historically key exports have declined in the last five years, there have been some strong gains in industries such as pharmaceuticals. Thus, while some manufacturing capacity will continue to be exported, other high value activities will continue to thrive in Canada and the U.S., generating a demand for outbound air cargo. If there is a trend to having inventories near the customers, Canadian airport communities can make a case for these inventories to reside in Canadian FTZs.
Boeing is still optimistic. Boeing, after assessing the steep decline in air cargo in 2001, the subsequent recovery, and the basic fundamentals driving air cargo, still comes up with a 6.2% growth rate projection for the next two decades-a tripling of the market over this timeframe.
Conclusion: challenges rather than doom. Now while there are certainly
challenges facing air cargo in Canada and globally, I think the prospects for air cargo growth for Canadian airports, air carriers, and the modes that feed air cargo, remain strong. Page 10 November 2005
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