Paper 8: Cargo Operations and Management

Module 27: E- Cargo Initiatives

THE DEVELOPMENT TEAM

Principal Investigator Prof. S. P. Bansal Vice Chancellor, Indira Gandhi University, Rewari

Co-Principal Investigator Dr. Prashant K. Gautam Director, UIHTM, Panjab University, Chandigarh

Paper Coordinator Prof. S. P. Bansal Vice Chancellor, Indira Gandhi University, Rewari

Paper Co-Coordinator Dr. Amit Katoch Assistant Professor, UIHTM, Panjab University, Chandigarh

Content Writer Mr. Surender Kumar Head, Deptt. of Tourism, Government, PG, College Dharamshala, HP (India)

Content Reviewer Prof. S. Kabia Chairman, Institute of Tourism and Hotel Management, Bundelkhand University, Jhansi

ITEMS DESCRIPTION OF MODULE

Subject Name Tourism and Hospitality Paper Name Cargo Operations and Management

Module No. 27 Module Title E-Cargo Initiatives Objectives To study the concept of e-cargo initiatives. Keywords e-cargo, E-Airway will, IATA,

TABLE OF CONTENTS 1. Outcome of Learning 2. Introduction 3. Automation in documentation 4. Airway bill (AWB) 4.1 Main functions of Airway Bill 5. Cargo delivery process 6. E-Commerce 8. E-fright/e-cargo 9. Benefit of e-cargo initiatives

10. Difference between traditional process and Chicago process 11. Important components of e freight initiatives 12. Summary

QUADRANT I

E-Cargo Initiatives

1. Outcome of Learning This module will help students to: i. Understand the concept of e-commerce ii. Classify various types of e-cargo initiatives. iii. Understand the Benefits of IT in air cargo operations iv. Learn the latest e-cargo initiatives.

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2. Introduction:

Air freight is expected to become the most important booking process in air cargo industry. Freight forwarders are using air freight services for transferring the cargo. At the

present time the international air freight services required more than 40 different types of paper documents and which leave more than 8000 tons of paper documents. The main goal of e-freight services is to eliminate the use of paper from air cargo supply chain and replace it with the electronic messaging and booking system which is more economically reliable. This is a vital operation which involves all stakeholders of air cargo industry such as freight forwarders, ground handlers, shippers, Airlines, customers and custom and excise authorities in this process. The present target of Fighter is to achieve 15% e-airway will uses globally and to expand the uses of E-Airway will globally. The ultimate aim is to reach 100% uses of electronic systems in the air cargo operations.

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This concept was started by information technology and it is now an industry wide initiative and all stakeholders are responsible for the uses of Technologies. This approach is international in scope and all the countries are required to work in accordance to achieve hundred percent e- cargo operations. The e-cargo initiatives has many benefits such as lower costs, Annual saving in billions for the industry, and ability to accelerate supply chain transit Times buy 24 hours. The e-cargo initiatives also benefit in the reduction of delay that is caused by inaccurate or inconsistent data entry or delay caused by missing paper documents. With the help of e-cargo initiatives the traditional paper based documentation work will be eliminated and the record

keeping will become safer and easily accessible. As the air cargo industry becomes more constrained by compliance issues, E-cargo initiatives will be able to offer regulatory compliance and meet all guidelines at both International and local level related to the documentation and data entry required by customs and other regulatory authorities.

It is one of the biggest projects at the present time in the airline industries and hence the challenges are also big. The main issue in the freight forwarding operations is the lack of IT Solutions for the small and medium-sized service providers. The medium sized service providers lack in IT Solutions because they don't have money and resources to invest in e-cargo initiatives. The cost of investment is high and the lack of financial incentives is a major issue for the small and medium-sized service providers. There are also many political and legal considerations that must be addressed to ensure Global participation of all stakeholders in e- cargo initiatives.

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3. Automation in documentation:

Document automation is a design of systems which helps in creation of electronic documents for the cargo operations. This system includes logic based system that use segments of pre-existing texts and data to assemble a new document. This process is used very frequently within certain industries to assemble their contracts and legal documents. The air cargo industry also uses this system for their documentation. This system can also be used for automation of existing text, variable text and data within a set of documents. The automation system allows companies to minimize data entry, reduce the risks associated with humans, and speeding proofreading and feeding of data. The automation system also has benefits like time saving, financial savings due to decreased paper handling, document loading, distribution storage, postage, shipping, faxes labor, telephone and wastage of material.

