According to the International Air Transport Association (IATA), international scheduled air cargo statistics for June showed continued strong demand growth as the industry recovers from the impact of the global financial crisis.
Compared to June 2009, international scheduled freight traffic showed a 26.5% improvement.
Capacity increased only slightly above demand improvements during the month, keeping load factors in line with historical highs at 53.8%.
Demand
International freight demand grew 26.5% in June 2010, down from the 34% recorded in May 2010. May was exceptionally high as some interrupted traffic from April’s ash crisis shifted to May.
Volumes remain 6% above the pre-recession peak in early 2008.
Freight demand continues to follow economic recovery and trade patterns with airlines in Asia-Pacific (up 29.8%), Middle East (up 39.6%), Latin America (up 44.9%) and Africa (up 54%) growing the fastest.
Carriers in North America (up 24.2%) occupy the middle ground.
Europe (15.3%) is growing at half the rate of the fastest growing regions based on slower economic growth. This trend is particularly evident in Europe, which is the only region still between 5% and 6% below the pre-recession peak. The low value of the Euro will be a help to the region’s exporters and eventually drive up freight volumes.
Market share
International freight traffic market shares by region in terms of FTK are:
- Asia-Pacific 44.9%
- Europe 25%
- North America 15.2%
- Middle East 10.7%
- Latin America 2.8%
- Africa 1.4%
Giovanni Bisignani, IATA’s director general & CEO, commented: “We remain cautiously optimistic. A clear indication of the growing confidence is the over 400 aircraft orders announced at the Farnborough Air Show. This is good news that will bring environmental benefits through improved fuel efficiency. But it will also make the challenge of matching capacity to demand much more difficult.”
TLC and BestFeightRate.com can provide you with a shipping solution that works best for your company.
Increasing cost and complexity
One of the biggest line items in logistics spend is the cost of moving goods over the ocean. This is true for several reasons, not the least of which is the complexity of the movement itself and, in turn, the complexity of billing processes. Ocean freight rates encompass a growing inventory of surcharges, turning bill of lading calculations into mathematical challenges. Given that ocean freight invoices represent the largest single component of any logistics spend, they also account for the greatest margin of error in the financial supply chain.
Now, more than ever, there is a need for automated, electronic-based systems and processes that can simplify freight payment and audit management, improve accuracy, and ultimately reduce costs.
The high price tag of manual processes
Despite the technology and resources available to the logistics sector today, manual processes are still used extensively in freight invoicing processes. Unfortunately, that inefficiency comes with a high price tag. Audits and spot checks have shown that anywhere between 25% and 30% of all ocean freight bills of lading are incorrectly rated. Today the question is not whether the shipper is being billed inaccurately. Rather, it is a matter of by how much.
The complexity of ocean freighting has always made bills of ladings prone to inaccuracies, and the remedy has been too costly to put into effect. This is in large part because the processes used to pinpoint incorrect rates are time consuming and require specialized skills. Even at that, only a fraction of errors are uncovered, simply because of the inability of human resources to sift through the volumes of contracts and carrier governing rules tariffs to capture all discrepancies. As a result of the difficulties and costs associated with performing a worthwhile audit, shippers find it easier to simply pay the overages, despite knowing they may be paying too much. Even when rates began to be published electronically, most applications in use still required clerks to manually enter rate information, and find and calculate rates for generating contracts. Those that have implemented more sophisticated billing systems in recent years continue to experience inaccuracies as ocean freight rates and surcharges do not conform to most accounting packages. Even when those errors are relatively small, the cumulative losses can be significant.
Electronic freight auditing
The optimal ocean freight audit solution is one that audits all bills of lading prior to payment, with
limited user oversight required. This is achieved by leveraging the capabilities of a globally connected network combined with a Web-based rate management system to automate the process of comparing and auditing bills of lading with contracted rates. With this approach, standard ocean bills of lading are transmitted electronically over a value-added network and processed within a rate management system for auditing. By combining electronic messaging with a powerful and sophisticated contract management system, shippers have the framework in place for much more efficient and accurate freight invoice audit, approval and payment process.
The critical components of an automated freight audit solution include:
Electronic Messaging Integration
The logistics industry depends upon electronic messaging, using a variety of file types and formats, including EDI, XML and flat files. Electronic bills of lading and advanced shipment notifications (ASNs) are relevant business documents that contain the data elements required for integration of electronic messaging and contract management in any ocean freight audit solution. For an automated solution to work, it is essential to have these electronic messages available through a network that offers connectivity to the greatest number of ocean carriers; and supports flexible options for electronic invoice receipt. Having the ability to manage different message types on a global network simplifies the carrier on-boarding process and drives down costs.
Contract Management
The core of a successful, efficient ocean freight audit system is a contract management solution that provides tools to easily maintain all rating charge components: base ocean rates, inland moves and surcharges. In order to minimize the costs of the audit process, managing the contracts and rates that are being audited must be simplified and utilize the range of web and office tools available. The ability to efficiently manage large numbers of rates and ocean carrier surcharges with self-service tools is essential to keeping costs down for managing the maintenance of a contract management database.
A successful ocean freight audit system therefore must combine the two key components of a robust, electronic messaging network with the power and flexibility of a contract management system. The latter system needs to automatically receive the messages from the network, process them, search for rates, calculate and compare. This automated workflow allows the system to drive down the cost of the audit and improve its accuracy, while performing audits on electronically processed billings. In addition, the reporting analytics can be invaluable in assessing carrier performance and providing data to negotiate favorable payment terms with carriers.
