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Challenges and Best Practices in Air Cargo Transport

Abstract

This paper presents the findings of a literature review on the applications of logistics management in the aviation industry. The author strives to describe the implications of effective logistics management practices on the air cargo transport industry. Precisely, the paper answers the question, ‘What are the challenges and opportunities for transport and inventory management logistics in the air cargo industry?’ The qualitative studies reviewed in answering the study question coincide in suggesting cost issues, inventory management problems, and slow cargo processing procedures as the primary challenges that major air cargo carriers experience around the world. The reviewed studies inform the need for adopting inventory optimization technologies in handling most of the issues related to air cargo logistics management. The findings from the literature review are critical because apart from their focus on the aviation industry, they underscore the significance of effective logistics management across multiple industries.

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Key terms: logistics management, literature review, inventory, inventory optimization, air cargo industry

Introduction

Logistics management is one of the components of supply chain management that deals with the planning, implementing, and controlling of the flow and storage of services and products with the objective of meeting the requirements of customers. Many researchers, including Closs and Savitskie (2015), report that logistics management is a fundamental factor determining the success of any organization because it has a direct effect on the bottom line. The growth in the volume of global freight makes transportation a complicated process, which emphasizes the need for logistics management. Logistics management is critical, especially because it inclines organizations toward meeting their customers’ demands. In contemporary business, customer-oriented service and product delivery highlight the most important function of logistics management. Consumers are always demanding better products and services, which has a ripple effect on the supply chain in any industry, such as the need for transporters to offer accurate, fast, and quality services. Overall, logistics, management helps in addressing the demands of customers.

Logistics management has the added importance of developing visibility into the supply chain of any organization. According to Closs and Savitskie (2015), advanced transportation management systems appraise historical information and track the movement of products out and into a business using real-time data, which allows logistics managers to use the data for process optimization. Notably, effective logistics management drives growth in the volume of revenues since it directly leads to the interaction between customers and businesses. As a result, most business managers are interested in controlling their inbound and outbound freight because of their desire to have steady supplies of products that they offer to clients.

Studying the challenges and best practices in air cargo transport and inventory logistics is critical for two reasons. First, the world has been experiencing a rise in the volume of freight transported by air over the past few years (Kasarda & Green, 2015). As the latter cited literature indicates, the trend has resulted from the effects of globalization, which demand a faster rate of product and service delivery to destinations around the world, a capability that no other mode of transport matches when compared to air transport. Second, the topic provides a chance to unravel the approaches to profitability that most airline companies around the world might want to adopt to revolutionize their operations. Specifically, the findings of such research could inform strategy formulation for stakeholders in the air cargo industry to deliver as much cargo as possible that could improve their profits.

This paper presents research findings from a qualitative review of literature on the issues and best practices in air cargo transport and inventory management logistics. The studies reviewed in this paper were searched from the Ebsco and ProQuest databases, and they were selected based on their topics of focus and dates of publication. Precisely, only literature that concerned logistics and supply chain management in the aviation industry that was published in the last six years was included. The review of literature seeks to answer the research question, ‘What are the challenges and opportunities for transport and inventory management logistics in the air cargo industry?’ In answering the study question, the paper is organized as follows:

  1. An appraisal of the literature on challenges to air cargo transport and inventory logistics.
  2. A review of literature on the best practices in air cargo transport and inventory management.
  3. A summary of literature reporting the implications of the most important best practice reported in (b) on the nature of transport and inventory management in the aviation and aerospace industry.
  4. Conclusion of the primary findings of the literature review.

Challenges to Air Cargo Transport and Inventory Logistics

While literature reports several issues facing air cargo companies around the world, this review reports the top three issues that extant literature suggests. The primary challenge that the air cargo sector faces is the realization that freight handling at the carrier terminals has been slower than the expected rate. The relationship between the rate of delivery and that of handling cargo at the carrier terminals borrows from the business significance of freight cargo. In a summary of the findings of a study conducted to evaluate the contributions of aviation to the global economy, Nair (2017), found that while air freight has contributed significantly to globalization, it still faces the challenge of meeting the demand for products and services delivered across the world. Precisely, the emergence and prominence of e-commerce over the recent few years contributed significantly to the rise in the volume of products and services, which are shipped across the world (Savelsbergh & Van Woensel, 2016). Many global companies, which trade using the e-commerce model have experienced challenges in meeting delivery schedules partly because of issues in air cargo logistics.

