New Articles

Air Freight Market Update

air freight

Air Freight Market Update

Many freight forwarders are showing a continued growth trajectory for air freight shipping. Perhaps it is a sign of the times, as shippers are continuing to use different strategies to work around persistent and significant supply chain disruption. To keep high-priority shipments moving, shippers have, at times, been choosing air over ocean in recent years.

However, overall demand for air freight dropped slightly in January this year, which may have shippers wondering – does this mean we may start to see demand and capacity levels regulate? Will air freight no longer be as necessary this year? The short answer is no, not anytime soon. In fact, demand for air freight is forecast to increase this year amidst significant capacity constraints and continued high depend for goods along with the need for inventory replenishment. While demand did drop early 2022, air freight will continue to be a key strategy for shippers.


 

For Many, A New and Necessary Strategy

A January 2022 C.H. Robinson customer research study confirmed that a significant number of shippers are using new strategies to manage through continued disruption, which has included a shift of more freight from ocean to air. Specifically, 52% leveraged new modes, ports, or trade lanes during the pandemic that they plan to continue using in 2022. And, over a quarter of shippers (28%) say that a top strategy was transporting freight by air that had previously been by ocean.

Interestingly, many have said shifting strategies has been a silver lining to the pandemic, with 44% of shippers reporting that one of the positive outcomes of the past year and a half is that they used new transportation strategies they hadn’t in the past, creating more choices for their business.

We continue to see interest from our customers in charter flights and ocean-to-air conversions, especially for moving high-priority freight such as we did for a customer moving emergency COVID-19 test kits when Omicron surged in January. Additionally, high tech and heavy industries such as automotive have leaned on air freight to help catch up with demand and mitigate high levels of disruption.

An Alternative to Ocean Port Congestion

Continued uncertainty in ocean shipping is likely to continue motivating ocean-to-air conversions. Port congestion is still causing significant delays, with vessels sitting at anchor for days waiting to berth. Global schedule reliability is at its lowest recorded level since 2011.

We’re advising shippers to consider the estimated average delays in vessel schedules (7-30 days depending on the port) and add them to the overall expected transit time to ensure proper planning to meet delivery schedules. In addition, long anchor times outside U.S. ports will cause vessels to be late on their return to Asia.

While the ongoing congestion at the Ports of Long Beach and Los Angeles, specifically, has resolved a bit in recent weeks, inventory is still backed up in transit from trans-Pacific routes. Additionally, trans-Pacific routes coming from China will continue to operate at a high level of variability due to stringent COVID-19 protocols, leaving shipments vulnerable to more delays.

In general, to help mitigate these issues, we’re advising shippers to move ocean freight two to three months in advance of normal timelines as opposed to the traditional 4-5 weeks. But, in cases where that isn’t possible, air freight can be a helpful alternative to keep shipments moving.

Latest Air Market Trends

As shippers consider air, it’s important to stay updated on trends that will affect capacity and pricing. While recovery times at airports remain elevated relative to pre-COVID-19 conditions, there are fewer extreme delays. However, throughout March and into Q2, global demand for air freight is expected to creep up and congestion will likely return.

Globally, the return of passenger flights has been slow and inconsistent. Surges in the COVID-19 Omicron variant continue, and markets with stricter policies are putting downward pressure on air capacity. That said, lowering of travel restrictions in some key markets may lead to capacity additions. It’s also important to consider using surface transportation when an outbreak arises, with past unforeseen shutdowns, C.H. Robinson has helped multiple companies shift their freight to another airport via truckload to keep their freight moving.

Tips for Next Steps

Overall, as shippers continue trying to navigate disruption and decide how best to move freight, here are some of the most impactful ways we’re seeing them find success:

-Seek creative solutions – Consider what different modes, trade lanes, or inland transportation strategies can keep shipments moving. It might be something new.

-Use information and technology – Find tools that provide timely market updates, visibility into shipments, and the predictability needed to know when to adjust.

-Closely communicate and collaborate with supply chain partners – Especially in this kind of market, it’s good to have a partner that can provide a range of options from global forwarding to surface transportation to customs and more. Working closely together, you and can better understand challenges coming from all sides be able to quickly adapt to changing circumstances.

To help stay updated on market trends and how they will impact capacity and pricing, check out the monthly updates on our Global Freight Market Insights page.

air amazon

Air Passenger Travel is Climbing, so is Capacity Relief on the Way?

