Air Transportation and Its Impact on Supply Chain

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Topic: Business & Economics
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Abstract

In this paper, the interrelation between air transportation and the supply chain is discussed to explain the impact the transportation industry may have on logistics. The United States increases costs on the air transportation industry.

The goal of the article is to prove that air transportation cost changes may be both negative and positive, and managers have to avoid problems and challenges in the field of logistics in order to succeed in supply chain management.

A systematic review of scholarly articles, governmental reports, and books is the research method used in this paper. The sources published from 2012 to 2017 will be used to explain the essence of air transportation and logistics as a part of the supply chain and identify the main challenges in the air transportation field. Such factors as price, consumer demands, and weather are chosen for the analysis of the possible impact on the supply chain.

Introduction

The industry of logistics and transportation remains to be highly competitive in the United States. There are many investing operations and programs in terms of which the country becomes one of the largest consumer markets in the world (Goldsby, Iyengar, & Rao, 2014).

The analysts state that approximately $1.48 trillion was spent in this industry in 2015, representing 8% of the US annual gross domestic product (“Logistics and transportation spotlight,” 2017).

This paper aims at discussing the basics of logistics, transportation, and supply chain to identify the connection between these three terms and clarify the possible impact of air transportation changes on the supply chain through collecting the data from governmental reports, official websites, and credible logistics literature sources.

Air transportation is a popular method of good delivery that is characterized by fast shipment and short deadlines. Still, there are such shortages as weather conditions or price policies that challenge many users. Therefore, the relation between what can be offered for air transportation and what is achieved through supply chain management has to be properly recognized.

Literature Review

Terms and Definitions

Logistics is a process of planning, managing, and controlling activities that are important for efficient and productive transportation and storage of goods under different conditions (Ji & Zhu, 2012). It is a significant part of the supply chain process that relates such concepts as a product (the right quality and quantity), physical distribution (the right way), location (the right place), and management (the right customer and the right cost) (Mangan & Lalwani, 2016).

The supply chain is a network of relationships that exist within an organization or between several organizations and include a number of processes such as marketing, services, distribution, optimization, finances, and logistics.

Air transportation is the industry that consists of numerous civil flying performances by certificated carriers and general aviation (Wensveen, 2016). It undergoes numerous changes because of such processes as globalization and nationalization. Still, its contribution to the economic sector remains to be integral.

In the United States, the supply chain network has already been properly integrated and created a necessary link between consumers, producers, and developers (“Logistics and transportation spotlight,” 2017).

Logistics and transportation solutions are important in the supply chain because they help to improve the quality of care offered to consumers, increase the number of services available, and control the work of different departments (Petruf, Kobra, & Kolesar, 2015).

Logistics services are used to support goods’ distribution and execution, and the air transportation industry is responsible for the promotion of express delivery services and support.

Air transportation is the industry where numerous world trade agreements are created today, where international production delivery is not a problem anymore, and where new inventory management concepts appear regularly to support its growth (Sales, 2016). Therefore, the role of air transportation in the field of logistics cannot be ignored or misunderstood.

Logistics in Airports

In the modern world, airplanes and airline services follow the same passenger traffic and require the same cost and improvements on a regular basis.

However, there are also the situations when logistic management is important because of technological changes, new opportunities, including e-commerce and online training, new competitors and the creation of new competitive advantage, globalization, and the involvement of third parties (Barnhart, Fearing, Odoni, & Vaze, 2012).

The development of international relations creates a possibility to use goods from different parts of the world. Land or rail transportation is not always possible. Therefore, airports have to be ready to manage various delivery services and transportation to meet the demands of consumers and not to lose a competitive advantage.

Interrelations between Air Transportation and Logistics

Transportation systems have to be well developed so that logistics can work effectively and bring new advantages (Masson et al., 2017). A good system decreases operational costs, improves service quality, and promotes efficiency through different services.

Transport systems play an important role in the economic activities of the country due to the possibility to make goods movable in the present and future (Aschauer, Gronalt, & Mandl, 2015). The results of logistics activities depend on transport a lot and determine such working processes as production and sale. A value of air transportation is defined by price, product weight, and deadlines, which are established by consumers.

Air transportation helps to plan all service functions into a system according to which goods are moved, and positive results are achieved. Unfortunately, today, not all transportation systems work properly. According to the representatives of the DOD and the United States Government Accountability Office (2017a), approximately 54% of HAZMAT (hazardous material) shipments were delayed in 2013 because of improper documentation and packaging.

Airline companies continue making attempts to improve the situation and demonstrate positive results and planning and organizing shipment activities. For example, the United States Government Accountability Office (2017b) states that several US airlines have already established new fees on preferred seating, carry-on baggage, and priority boarding and observed significant changes in revenues (from $6.3 billion in 2010 to $7.1 billion in 2016). Airline companies continue competing with each other regarding the demands of customers, time, and optional services and influencing service quality and quantity.