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Fuel costs have also negatively affected the transport logistics in the aviation industry. Literature finds that fuel prices have been the most significant factor contributing to the need for air cargo transporters to minimize their costs (Kasarda & Green, 2015). This finding in literature coincides with Closs and Savitskie (2015), which report that fuel prices influence the operational costs of air cargo shippers primarily because of a lack of control of the petroleum industry by major airlines. The same study reports findings from the rest of the aviation industry, which suggest that inconsistencies in jet fuel prices have had the most significant influence on air ticket prices for passengers. While passenger airliners have developed strategies that help them in mitigating the effects of high fuel prices on their operations, air cargo companies have experienced challenges with the same. For example, while major air cargo firms operate using hubs, others do not enjoy the luxury of operating from the biggest international airlines because they serve small-scale customers. Coupled with the fact that businesses desire to have fast deliveries, most cargo airlines have not been able to use the strategies that passenger airlines use to fill their carrier capacities; the need to deliver on time forces the firms to operate below their carrier capacities most of the time.

Disruptive technologies also affect air cargo transport and inventory management logistics. Technological advances have influenced the business processes of many companies, including those outside the aviation industry because of concerns about the costs involved in the process. Precisely, firms have had to deal with security concerns in this age of terrorism because of the regulatory requirements placed on them. According to Savelsbergh and Van Woensel (2016), cargo airliners are required to only accept the cargo, which meets the 100% inspection regulation as a safety precaution, which Leung, Cheung, and Van Hai (2018) further supports as one of the ways of improving the credibility of air cargo companies. In light of trends in security, such as the need to mitigate terrorism, most experts argue that air cargo security measures are likely to tighten further, which is the same approach that the passenger air transport sector has adopted over the recent few years. However, Kasarda & Green (2015) contradict the reported findings by arguing why most air freight companies oppose the 100% cargo inspection policy. In cementing the argument, the latter cited literature indicates that the costs involved in the 100% inspection rule, which is approximated to be $650 million per year, do not justify the benefits that the program will achieve for the economy (Kumar & Shirisha, 2014). The cited literature terms the strategy as the institution of a draconian regime, which is intended to keep many small air freight companies out of business.

Best Practices in Air Cargo Transport and Inventory Management Logistics

Within the contemporary business landscape, a significant proportion of businesses are growingly adopting global sourcing, primarily from low-cost nations. The sourcing approach has aided many corporations across several industries to attain cost savings. Nevertheless, the reported benefits are frequently offset by the several complexities that are associated with global logistics management. For instance, the effect of rising fuel prices on air transport charges, imbalances experienced in the transportation capacities, and the significantly high costs involved in the long-distance carriage of business commodities have fundamental negative effects on the effectiveness of air cargo operations. According to Pathak (2016), close to nine percent of revenues that airlines make come from freight, and the figure represents twice that the first-class segment of passenger travel makes per year. Despite the challenges reported previously, best practices in air cargo transport and inventory management logistics could help air freight firms to save money through lesser cargo handling time, faster deliveries, and exceptional management of inventories.

Studies report that partnering with reliable carriers is one of the best practices in air cargo logistics. According to Kumar and Shirisha (2014), a significant proportion of air cargo the world over is managed by freight intermediaries. As the latter cited study indicates, a robust relationship between air cargo providers and business enterprises is critical for the effectiveness of the procedure. The priority given to timely deliveries by customers globally implies that providers of air freight are financially secure and that they have stable workforces (Kasarda & Green, 2015). The reported finding coincides with a series of other management literature reporting that unhappy employees could have negative outcomes on the reputations of their companies, such as Leung et al. (2018). Consequently, freight carriers in the aviation industry do not have room for failures in service delivery since some of the goods that they handle could be highly perishable. A further review of the literature reveals that transporting goods across international destinations by air entails a multitude of legal requirements and carriers, which means that business corporations are required to partner with freight intermediaries, which improves the chances that they will meet their delivery schedules (Savelsbergh & Van Woensel, 2016). Therefore, if air freight companies fail to find reliable partners, they are likely to experience challenges with their delivery timeframes.

