Digitalization: The writing is on the wall

Sixty percent of air cargo carriers have adopted digital booking technology, and while that’s a vast improvement over just two years ago when digitalization first began taking off, some stakeholders say it’s not nearly enough. 

But it might have to be. 

The pandemic forced supply chain companies to move away from manual processes, and digitalization is accelerating along with the development of new technologies. Global cargo capacity has gone from 35% digitalized in 2021 to 60% in early 2023, Brennan O’Dowd, founder and chief executive of Freightos’ cargo pricing and booking platform 7LFreight, told Air Cargo Next. 

New platforms are simplifying the connections between links in the supply chain, and cargo operations are adopting automated technology. 

But the shift comes with new challenges: continuously evolving technology, slow adoption rates and security issues around digital platforms. 

Digitalization in next 5 years

Looking to the next five years, O’Dowd said he sees digitalization tapering off at most cargo carriers.  

“A lot of it is a lot of airlines just don’t have the tech capabilities,” he said.  

O’Dowd predicts that 80% of carriers will go digital by the end of 2024 or early 2025. “I don’t think it’s a matter of if, it’s now a matter of when these other carriers are going to be coming online,” he said.  

Some local carriers have a set client base that they know may never go digital, O’Dowd said, because they don’t see the need. Those carriers allow their clients to continue submitting orders in person through paper forms. 

Bridget Butler, cargo customer service manager with Southwest Airlines at William P. Hobby Airport (HOU), works with such forwarders. 

“We get some smaller businesses that just prefer to do things the old-school way,” Butler told Air Cargo Next. “Some of our smaller business owners, they just prefer to just be able to walk in and hand us a sheet of paper.” 

Matt Motsick, chief executive of logistics software provider Rippey AI, agrees that the “if it ain’t broke, don’t fix it” mindset is keeping many small-to-midsize carriers and forwarders from embracing digitalization. 

“Small-to-midsize carriers and forwarders that may retire in five to 10 years may not want to invest in digitization,” Motsick said. Unfortunately, those SMEs need digitalization the most, he said, to differentiate themselves from the competition. 

The pandemic push

The mindset keeping some smaller companies from digitalizing is the same one that prevented the air cargo industry as a whole from going digital before the pandemic. 

Glyn Hughes, director general of TIACA, told Air Cargo Next that the technology was around long before 2020, and it just took the pandemic to push people to use it. 

“We’re significantly further forward than we were,” Hughes said. “The job is not done. There’s more that needs to be done. More solutions for more standards and more standards for more solutions as problems come up and get encountered.” 

Another factor keeping some carriers and forwarders from embracing digitalization is cost.  

Automating warehouse operations can cost from $1 million to $25 million, according to fulfillment and warehousing provider ShipHero. 

“Depending on where a forwarder is at currently, it can run a few thousand [dollars] to digitalize/automate to several millions as we’ve seen [with] larger forwarders,” 7LFreight’s O’Dowd said, adding that costs can vary depending on specific needs, the level of digitalization a company wants and the technology it already uses.  

Where AI will fit in cargo industry 

Artificial intelligence (AI) has become a focal point of forward-looking digitalization discussions. O’Dowd said he sees AI taking over low-level tasks to help employees do their jobs more efficiently and thinks there is room for people to get creative with the tech.  

“I think it’s really going to be how clever can people utilize a lot of the AI,” O’Dowd said.  

Rippey AI’s Motsick said on a recent Air Cargo Next podcast that his company’s new AI-powered chat bot allows users to view booking information and book shipments without interacting with a human.  

He predicts that 50% of enterprise logistics companies will have an interactive chatbot on their site within five years. Only 2% currently have an interactive chatbot, Motsick said. 

As the cargo industry continues to adopt AI software, cargo booking will become more automated, streamlining the industry, he added. 

Adoption of artificial intelligence in air cargo will depend on two primary factors, according to Motsick: First, it matters whether a company’s current systems have interoperability, and can communicate with new systems; and second, it matters how forward-looking the executive team is with regard to the tech. 