Additional features to look for in an automated solution include:
- Built-in flexible tolerance thresholds to streamline audit processing, to enable shippers to pinpoint deviations that are worthwhile to address.
- A workflow for evaluating and correcting audit failures and any data quality issues that arise.
- A reporting solution that can provide ad hoc reports based on the results of the freight audit to analyze the number and nature of incorrect ratings and evaluate ocean carrier performance.
- The ability to integrate with shipper back office accounts payable systems to close the loop in the financial supply chain.
- Rapid return on investment for shippers and NVOCC (non-vessel operating common carrier) customers.
Effectively keeping freight costs in check
For today’s organizations, removing costs and identifying opportunities to improve cash flow are paramount to financial success. The complexity associated with bills of lading has made it increasingly difficult for shippers to use traditional, labor-intensive methods to audit even portions of these bills. Embracing an automated ocean freight audit system is gaining popularity to a larger number of shippers who want to manage their transport spending and improve audit accuracy and efficiency. Fast, cost effective and able to drive value in an increasingly shorter time frame for a rapid return on investment, a flexible ocean freight audit system is a must for any large shipper where ocean freight is a major component of their logistics costs. The potential to identify savings on a large portion of ocean invoices, while leveraging better tools to evaluate ocean shipping providers, is making ocean freight audit systems a critical tool for managing the financial supply chain.
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The software as a service (SaaS) model has been widely embraced by multiple industries thanks to the numerous advantages that on-demand solutions deliver. Logistics-intensive organizations, however, were among the first to turn to SaaS to reduce costs, increase operational performance and improve customer satisfaction. As the need for connectivity, collaboration and compliance grows, many members of the global supply chain now realize that SaaS in the logistics market can offer far more than “rented” application software when connected to a “federated” network comprised of several communities (such as airlines, ship and truck carriers, government agencies, logistics providers, etc.), each with a common interest.
Consider the next evolution of SaaS as business social networking for the supply chain community –SaaS 2.0, if you will. Leveraging a federated network, SaaS 2.0 extends the value that traditional on-demand solutions offer by not only providing pay-per-use access to applications that businesses need to manage their supply chains, but also by bringing together and enabling multi-party collaboration between logistics service providers, supply chain partners, carriers, customs agencies and customers from around the globe.
Combining SaaS logistics applications with a federated network helps participants build communities, readily connect with trading partners (already connected to the federated network), and transition beyond the simple interchange of information. In this scenario, SaaS logistics applications and a federated network combine to support multiple multi-party processes and connections within a single environment on a global scale.
A logistics network is a highly complex “organic” group of trading partners that perform any of a wide range of logistics-related business functions (e.g. freight forwarding, customs compliance, etc.). Many industry players have become seasoned users of SaaS applications that pertain to specific functions in order to speed up delivery, streamline processes, and reduce errors and complexity.
As supply chain processes become more complex, the need for partners to work together, be more efficient, and keep pace with the latest legislative requirements regarding advance notification, securing trade lanes, chain of custody, accountability and the automation of paper documentation, continues to grow. SaaS 2.0, for its part, brings a blend of hardware, software, networks and business services to enable multi-party workflow-based applications that need to be shared by thousands of companies on a daily basis.
In the past, SaaS applications tended to serve a specific business function (e.g. order processing, transportation, warehousing) or vertical (e.g. manufacturing, healthcare, pharmaceutical). Today, a SaaS 2.0 platform, such as the TLC’s Global Logistics Network (GLN), serves as “all things to all people” by connecting the entire community of logistics service providers and trading partners through a single polymorphic federation.
This state of being united and leveraging multiple network applications through a global network promises to take the industry well beyond its reliance on standalone solutions and individual transactions. This approach delivers a wealth of advantages, including standardization of documents and data, increased automation of routine functions, and easy accessibility to real-time information for all partners.
It also provides an opportunity for customer intimacy and the prospect to make more money; facilitates operational improvements to dramatically lower the cost of doing business; and facilitates compliance with an increasing number of regulatory changes around the world.
Communication barriers between manufacturers, retailers, carriers, government agencies and other stakeholders are reduced by applications and the trading community being brought together. By way of example, when one party generates information or implements a change, that data can be disseminated throughout the relevant members of the community in real-time.
Given the complexity of global trade and the information that must be communicated, it comes as no surprise that the logistics industry is among the first to venture into the concept of SaaS 2.0.
The ability to unite disparate business processes represents a pivotal shift in global logistics practices. The convergence of functions is now taking the logistics industry from a cost-savings oriented mentality that focuses on functionality, integration and risk reduction, to a compliance-oriented one, which drives innovation and business networking through automation and real-time access to information.
As we look ahead, SaaS 2.0 has potential to provide the foundation for delivering the next big thing in logistics – the ability to track and manage all elements of the global supply chain (Global Trade Management, Supply Chain Execution and Mobile Resource Management) through a single resource, while collaborating seamlessly with supply chain partners. Undoubtedly, the impact of this evolution would be felt by carriers, logistics service providers, customs filing agencies, and of course supply chain operators such as manufacturers, distributors and retailers. In view of this, now is the time for members of the global supply chain to prepare for what lies ahead by embracing SaaS 2.0 today.