Airfreight 101

ALEXIS BOUTET: Why use air freight? First, to set the stage, the objective of a logistic manager are to ensure that merchandise arrives in the correct location, in good condition, on time, at the lowest cost. This last point in particular is a red flag for any supply chain manager thinking about shipping fare.

In normal circumstances, the cost of air freight is 10 times higher than ocean freight on the trans-pacific inbound trade lane, and it can be more than 30 times higher in times of acute air freight spike. So this begs the question, why do you even use air freight? Well, supply chain manager use air freight because it's secure, reliable, and fast.

Let's look at five criteria on deciding on the correct shipping method.

First, the retail value of the good per kilo compared to the cost of air freight.

If the cost of airfreight is peanuts compared to the retail value of the goods, then it will fly. For example, you would move luxury watches via air and actual peanuts via ocean.

Number two, the perishability of the product. If the product perish is in 10 days, you do not want it to sit 30 days on the ocean. So for example, fresh fruit and fast fashion will move via air, while rice and other grains will move ocean.

Number three, variability of demand.

If a supply chain pace is unpredictable demand, the firm will be more inclined to choose air.

This allows them to quickly switch the delivery location or catch an opportunity to ride the wave of strong demand.

This is what happened with space Mike at the beginning of the COVID 19 pandemic. The demand for mask, which usually ship ocean suddenly need faster transit time to meet the unexpected spike in demand, and they started to ship all the mask via air.

Criteria number four is the batch size. If you produce a very small number of units such as engineering sample, well, we usually ship this product via air and not via ocean.

Number five and last criteria, if a product really needs to arrive without fail by a certain needs by date such as for a product launch for example, you would send part or all of the production via air to mitigate risk of missing that launch. So consider any products whose manufacturing is delayed but is still needed for planning norms that the firm marketing has already announced.

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Module two, how is air cargo flying and what are the constraints inside an airplane?

In this module, we would like to bring you inside an airplane to understand how cargo is loaded and the critical information any supply chain professional needs before requesting or working in air shipment.

First, let's break down some misses.

Air [? consumers ?]

do not typically fly only on dedicated freight aircraft.

Most of freight actually flies underneath the feet of passengers.

Pre-COVID-19, around 68% of air freight capacity flew on these passenger aircrafts. Airlines always try to maximize the passenger baggage before they employ additional freighter capacity.

Note that in each of these aircrafts, there are positions to place the cargo you need to load the devices--

ULDs for short.

These ULDs have irregular shapes that are meant to embrace the shape of the aircraft and to maximize the usage of space for each of the positions available to load.

All cargo is placed on a metal base, manually or with a forklift.

It is shrink wrapped to protect from humidity. And wrapped in a net to be held together during the flight.

There are a few standard dimensions to remember as baselines for air freight. First, the maximum height of a pallet to be loaded on a passenger flight is a 163 cm, or 64 inches.

Second, the maximum height of cargo you can accept on a 747 freighter, the biggest of regular freight aircrafts, is 300 cm, or 118 inches.

Lastly, any piece over 344 cm long, or over 1,000 kilos, will be oversized and a managed through a different loading procedure.

Since air is so expensive, the key is to make use of every inch of space.

Airline load planners built simulations of the physical cargo in planning software.

So they require information to be as accurate as possible when placing a [INAUDIBLE]. Dimensions deemed inaccurate can be subject to additional fees.

The overarching rules of the planning game are--

first, arrange all pieces to maximize the utilization of the space.

Second, don't mix customer with bad customs records with urgent ones. Because the whole ULD can get held.

Third, combine pieces of different weights to maximize the load balance across the plane. We will be diving into this last point, in particular, in a later section.

JASON RU: Now, an interesting fact about air freight is that there is very often cheaper routing if you can wait an extra day to allow for creative solution. As we started this video by saying, there were over 100,000 flights per day before COVID-19, many of which have room for cargo.

To highlight this point, I'll give one anecdote from my previous company.

One year, we as incumbent were awarded PVG-Sydney land from a major technology company through a severe price competition in yearly [INAUDIBLE].. If there was a three rounds of q, so the business was finally maintained at a very low price, which customer can afford. Actually, it is below the best direct flight buying costs we can procure from the market.

How to make it profitable becomes a number one challenge to us. After study the market, we noticed that these passenger flights from PVG to Denpasar, and then Denpasar to Sydney, is really cheap and available. As Denpasar is the airport for Bali, which is a famous sightseeing place, so not much cargo is shipped to or out of Denpasar.

Even allowing the local [INAUDIBLE]

handling charges at Denpasar, for example, cut a new [INAUDIBLE]

review, extra customs process, et cetera.

Such a PVG Denpasar Sydney solution is far cheaper than PVG direct uplifting.

So if a customer can wait one or two extra days for their cargo, then the supply chain managers can provide tremendous value.