Supply Chain Trends Impacting the Air Cargo Industry
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MOT2910 MSC THESIS PROJECT SUPPLY CHAIN TRENDS IMPACTING THE AIR CARGO INDUSTRY ASSESSING TRENDS AND THEIR IMPACTS IN THREE INDUSTRY SECTORS FLORIAN SCHMIDT MSC. MANAGEMENT OF TECHNOLOGY FACULTY TECHNOLOGY, POLICY AND MANAGEMENT SECTION TRANSPORT AND LOGISTICS DELFT UNIVERSITY OF TECHNOLOGY IN COOPERATION WITH SEABURY CARGO ADVISORY B.V. AUGUST 2013 SUPPLY CHAIN TRENDS IMPACTING THE AIR CARGO INDUSTRY - ASSESSING TREND AND THEIR IMPACTS IN THREE INDUSTRY SECTORS - Student: Florian Schmidt Student Nr: 4180534 E-mail: [email protected] Program: MSc. Management of Technology Course Code: MOT2910 MSc Thesis Project (30 ECTS) THESIS COMMITTEE: Chairman: Prof. Dr. Ir. Lori (L.A.) Tavasszy Delft University of Technology & TNO Faculty Technology, Policy and Management (TPM) Department of Transport and Logistics (TLO) [email protected] First Supervisor: Ir. Marcel (M.W.) Ludema Delft University of Technology Faculty Technology, Policy and Management (TPM) Department of Transport and Logistics (TLO) [email protected] Second Supervisor: Dr. Eric den Hartigh Delft University of Technology Faculty Technology, Policy and Management (TPM) Department of Technology, Strategy and Entrepreneurship (TSE) [email protected] External Supervisor: Ryan Keyrouse Associate Seabury Cargo Advisory B.V. [email protected] I Preface Preface During my Bachelor and Master study, the aviation industry and the field of logistics have drawn my attention more and more. An internship at Fraport, the operator of the Frankfurt International Airport, enabled me to get a first insight to the aviation industry while an internship at Mercedes- Benz in South Africa brought me detailed knowledge in the field of logistics engineering. After attending elective courses at the Faculty of Aerospace Engineering of TU Delft, participating in a one week exchange course organized by Air France and École de Mines in Paris and choosing the specialization of Supply Chain Management within my master program Management of Technology, it was my aim to graduate with a research study combining both of my interests: aviation and logistics. I consider the way goods are transported across the world to be fascinating and interesting to research. Especially the air cargo industry, which is indispensable for moving time-sensitive, valuable or perishable goods to nearly any point in the world, captivated my interest. Hence, it is not a surprise that the content and the objective of this master thesis can be summarized in the following statement: To research global supply chain trends that have an impact on the air cargo industry by conducting interviews and a questionnaire with international shippers in three different industries. The result of this master thesis, which was done in collaboration with Seabury Cargo Advisory in Amsterdam, is a comprehensive analysis on current and near future supply chain trends that have an impact on the main market players of the air cargo industry. Besides a validation and falsification of the proposed trends, an assessment on the magnitude on impact of each trend was done. To complete this research within the set time and to fulfill its aim required hard work. This master thesis would not have been possible without the contribution of many individuals from TU Delft, Seabury and the many shippers that have participated in the interviews and the follow-up questionnaire. In this preface, I would like to thank those who supported and motivated me throughout the challenging but interesting and insightful course of this master thesis. I would like to thank Marcel Ludema, my first supervisor from TU Delft, who supported me and helped me with difficult decisions. I am grateful for the valuable feedback and comments he gave me especially in the last months of this master thesis. Next to him, I would like to thank my graduation chair, Professor Lori Tavasszy, for valuable suggestions in the beginning of this master thesis. Furthermore, I would like to thank my second supervisor Erik den Hartigh for his guidance during the course of this research via Skype from Istanbul. From Seabury, I would like to thank all colleagues of the Amsterdam office for the exiting time I had. Especially, I would like to thank my first external supervisor Ryan Keyrouse. Even though he was on many business travels during my time at Seabury, he always made sure to guide me and give me valuable feedback in regard of the content of this project. Next to him, I would like to thank Marco Bloemen, who was the key person in arranging most of the interviews. I am thankful for learning a lot on how to conduct interviews with key managers. Besides the colleagues at Seabury, I would also like to thank some of the key account managers of the large network forwarders such as Ceva and Kuehne & Nagel that introduced me to many global shippers. The same is true for Joost von II Preface Doesburg of EVO (Dutch shipper