According to leading logistics software specialist JDA Australia, manufacturers and suppliers need to use cost saving software to estimate the Total Landed Cost (TLC) before making any transportation decisions.
While air freight may be more expensive than a surface freight solution, it is also by far the fastest and most direct form of delivery, allowing businesses to make last-minute logistics decisions and fulfil urgent orders.
Businesses can get a far better insight and an end-to-end view into exact transportation costs by factoring TLC into their calculations, says Sales and Business Development Manager of JDA Software Australia, Ms Emma Hose.
This can be achieved by better anticipating demand, planning for greater capacities and meeting growing demands by basing operations on the appropriate software platform.
Eleventh-hour shipments account for roughly 50% of the freight shipped by air. The high costs, however, prevent companies from using air freight, instead depending on trucks or container ships to deliver their goods cheaply.
What isn’t factored into the cost estimation process for ground or sea freight is the fact that other areas of the transportation process can drive up costs. These could include warehousing costs and lost sales due to slow delivery that may cancel out potential savings, making the more expensive air freight more cost effective.
Using air cargo transportation at short notice is also advantageous for customers who are able to receive goods within hours of placing an order.
Air cargo carriers can make air freight a continued viable option for shippers through fast and reliable service. But they also need to better anticipate demand, plan capacity to meet that demand, guarantee service levels and offer compelling pricing commensurate with the value provided.
Opportunity exists today for air cargo to stake a claim as the most suited freight option for the modern supply chain.
However, the requirement for speed and the last minute nature of air freight transportation makes it very difficult for air cargo carriers to anticipate demand and ensure they have planned their capacity efficiently.
Across the business world, planning cycles have shrunk and now demand significant agility from air cargo carriers. Without a clear picture of their demand/supply situation until the last minute, carriers find that space is being either under-utilised or, at the other extreme, overbooked.
It is important for carriers to gain better understanding of demand early, map it to their capacity and be agile with their pricing policies.
For instance, if there is a demand surge for a Chinese-manufactured product in Australia, air freight companies should be the perfect choice for their ability to transport items quickly. However, if the carrier has no way to anticipate such a demand and has no agile processes in place to react to the demand, it would be unable to deliver the shipments.
Even if it did, when the service isn’t offered at a price agreeable to the end-consumer, the company will be forced to give up on a significant profit opportunity.
Air freight carriers who can find the balance between capitalising on demand, and providing good service to customers at the right price and at the right time are the ones that can successfully tap into the opportunity.