Using technology and business digitalization is another best practice for the improvement of air freight around the world. Related literature reports that companies in the aviation industry that handle cargo should comprehend that effective logistics contribute to the success of their businesses (Leung et al., 2018). Consequently, measures that enable such companies to enhance efficiencies in document processing are preferred. The digitalization of documents to enable their safe storage, retrieval, and transfer has been described by Nair (2017) as one of the major approaches to boosting the operations of air freight transportation logistics. The cited literature coincides with other findings by Kumar and Shirisha (2014), which indicate that the incorporation of the technology enables air freight carriers to avail data in real-time and to seamlessly coordinate processes and activities that lead to the timely delivery of goods to their customers. The use of technology in logistics management has also been associated with different operations that create and sustain competitive advantages for air cargo companies through the reduction of cycle time as well as the implementation of cross-functional procedures (Kumar & Shirisha, 2014). The implementation of approaches to the management of data quality enables the involved corporations to boost the accuracy of the information, which enhances their business performance.

Improved inventory accuracy and management practices have also been proposed in studies as another approach to bolstering freight transportations around the world, especially by air cargo firms. For example, studies underscore the significance of inventory in air freight management (Kumar & Shirisha, 2014). According to the cited research, lack of proper tracking of inventory is associated with negative implications for finances and profitability that could result from surpluses and shortages, poor customer service, and employee theft among other issues. Consequently, air cargo companies have been forced into adopting inventory quality standards, such as lean manufacturing, Six Sigma, ISO, and Total Quality Management to ensure that every stakeholder involved in cargo handling supports effective handling procedures. Furthermore, inventory optimization has been associated in other literature with profitability for air cargo companies.

Implications of Air Inventory Optimization on the Nature of Air Cargo Logistics Management

Inventory optimization is a product of an advanced algorithmic perspective of comprehending and quantifying the propagation of uncertainties in demand and supply within multi-level supply chains. In contemporary logistics management, inventory optimization is one of the core competencies for both medium and large-sized companies across different industries in the world. In the aviation industry and others, inventory optimization has been identified as one of the most sustainable approaches to freeing up working capital through the reduction of inventory without adversely affecting the levels of services delivered to clients (Pathak, 2016). Overall, the cited literature reveals that inventory optimization in the aviation industry is a scientific way of determining the least inventory targets across the whole supply chain network while avoiding constraints that could result from poor planning.

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Inventory optimization has moved transited from theory to practice over the past decade. According to Pathak (2016), the drivers of inventory, in aspects of demand and supply, are universal across supply chains, which implies that inventory optimization applies to each industry. The cited study indicates that four factors have forced the popularity of inventory optimization in the air cargo industry, and they are the effectiveness of operations-focused improvement interventions, the consideration for metrics that reveal the performance of supply chains, the development of commercial inventory optimization software, and the brute-force reconciliation between demand and supply (Pathak, 2016). Notably, the latter cited study indicates that inventory optimization is established on lean manufacturing, process reengineering, and six sigma projects that establish rigorous relationships among the inputs and outputs of the supply chain. In underscoring the benefits of inventory management, most air cargo companies have adopted inventory management software, and the subsequent paragraphs of this section compare and contrast literature on their effectiveness.

As expected, the use of inventory management software in the aviation industry, especially for air cargo logistics, improves the speed and efficiency with which companies handle their inventory. Usually, companies that deal with air freight employ qualified and skilled personnel in handling the large volumes of cargo that require to be ferried, including sorting them accordingly, completing security checks, verifying their transportation payment, and other activities. If such activities were to be handled in the era of poor technologies and inventory management software, the involved employees would take longer than expected to handle the ever-growing volume of cargo and data (Nair, 2017). Inventory management software also contributes to accuracy in inventory management, including stock-taking, which addresses the challenges of the human era that could be associated with human errors in handling inventory. The implications for-profit and reputation of air cargo companies make it necessary for modern carriers to adopt such technologies into their inventory management process.

Other scholars report that using inventory management software contributes to efficient document processing and generation, which simplifies business processes (Nair, 2017). The cited literature contributes to a wealth of literature that reports the best practices in inventory management in the air cargo industry, especially because it underscores the importance of digitalization. According to Leung et al. (2018), efficiency in document processing is one of the ways in which air cargo firms minimize the time between sourcing and delivery of cargo. The reported literature relates to Kasarda and Green (2015), who report the positive effects of information technologies on supply chain management. While avoiding considerations of the challenges of digitalization, such as cybercrime, the latter literature indicates that digitalization is the future trend in document processing, especially because of the possible contributions of artificial intelligence to logistics management. According to Nair (2017), artificial intelligence will play a part in future logistics management through replacing human functions, such as monitoring, recording, and analysis of inventory data.