Methodology

A systematic review is a method chosen for this project. It aims at gathering and analyzing research literature and raising questions concerning the worth of the subject and its implementation.

Several scholarly articles and GAO (Government Accountability Office) reports published between 2012 and 2017 will be synthesized to divide the topic of air transportation and supply chain management into several categories, including “positive impact of air transportation on the supply chain”, “negative outcomes of air transportation on the supply chain”, and “future implications of transportation systems in logistics”.

The following keywords were used: “air transportation,” “logistics,” and “supply chain.” Additional keywords were “quality”, “consumer”, and “time”. Electronic research-literature databases EmeraldInsight and Google Scholar were used to find full-text articles.

A local library was used to find the books. An official site of the US Government Accountability Office was visited to find out several reports on the latest achievements and changes in the air transportation industry and logistics.

Results

Five articles, two governmental reports, four books, and the data from one official website were chosen for the analysis. In these sources, the authors explain the peculiarities of the air transportation industry in the United States and underline the challenges airline companies and logistics offices face today.

Through these sources, the main keywords for used for the search to prove their credibility and appropriateness to research.

For example, in the reports offered by the United States Government Accountability Office (2017a; 2017b), it is stated that the airline industry undergoes certain challenges in organizing shipment operations and has to increase the price to stay competitive. The authors of scholarly articles support the idea of interrelationship modeling regarding different factors of a delivery process.

Certain positive and negative aspects of the interrelations between air transportation and the supply chain were discovered. Air transportation promotes the movement of goods from one location to another and creates an effective starting point in the supply chain (Mangan & Lalwani, 2016; Petruf et al., 2015; Sales, 2016).

Transportation is also defined as a means of physical connection between different companies in the same supply chain (Goldsby et al., 2014). If one of the parties experiences delays or other delivery problems, new problems and difficulties are observed in other parts of the supply chain.

Air transportation is the beginning of the chain, and it defines the speed and direction of the working process. At this stage, all potential disruptive sources have to be removed.

The negative aspects of the interrelations between air transportation and the supply chain include the impossibility to break or loosen the connection between these two processes. In case some problems occur in air transportation, supply chain management is challenged, as well.

For example, weather conditions are not always easy to predict (Sales, 2016; Wensveen, 2016). Air transport depends on this weather factor considerably, and some shipments and flights have to be postponed and delayed. The supply chain cannot continue taking other steps, and all actions and decisions have to be postponed.

Discussion and Conclusion

Air transportation is a vital economic activity in business due to its ability to move goods from the places where they are produced to the places where they are demanded. Supply chain management includes various sourcing, procurement, and conversion activities that define the level and quality of collaboration between different parties of a delivery process.

The connection between these two concepts cannot be neglected in the delivery process. There are many positive and negative impacts of air transportation on the supply chain, and managers have to understand that the way of how air transportation is organized influences the way of how all processes in the supply chain may be performed.

During the last decade, significant changes and improvements have been observed in logistics management. Its growth in different fields proves the necessity to continue investigating the correlation between transportation and the supply chain on the examples of certain companies.

References

Aschauer, G., Gronalt, M., & Mandl, C. (2015). Modelling interrelationships between logistics and transportation operations – A system dynamics approach. Management Research Review, 38(5), 505-539.

Barnhart, C., Fearing, D., Odoni, A., & Vaze, V. (2012). Demand and capacity management in air transportation. EURO Journal on Transportation and Logistics, 1(1-2), 135-155.

Goldsby, T.J., Iyengar, D., & Rao, S. (2014). The definite guide to transportation: Principles, strategies, and decisions for the effective flow of goods and services. Upper Saddle River, NJ: Council of Supply Chain Management Professionals.

Ji, G., & Zhu, C. (2012). A study on emergency supply chain and risk based on urgent relief service in disasters. Systems Engineering Procedia, 5(2012), 313-325.

Logistics and transportation spotlight. (2017).

Mangan, J., & Lalwani, C. (2016). Global logistics and supply chain management (3rd ed.). West Sussex, UK: John Wiley & Sons.

Masson, R., Trentini, A., Lehuede, F., Malhene, N., Peton, O., & Tlahig, H. (2017). Optimization of a city logistics transportation system with mixed passengers and goods. EURO Journal of Transportation and Logistics, 6(1), 81-109.

Petruf, M., Kobra, P., & Kolesar, J. (2015). Roles of logistics in air transportation. NASE MORE, 62(3), 215-218.

Sales, M. (2016). Air cargo management: Air freight and the global supply chain. New York, NY: Routledge.

United States Government Accountability Office. (2017a). Defense Transportation: DOD has taken actions to address hazardous material transportation issues but it is too soon to evaluate the effectiveness of these efforts. 

United States Government Accountability Office. (2017b). Commercial aviation: Information on airline fees for optional services.

Wensveen, J.G. (2016). Air transportation: A management perspective. New York, NY: Routledge.