The basic function in automation is to replace the traditional manual filling operation with new software and data entry systems in which machines are used for the data entry and human integration is less required. The information collected is then stored in a system and this information is easy for access. The present automation systems which are advanced in technology allows user to create their own data and rules without the need of the programming systems. The document automation system was primarily used in financial services and legal services but it can be used in any industry that creates transaction based documents. The air cargo industry is another such industry which can use document automation system for the better functioning of the industry.

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4. Airway bill (AWB):

The airway bill is a receipt issued by an airline for cargo and it acts as an evidence of the contract of carriage of material. The airway bill is the most important document in cargo operations and it is issued by the cargo carrier either directly or through its authorized agent. Airway bill is a non-negotiable transport document and it covers transport of cargo from airport to airport. An IATA cargo agent acts on the behalf of carriers whose airway bill is issued by agent after accepting the shipment. For making bookings, checking Status of delivery and current position of shipment airway bill has 11 digit numbers which is used for this. Airway bills are issued in 8 different sets of colours in which first three copies are classified as originals. The first original copy is green in colour and it is the copy of issuing career. The second copy is pink in colour and it is consignee's copy. The 3rd copy is blue in colour and it is shippers copy. The first copy is brown in colour and it is a delivery receipt or proof of delivery. The other three copies of airway bill or white in colour.

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4.1.Main functions of airway bill:

 Airway bill is a document for contract of carriage. Within original airway bill there are conditions for contract of carriage.

 The airway bill is an evidence of receipt of items, goods and materials. When the shipper delivers items to the forwarders they will get a receipt from the freight forwarder. This receipt is a proof that the shipment was handed over in a good condition as per the instructions of the shipper and the material is accepted for the transfer. After the completion one copy of airway bill is handed over to the shipper as evidence of the acceptance of the goods and as a proof of contract of carriage between shipper and sender.

 The airway bill is also used as bill or invoice with the help of supporting documents as it shows the charges which are to be paid by the consignee and the charges pending to the agent of carrier. The original copy of airway bill is always used by the carrier for record keeping.

 The airway bill also acts as a document or certificate of insurance. The airway will serves as evidence that the career is in a position to insure the shipment and is requested to transfer the shipment.

 Airway bill is important for the custom declaration, the custom authorities requires various document like packing list, invoice etc. but still airway bill is a proof of the amount charged for the goods by carrier and maybe needed to be presented for the custom clearance at the destination country.

The format of airway bill is designed by IATA and this format is used for both International and Domestic transportation. The airway bill is available in two forms one with the logo of airline and another one is neutral airway bill.

The Airway will shows logo of airline, Carriers name, address of head office and eleven digit airway bill numbers which is preprinted on the airway will. Airway bills are now completed through the computerized systems and the agents all over the world are using their own in-house computer system to issue airlines and freight forwarders airway bill. Sometimes it is difficult to accommodate pre-printed and numbered airway bills so the use of neutral airway bills is also increasing. The neutral airway bills are created by the agents so that these neutral airway bills will be filled at the time of operations. Both types of airway bills have the same format and layout. The neutral airway bill does not have any preprinted logo, Individual name, address of head office, and serial number.

The airway bill is the most important transportation document in air cargo industry. The e-airway bill initiative is more and more considered as the starting of a great goal. The e-airway bill project is aimed to replace the paper airway bill with an electronic system of carriage between

freight forwarders and cargo carriers. One of the most fundamental needs for future success of cargo industry is automated cargo processes and operations. Automation process improves the operational process between airlines and freight forwarders. This can be achieved by universal adoption of qualitative electronic communication system in air cargo industry. Nowadays various airlines are using easy to use air communication services to help e-cargo practices. The airway bill is the main base of all cargo operations that is why IATA and Airlines are interested in e airway bill initiatives. The air cargo initiative enables the airlines to improve the accuracy of data and speed up the process. At the same time better consumer services and saving on operation and administration work will be ensured with the help of e-cargo initiatives. These initiatives will further help in e status updates.

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5. Cargo delivery process:

Cargo transportation starts with shipper, when the shipper gets in contact with the freight forwarders the freight forwarder arranges entire process of transportation from one place to another. The freight forwarding company is responsible for the arrangement of all transportation such as air, sea, water or road. Freight forwarders are also responsible for processing and preparing the necessary documents so that they can ensure compliance with all legal and custom related requirements.