While the reviewed literature suggests the positive effects of inventory management software, others contradict the reported findings. For example, Cochrane, Saxe, Roorda, and (2017) cancel the possible contributions of logistics management software in the air cargo industry because of the security threats that are associated with digitalization. The latter study suggests that uncertainties surrounding cybercrimes, especially on the development of universal regulations against the irresponsible use of technologies, risk the safety of digitally generated, stored, and disseminated information. While the world is yet to witness a major cyberattack on a major air cargo airline, other sectors of the economy, especially banking, have been victims of online criminal activity (Cheung, Tong, & Slack, 2014). The cited literature cautions the air freight industry against laxities in security enforcement, especially when digitalization is becoming one of the most preferred strategies of supply chain management.

Using one of the most renowned supply chain management software also comes with significant cost expenditures, which adds to the financial challenges of inventory and supply chain management that major freight airliners experience the world over. Many authors underpin cost challenges associated with digitalization to the adverse experiences of cargo airlines at least in the short run (Cheung et al., 2014). However, the cited study has been criticized by many academicians who report that while the focus on the short-term effect could be properly informed, adopting technologies into logistics management by cargo airliners eventually reduces the costs of operations (Savelsbergh & Van Woensel, 2016). According to the latter study, concluding that inventory management software escalates the cost of logistics management is implausible because the infusion of technologies into business is one of the promises of business process management.

Overall, the indications in the literature suggest an overall advantage in the application of inventory management software, especially for inventory management by cargo airlines around the world. The advantage comes from the fact that such technologies attempt to deal with one of the major issues in air transport and logistics management, which is the challenge of timely handling and delivery of goods across global destinations. Precisely, using inventory management software accelerates the speed and bolsters the efficiency of document processing by air freight companies, which promises a steady supply of products to the consumers of companies that rely on their services.

Conclusion

While attempting to answer the research question, ‘What are the challenges and opportunities for transport and inventory management logistics in the air cargo industry,’ this research has reviewed extant literature on logistics management in the air cargo industry. The author has considered the significance of effective inventory management on the effectiveness of service delivery by freight companies in the aviation industry. As noted, logistics management plays a significant role in the profitability of air cargo firms, especially because it attempts to deal with three of the major challenges that the industry experiences. Among the many proposed solutions to dealing with the experienced challenges, the reviewed literature has underscored the need for adopting revolutionary technologies that reduce the inventory processing time by air cargo firms around the world. Precisely, the reviewed literature suggests that using revolutionary technologies reduces document processing and distribution time, which makes companies move many steps closer to timely deliveries of products to the clients. Most importantly, while this study focused on the aviation industry, the findings reported reasonably apply across different industries because of the significance of logistics management for businesses around the world. Using this approach, global businesses should strive to adopt best practices in the management of their supply chains if they have to deal with the challenges of meeting their customer schedules and realizing profits from their business models.

References

  1. Cheung, R. K., Tong, J. H., & Slack, B. (2014). The transition from freight consolidation to logistics: The case of Hong Kong. Journal of Transport Geography, 11(4), 245-253.
  2. Closs, D. J., & Savitskie, K. (2015). Internal and external logistics information technology integration. The International Journal of Logistics Management, 14(1), 63-76.
  3. Cochrane, K., Saxe, S., & Roorda, M. J A. (2017). Moving freight on public transit: Best practices, challenges, and opportunities. International Journal of Sustainable Transportation, 11(2), 120-132.
  4. Kasarda, J. D., & Green, J. D. (2015). Air cargo as an economic development engine: A note on opportunities and constraints. Journal of Air Transport Management, 11(6), 459-462.
  5. Kumar, G. S., & Shirisha, P. (2014). Transportation the key player in logistics management. Journal of business management & social sciences research, 3(1), 14-20.
  6. Leung, L. C., Cheung, W., & Van Hai, Y. (2018). A framework for a logistics e-commerce community network: The Hong Kong air cargo industry. IEEE Transactions on Systems, Man, and Cybernetics-Part A: Systems and Humans, 30(4), 446-455.
  7. Nair, K. S. (2017). Cost effective utilization of transportation services in today’s business environment-a logistics overview. Journal of Research in Business, Economics and Management, 8(5), 1529-1536.
  8. Pathak, O. P. (2016). A review: Managing transportation in supply chain management. Asian Journal of Research in Business Economics and Management, 2(3), 50-57.
  9. Savelsbergh, M., & Van Woensel, T. (2016). 50th anniversary invited article—city logistics: Challenges and opportunities. Transportation Science, 50(2), 579-590.

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