A new era of air transportation trends is emerging to create a confusing outlook for shippers.

Air freight has been in nonstop peak-season mode despite pandemic-induced capacity decline, while other disruptions, such as the Suez Canal blockage, drove even more demand to air. This is all happening while the Transportation Security Administration is reporting a 1000%+ increase in passenger travel in April 2021, compared to April 2020, with the vaccine fueling hopes of getting back to a sense of “normalcy.”

Though vaccine distribution is increasing, and we are seeing a spike in passenger travel, capacity relief is not on the horizon. Why not? Most current air travel is domestic, meaning that planes are still not populating major global trade lanes.

In fact, numerous commercial flights are being canceled a few weeks before takeoff because passenger demand is not there. For passenger travel to have an impact on air capacity, business travel will need to return to pre-pandemic levels, That’s not likely to happen anytime soon. Right now, cargo is king and leading routing decisions for most airlines.

With this in mind, there are three tactics that you can bring into your shipping strategy to navigate the current capacity constraints in the air market.

1. Prepare for the permanent changes that will impact the future of air travel

While cargo planes and charters seemed like temporary fixes for shippers in a pinch, they’re quickly becoming necessary for the long term. Even with business travel becoming more viable, it is estimated that business travel will not reach 2019 levels until 2025. Plus, tight budgets and the newfound appreciation for virtual communication may keep many international planes grounded.

Therefore, depending on the slight uptick in commercial travel is not wise. Global shippers will need to look at how cargo planes and charters fit into their shipping strategies long term. Finding the correct partners and resources will be more important than ever as these modes of shipping continue to be needed.

2. Flex your creative muscles

Consider the new level of creativity that these air freight challenges are requiring and how you can do things a new way. For example, to get a timely shipment out for a global customer, we removed the seats from a passenger aircraft to make room for important shipments. Additionally, the plane was routed to a non-traditional cargo hub to avoid the additional delays and congestion found at more popular airports.

That may not be the right muscle to flex in your supply chain, but thinking outside the box is crucial. Depending on your goals, the end strategy will look different.

3. Consider using a mix of modes and ensure you have a partner that can accommodate

A mix of modes doesn’t just mean putting things on a ship when there is no room on aircrafts. Sometimes, it means using a mix of transportation modes for one shipment and being flexible to change on a dime. It all depends on your unique situation, but you must be agile and find the right partner to guide you in the correct direction.

We used this strategy on a recent project with Thomas Scientific, a laboratory equipment provider. We helped them work through the extreme ramp up of demand for COVID-19 related items such as masks, gloves, PPE, and testing supplies.

Prior to the pandemic, most of their business was domestic, requiring only a handful of ocean containers each year to accommodate their international shipping needs. However, they faced a sharp increase in demand in 2020 for COVID-19 test kits and needed to develop an international shipping strategy quickly.

Through our global suite of service offerings and information advantage, we worked with them to create tailored solutions to secure the capacity they needed. We focused on a multimodal distribution strategy based on time and needs. Shipments have since gone directly to customers through less than truckload, truckload, ocean, and air charter.

Once inventory levels are stable and demand shifts as we expect it to, we’ll help them move some COVID-19 test kits to ocean. As warehousing space is tight, making this switch will not only promote cost savings, but also help avoid storage backlogs.

Together, we have implemented strategies that have given Thomas Scientific the ability to quickly change directions as needed.

Despite the challenges that are currently present in the air market, rest assured that there are new ways to get creative and work with your logistics partner to create a long-term plan that navigates capacity constraints.

To stay updated on market trends and how they will impact capacity and pricing, visit our Global Forwarding Insights page.

To dig even deeper, connect with a logistics provider.

Air shipments of export cargo and import cargo in international trade can help optimize supply chains.

TAKE FLIGHT

Air cargo can be an important and highly efficient component of today’s optimized supply chain. For many products, markets and industries, air cargo is the critical link that allows organizations to respond to customer demands in a timely manner. Multiple air shipment options, as well as advancements in reporting and aircraft efficiency, make air cargo essential for many supply chains.

Indeed, air cargo can help organizations optimize their supply chain in three important ways. It allows the speed needed to deliver time and temperature sensitive products, provides reliable access to remote and developing locations, and can offer the best combination of service and price.