The freight forwarding companies are also responsible for advising shippers on arranging and Packaging of transported goods. The freight forwarding companies are non-asset based companies and they rely on carriers for physical movement of cargo. The contract with surface Transporters such as train and trucking companies for road cargo services so that they can move the freight between airport and shipper.

At the airports the Airlines handling providers receives the cargo and are responsible for further documentation. They have to do inspection of the freight and verify that it is ready for Air carriage. The handling companies load the containers and deliver the containers to the airplane and load them into the airplane. The air cargo Carriers are responsible for the airport to airport transportation of cargo. The carriers may carry both passengers and cargo or they may act as all cargo operators.

At Destination airport the carriers makes the air freight available for the forwarder’s representative. The Forwarder’s representative for this takes the cargo for a road feeder service to the consignee who is ultimate recipient of the goods. When the air cargo package is delivered successfully to the consignee the supply chain process is believed to be complete. The role of intermediaries and other stakeholders is important in air cargo supply chain because success of each step of each process depends on the successful completion of the previous step.

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6. E commerce:

With the emergence of Internet and Technology the E-Commerce practices are increasing day by day globally. The emergence of e-commerce has also brought new challenges and opportunities to the air cargo industry. The third party E-Commerce community network is an important component of e commerce. The present E-Commerce practices features the online integration of business transactions through various stakeholders. This process provides a vital market for air cargo industry agents, enabling them to develop and engage in integration of Logistics.

The new E-Commerce and information technology practices facilities tracking and tracing of cargo easily. This further minimizes unnecessary travel and inventory costs therefore it will achieve supply chain management goals at the industry level. The uses of e-commerce will transform the air cargo industry in to the industry which can provide customized services to the

individual shippers at very less cost. This can be achieved by effective planning and cooperation among industry stakeholders.

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7. E-fright/e-cargo:

E-freight is an initiative for the air cargo supply chain by the air cargo suppliers. This system involves various stakeholders such as carriers, Freight forwarders, ground handlers, custom brokers, shippers and excise and custom authority. This system replaces paper documents with electronic messages which further reduce cost, improving transit time, accuracy and competitiveness of air freight industry.

 E-freight process uses the existing air cargo industry infrastructure and the participant uses in house technology to connect to their partner’s service providers and stakeholders.  The e-freight initiative tries to adopt the new standard by the industries participants.

 Building a paper free air cargo supply chain is final goal of e-freight initiatives.

 Documents are replaced with the exchange of electronic data.  These practices include a set of business processes and standards that aim to remove paper documentation from the process of shipping cargo from airport to airport and destination to destination.  E-freight initiatives identify the location where modern electronic standards can be used.  The e-freight is an industry based program that aims to build an end-to-end paperless system for air cargo transportation.  End to end paperless transportation process of air cargo can be made possible with modern equipment’s regulatory framework and high quality transmission of data through Internet.

In the year 2016 more than 50% of the Global trade relied on paper based documentation. A shipment in general generate up to 30 paper documents and some processes such as tracking, tracing etc. still depends on human intervention. According to a study every years more than 7800 ton of paper documents are used for Cargo handling. This is equivalent to 8 Boeing 747 freighters filled only with the papers.

E-cargo initiatives allows his cargo industry to pursue business opportunities as well as it allows business organizations to adopt transformational or disruptive Technologies to change the traditional way in which is cargo industry was working across the world. The e-cargo initiatives aims to build and implement an end-to-end paperless process for the air cargo industry where paper documents are replaced with the exchange of electronic data. IATA has set a target of achieving 45% paperless working for the year 2015 but the cargo industry achieved only 36.4%. For the year 2016 IATA has set a new target of achieving 56% paperless working target. The most challenging part of this initiative is that there is still a lack of knowledge about IT, which needs to be imparted to everyone. The ultimate and long term goal of e-cargo initiatives is to replace all paper documents with electronic systems. At the present time Fastback approach is required for the digitization of airline industry and air cargo industry in particular.

There are certain problems to achieve electronic documentation system such as, there are number of stakeholder’s airlines handlers forwarders and other staff members who are using old systems

for cargo handling. These stakeholders used in house system where they use outdated manual processes for handling cargo and it is very problematic for them to change the system overnight.