In addition to AI-driven bots, data analytics are another feasible AI use case, TIACA’s Hughes said, noting large companies and fulfillment centers can use AI analytics to predict how consumers will behave and move cargo accordingly.  

“The more information that can be pre-notifiable, pre-assumed or pre-determined helps everybody perform,” Hughes said. 

Digital booking

Digital booking and tracking platforms are multiplying in air cargo and bringing with them the ability to book and monitor shipments online and provide each entity in the shipping process with the data they need. 

Michelle Williams, managing director of strategy and business services for Southwest Airlines Cargo and Charters, spent over 15 years in airline technology before moving to the cargo side. 

“It was interesting to come to cargo [in 2019] and see how much of it was not digitized or in that technology front,” Williams said. Now, “marketplaces have really skyrocketed, at least the availability of them.” 

The legacy manual system led to issues such as overbooking or ruined orders, especially when dealing with cargo with special requirements like refrigeration.  

Before the pandemic, “we were moving the highest-tech goods around the world using the lowest-tech procedures and processes,” TIACA’s Hughes said. “We were relying on pieces of paper to move with the cargo to actually then tell the person receiving the cargo: ‘This cargo needs to be stored in a refrigerator.’” 

Paper systems result in outdated information when forwarders rely on paper printouts of rates and sort through physical binders of data to provide customers with information, whereas digital booking platforms allow customers to easily browse regularly updated data to find what they need. 

Digital booking has “eliminated a lot of the rate discrepancy,” O’Dowd said, adding that “even the carriers that don’t have the technology today — every single one that we’re talking to, it’s on the roadmap.” 

And as the number of carriers and forwarders using digital booking increases alongside the proliferation of platforms such as cargo.one, Pelicargo, CargoAi, IBS Software’s iCargo and Awery Aviation Software’s CargoBooking, the barrier to entry has lowered.

 Zeid Houssami, global head of air at trade management platform Flexport, said that smaller forwarders are struggling with how to differentiate themselves. “They’re unable to create differentiated customer experience on the front end, because they’re not technology companies,” he told Air Cargo Next.  

“They can do a lot of the back-office work and automate that through [robotic process automation], but in terms of differentiating the customer experience, they don’t build that, so they don’t know how to do that.” 

The only way those forwarders can separate themselves from the competition currently is by being a niche provider or focusing on a specific vertical or region, Houssami added. 

Data security

Data security is also an issue for shippers using digital booking, as they have to transmit sensitive data electronically. 

Just Wednesday, the International Federation of Freight Forwarders (FIATA) and the Global Shippers Forum (GSF) announced the creation of their Charter for Protection and Governance of Data in International Trade, a nine-page document that sets out the “minimum rights and responsibilities” that the groups say should be included in digital freight agreements. 

The rights portion of the charter includes consent for storing, transferring and analyzing data and guidelines for who owns the data supplied by a supply chain stakeholder. 

Responsibilities in the charter focus on the duty of a digital application or platform to protect a stakeholder’s data and to report a data loss or breach as soon as possible. 

James Hookham, director of the GSF, said the charter constitutes “a significant contribution to the digitalization debate that’s taking place in the industry.”  

“Information is power,” Hookham added. “Once you start to amass trade and transactional data and have the ability to look over it over time, then you start to be able to spot patterns and trends that are commercially valuable.” 

GSF and FIATA both saw the importance of trade data as well as the importance of keeping that data secure, Hookham said. The two organizations worked on the charter for a few months and put it through a rigorous review process before publication. 

There is a “big wave of digitalization activity” on the way according to Hookham. He pointed to recent United Kingdom legislation, due to become law in July, to legally recognize electronic trade documents as the spark for the next wave. 

But Hookham knows that getting to 100% digitalization will be hard.  

“I’m sure there will be some niche parts of the market that will probably still be using paper documents in 10 years’ time,” he said. “But I think that it is inevitable that this will all be going digital and it will be uncomfortable for some parties,” he added. 

“I think the writing’s on the wall,” Hookham said, “and those that survive will be those who have seen it and read it and reacted to it.”