Quick Response to Market Demands

Air cargo is simply the only service that delivers the speed needed to respond to constantly changing customer demands.

Market response. With air cargo, shorter lead times for inventory replenishment are realized and a company can quickly respond to holiday or seasonal demands, as well as reduce inventory carrying costs. All of that adds up to a supply chain that offers efficiency coupled with flexibility—providing customers the agility necessary to contract and expand with market needs.

Time and temperature sensitive products. Air cargo also provides the perfect way to extend shelf life for both time sensitive and temperature sensitive products. It gives another way to increase inventory life and decrease potential losses.

These quick response times also come in handy when dealing with unforeseen events, like factory delays or urgent customer demands. Addressed early, these situations can provide an opportunity to position companies as the problem-solver instead of the problem. Working with a provider who can seamlessly shift from one service to another, depending on needs, offers an advantage over the competition.

Value of Technology in Air Cargo Services

It is very important to find a provider that offers seamless access to multiple services along with true visibility from a single platform.

With the use of Electronic Data Interchange (EDI), a top-notch provider can offer current updates about shipments, 24/7.

Benefits of Air Cargo in Emerging Markets

In emerging markets, air cargo can often be the only reliable method to connect customers with goods. As part of a seamlessly connected global supply chain, air cargo can facilitate growth into new markets.

It’s also important to realize that in today’s global marketplace, it’s not just about being fast, it’s about being first. Having the flexibility within the supply chain to be first to market offers many advantages. Whether a company is looking for a service that’s fast, first or simply flexible, air cargo can fill a critical role in making sure that a supply chain is meeting business objectives and serving customers’ needs.

Time And Money: The Metrics of Air Cargo

When evaluating the costs of air cargo, the freight cost is only one component of the equation. Inventory carrying costs and the sales opportunities associated with being first to market are important considerations for shippers.

The increased use of more fuel-efficient cargo fleets has changed the cost equation as the opportunity to capture market share can offset freight costs.

Keeping Overall Spend in Mind

For many industries, like automotive, aerospace, electronics and medical devices, air cargo is an essential component of an optimized supply chain.

Finding a provider who offers access to the benefits of mode-neutral routing can widen shipping options. Mode-neutral routing allows a provider to put a company’s needs first by selecting the service that best suits the specific shipping requirements and expectations. This allows for tightening the supply chain— focusing on overall spend rather than specific costs.

Saving a few dollars here and there on air cargo does not make sense if delaying time to market increases inventory costs or unnecessarily lengthens the cash-to-cash cycle.

Simply choosing services based on price alone can negatively impact the supply chain. In any economic climate, shippers should remember to calculate the cost, door to door, keeping in mind the right blend of spend to the best benefit to their overall business concerns.

That’s why taking advantage of a mode-neutral relationship with a multimodal shipping provider is a smart business move in today’s ever-changing global market.

Matt Castle is vice president, Global Forwarding Products and Services, at C.H. Robinson, which is one of the world’s largest third-party logistics providers. The 3PL provides a broad portfolio of logistics services, fresh produce sourcing and managed services through its global network. In addition, the company, its foundation and its employees contribute annually to a variety of organizations. For more information, visit www.chrobinson.com.

 

 

MULTIPLE FACETS OF AIR CARGO

* Know the options within this transportation service: next flight out, consolidation, and deferred services. There is no one-size-fits-all air cargo solution. An experienced provider will help determine which type is best for supply chain efficiency.

* Ancillary services such as customs clearance and distribution/delivery sourcing may not be top of mind when considering freight options, but they move in concert with the speed of freight and are key to ensuring on-time delivery. An experienced provider keeps these in mind when advising the best options for a business—helping translate an optimized supply chain into lower overall transportation spend.

 

 

YOU ARE ON FIRST

A provider should put a company’s priorities first by choosing the specific air service that best suits the company’s needs:

Next flight out. Urgent, fast and most costly

Consolidation. Moves on a schedule as a consolidated shipment with other freight, pro-viding both time and cost efficiencies.

Deferred. Moves as a lower priority with longer transit time for the most cost savings.

 

 

FOUR REASONS TO RETHINK AIR CARGO IN A SUPPLY CHAIN

Seek a provider that offers:

  1. Quick response to market demands
  2. Global visibility on a single platform
  3. Better access to emerging markets
  4. Increased value from a supply chain optimized with the right air service for any specific business needs