Gateway Magazine: Air-freight tech fight

Volumes set to rise but margins likely to be squeezed

Flying Fresh Air Freight has recently made multiple technology investments that were each more than $100,000, according to its vice-president of sales, marketing and strategic planning, Robert Parker | Rob Kruyt

Freight forwarders stand to benefit from rising global volumes of air freight, but they also face challenges from heightened competition among players in the supply chain. A 2018 report by McKinsey & Co. suggests that the volume of air freight will continue to increase, by an average of about 3% per year until at least 2025 and most likely until 2030.

The problem for those who move cargo by air is that ocean-freighter operators will pressure prices for air freight by about 3% per year because the ships will be bigger and more efficient, the report predicts. So while there may be more air-freight business, companies operating in the sector may have to charge less for it.

One solution, according to McKinsey & Co., is for air-freight forwarders to invest in enhanced data analytics and automation to provide added value. B.C. companies are taking that advice to heart.

Richmond-based Flying Fresh Air Freight, for example, has recently made multiple six-figure investments to become more efficient and to add value for customers, says Robert Parker, the company’s vice-president of sales, marketing and strategic planning.

The biggest new investment was to pay WiseTech Global more than $100,000 in early November for use of its cloud-based CargoWise One technology.

That technology converts emails into price quotes, then into bookings, jobs and end invoices. The process saves time and allows Flying Fresh to then reinvest that time into business development or other aspects of the business.

“CargoWise One saves us a lot of infrastructure costs,” Parker says. “Instead of spending millions of dollars, we can operate for less than $250,000. It gives us the capability to run everything for our clients – from our billings to bookings to transport.”

He says Flying Fresh is creating portals for its clients and that one day the company will be able to use blockchain technology, which is an end-to-end system that tracks signatures and accountability in every step of complex transactions.

Flying Fresh customers could also soon be able to track their orders online.

The company, which Parker says is the largest air-freight forwarder in Canada, had previously made another six-figure investment late in 2017, when it bought what he describes as a “really, really, really big” X-ray machine for its facility at Vancouver International Airport.

Much like the X-ray machines that Canadian Air Transport Security Authority employees use to screen airline passengers’ bags, the ones at Flying Fresh have rollers. Instead of those rollers carrying light plastic baskets for wallets, keys or carry-on bags, however, the ones at Flying Fresh carry pallets of products – about 90% of which tend to be perishable items such as seafood or fruit.

Because speed is of the essence when handling such supplies, the machines are important in that they allow the company to process cargo without sending it to a third party, Parker says.

Use of such machines, by certified technicians, is required by Transport Canada for cargo destined to be carried on an airplane that has at least one passenger.

Parker says some of Flying Fresh’s 88 Canadian employees are Transport Canada-certified to operate the machine.

He expects that Flying Fresh will continue to invest in technology and that the next step will likely be to get some scanners for bar codes that are affixed to product shipments.

Until late 2018, the company’s employees were largely using the time-consuming method of paper and pen.

A load of fresh farmed salmon, for example, could be destined for nine different consignees in nine different parts of the world, Parker says. “It can take a lot of time to process the receiving of those shipments and labelling them with colour-coded labels, depending on the final destination.”

Other freight forwarders are also investing in technology to get a leg up on competition.

Langley-based Vital Logistics, for example, has four programmers on staff to create proprietary software.

Some of the work that its software engineers produce is plug-ins to popular customer relations management software made by Salesforce.com.

“Our system, on a daily basis, will give you updates and proactive email notifications that are auto-generated,” says owner and Business in Vancouver Forty under 40 winner Matthew Gruben.

Gruben says the system is similar to the one used when someone buys a pair of socks on Amazon, or a meal from a meal-delivery service.

“They send you a message to tell you that your order has been placed, that your order has been picked, your order has been shipped and that your order is about to arrive.”

While Vital Logistics does not yet have a GPS system with mapping, like some meal-delivery services have, Gruben is unsure that his clients want to pay the extra cost such a system would entail.

Some customers place GPS tracking devices in the shipments as well as temperature reading devices, he says. The problem is the expense of adding those items to every shipment, he adds.

“I don’t particularly think customers need to be tracking the order on every street on the way from China to their door in Toronto. But that might become standard at one point.”

Until that service becomes a standard feature, he plans to compete using the ageless strategies of leveraging relationships and accurately assessing how much space he will need on airplanes.

Much of the trick to turning a profit in the air-freight logistics sector comes down to buying guaranteed allotments for cargo from airlines, he explains.

If all the cargo space on the plane is full, customers needing space then have to deal with logistics companies that have acquired guaranteed space.

“Sometimes it comes down to who’s got the space, who’s got the relationship,” he says.