One eye on the sky; the other on supply

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Companies with a faster supply chain will always have a better opportunity to be successful over their competitors. It doesn’t matter how great your product is if you are unable to get it to your customer fast enough. 

Air cargo has the benefit of speed on its side. And as the International Air Transport Association (IATA) points out, air cargo is predicated on speed. It is the sector’s unique selling point, an unambiguous advantage over its maritime counterpart. 

Despite this, air freight is but one of several links in the supply chain from producer to consumer. The speed advantage is wasted if one or more parts of the supply chain are not running in harmony with each other. 

Pitfalls of cost-cutting

While time-to-market speed should be part of any company’s logistics strategy, improvements in the supply chain can be made via production, transportation and inventory management channels. Frederik Wildtgrube, Finnair Cargo’s head of Global Sales, feels that companies might be overlooking hidden strengths in these channels. “Companies can make incremental changes to their supply chain strategy and improve their chances of success with new revenue gain, balance sheet health and overall profitability.”

Naturally, cost reduction is a high priority for companies, but there is danger in placing too much emphasis to the detriment of other areas. In his blog, The Basics of Air Freight: Optimizing Your Global Supply Chain, Matt Castle, Vice President, Global Forwarding Products and Services states, “Although air freight can be expensive, the other benefits within your supply chain may offset the possibility of higher freight costs. These benefits include lower inventory carrying costs and the opportunity to capture market share.”

Constant reductions in cost inevitably lead to compromises on other supply chain values and one area that repeatedly gets affected is delivery speed. The cheaper the supply chain gets, the more chance there is of reduced delivery performance, which effects customer experience and revenue gain. 

Rearranging the timeline

End-to-end delivery speed is even more important when talking about time-sensitive materials. Nowadays, perishables aren’t just relegated to food items but that of digital, fashion and other forms of product that relies on being current. The longer it takes products to reach the consumer, the more chance of price erosion due to superseding products entering the marketplace. Furthermore, the longer time in storage, the more need for additional space to store the product(s). 

Wildtgrube points out, “Air transportation has the opportunity to reach customer demand much more quickly, especially in a market environment where product lifecycles are getting shorter, customer demand more difficult to predict, and consequently supply chains are getting longer.” 

This serves a toxic cocktail to many customers and in particular to time-to-market speed. Wildtgrube adds: “Cutting transportation time, will of course impact the product shelf-life at the consumer's end and enable more sales time and possibility for the purchase.”

Obviously, optimizing the supply chain can be a point of differentiation as well as a real and tangible competitive advantage. Few companies use air cargo as their primary transport mode, though. Wildtgrube notes, “Companies that have understood the impact of air freight realize that it's an investment in speed with a substantial return.” 

Text by Mark Fletcher
Illustration by iStock 

 

 

Published August 29, 2017

Category: Finnair Cargo, Economy

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