council) who supported me by supplying me with contact details of EVO members and who distributed the questionnaire to many EVO members. Furthermore, I would like to thank all the supply chain managers of the many shippers that have participated in this research. Without their valuable input during the interviews and the follow-up questionnaire this research would have never been possible. Lastly, I would like to thank Eva Veldman for reading along and giving valuable input for writing this report, my parents for their advice and everyone else who has supported me in any way during the last six months. Looking back at the last six months, I am happy and proud that I had the chance to finish my study and master thesis in a field that interests me to such extent. I am grateful to learn a lot from Seabury in regard to the air cargo industry and consulting. Lastly, I would like to mention that conducting interviews was very challenging but most of the time very interesting. I especially appreciated the openness of the respondents and the possibility to visit the headquarters or national branches of global shippers. Florian Schmidt August 5, 2013 III Executive Summary Executive Summary Background of the research The air cargo industry is indispensable for the transportation of many time-sensitive, valuable and perishable goods to nearly every place across the world. After tremendous growth during the last decades of the 20th century, the air cargo industry was doing poorly within the last 10 years. Growth rates were declining and from 2011 to 2012, air cargo volume actually decreased by 4%. The air share of total transportation dropped from 2.9% in 2000 to 1.7% in 2011. Complemented by that, were decreasing load factors and an increasing imbalance between demand and supply. As the air cargo industry is deeply integrated in the global supply chains of many shippers, it is necessary to research supply chain trends that have an immediate impact on the air cargo industry. This would make it possible to respond to these trends as a countermeasure to the lost momentum of the air cargo industry. Seabury Cargo Advisory, the problem owner, is interested in researching which global supply chain trends have an impact on the air cargo industry in order to better advice its large client base. Furthermore, this research is trying to ‘de-mystify’ some of the discussion on certain trends in literature and put proof and numbers to them. Scope of the research The scope of this research is defined by three characteristics. Firstly, the research focuses on three industry sectors (high tech, pharmaceuticals and automotive) that are considered to be very important for the air cargo industry. Secondly, the impact of supply chain trends on the air cargo industry is investigated in two main fields: air freight and air express. Hence, air mail will be excluded from this research. Thirdly, supply chain trends are considered to be current trends or trends which will be evolving within the next five years. Research approach A series of different research techniques are used to answer the main research question: What are the global supply chain trends and how are they impacting air transportation? To research supply chain trends, this research project is based on a framework of Zografos and Giannouli (2001). In their framework, drivers impact the emergence of supply chain trends which have an influence on the air cargo industry. By conducting a comprehensive literature review, the current state of the air cargo industry is identified. Apart from that, literature is used to identify social, technological, economic, environmental and political drivers that influence the development of various supply chain trends. The identified supply chain trends are verified or falsified by means of in-depth interviews and a follow-up questionnaire with global shippers in three different industries. During the interviews and the questionnaire the impact of these trends on the air cargo industry is examined qualitatively while a statistical data analysis of Seabury’s databases is used to examine the impact of certain trends on the air cargo industry quantitatively. IV Executive Summary Identification of supply chain trends and their possible impact Based on an extensive literature review, 21 supply chain trends are identified and grouped in four categories. Structural supply chain trends deal with the physical structure of a supply chain and relate to the number, location and capability of manufacturing plants and stockholding points as well as sourcing and distribution trends. Product characteristics and production trends refer to changes in product design, the length of the product life cycle and to the developments on how goods are produced and manufactured. Product flow trends are related to changes in the way products are transported. This includes the speed of product flow, the transport mode, the shipment size and frequency and the trend towards direct door-to-door deliveries.