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Important requirements for e-cargo initiatives:

1. The declaration of goods and cargo should be exchanged electronically. 2. The paper based documentation system should be replaced by electronic system. 3. Electronically exchange of control notifications 4. Document exchange should be supported by electronically systems 5. All the messages and documents should be electronically transferred. 6. Paper printouts of only important electronic records.

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8. Benefit of e cargo initiatives: 1) The final goal of the e-cargo initiatives is to bring benefit for the air cargo industry. 2) The e-cargo initiatives reduce the cost of operation for cargo handling. The e-cargo initiatives eliminate paper handling, processing and transporting cost. 3) The e-cargo initiative reduces wait time for freight. The documentation process can be done in less time using e-cargo initiatives which saves a lot of time. E-cargo initiatives brings operational efficiency through the reduction of the end to end processing time. 4) The e-cargo initiatives contribute to the environment by reducing paper conjunction. The overall process helps in achieving sustainability goals. 5) E-cargo initiatives helps in quality electronic messaging for tracking status of freed which further will improve visibility of the cargo operations. 6) The e-cargo initiatives are major contributors in achieving unified quality management standards.

7) The e-cargo initiatives facilitate compliance to the international and local regulations such as advance electronic information requirement for the security purposes. 8) Digitization and standardization are the key factors for the development of new innovative services, which increases the value of air freight to shippers. It helps in real time status update. 9) E freight services improve accuracy and data quality through auto checks and mandatory fields.

9. Difference between traditional process and Chicago process:

s.no. Old system e cargo process

1. use of paper for preparing Automation to make communication through documents electronic systems

2. In case of change in delivery real time information is provided which address the person who is handling increases time for planning and execution of the cargo is informed very late plans

3. standardized cargo execution standardized cargo execution process across processes were not there because the entire process each stakeholder required their own way of handling the cargo

4. Manual handling of cargo invoices Automation in calculation of freight cost with actual cargo movement. providing standard workflow for invoice management.

5. Visibility of cargo movement was The cargo movement is accessible from not there anywhere anytime

6. There were large discrepancies in all stakeholders in the supply chain have delivery date between manufacturer visibility over the same delivery date and freight providers

7. the day to day activities recorded on the day to day activities occur on electronic paper and were difficult to be data which is easy to be stored securely on the maintained for future reference service

8. Old system was not able to measure The performance of freight providers is accurately the performance of measured on daily, weekly or monthly basis freight forwarders due to the lack of and it can be measured against key complete and timely information performance goals

9. There was no integration between Electronic systems provide end to end different modes of transportation visibility by rail road or see transport. and different tools were used to manage different modes of transportation

10. Decentralized management of centralized management of dispatch and dispatch and invoicing invoicing

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10. Important components of e freight initiatives:

The e-freight initiatives were started by IATA in 2006. This program became and industry wide initiatives which involve carriers, freight forwarders, custom authorities, custom brokers, and shippers.

The Three most important components of the e-freight program are:

 Custom documents  Transport documents  Commercial and special cargo documents

1. Custom documents:

To engage governments and other stakeholders worldwide to create an e-freight route network. This network will be fully electronic customs procedures and where regulations support paperless processes.

2. Transport documents:

For digitization of the industries transport documents, working in collaboration with cargo supply chain. The digitization of documents will start from e-airway bill.

3. Commercial and special cargo documents:

Developing a plan to digitize the commercial and special cargo documents, with accompanying the air freight today in or outside the ‘cargo pouch’.

11. Summary:

Air cargo business is transformed from supplier focused to more customers centric with e- commerce initiatives. Convenience control and cost has a crucial role with E commerce. Now customers determine the hours of operation, they logon to the websites whenever they want and hence a company needs to be always working to provide services to always active customers. Customer oriented services are increasing day by day with the help of e-commerce practices. The service providers are forced to deliver their services at the customer’s door steps with the help of e-commerce practice.

“Customers have never had access to more information today and with the next best website only one mouse click away, suppliers in the air cargo value chain need to be more than ever mindful of their price levels and quality of service,”

The E-Commerce has improved efficiency of business processes which are becoming more and more customer oriented. The emergence of Internet and Internet based Technology has forced many air cargo service providers to redesign the relationship with the customers. The customers or directly interacting with the air cargo service providers with the help of their websites for booking of shipments, tracking and others services, therefore the use of middle man is reduced.