Tag: air cargo

OM in the News: Car Tires Flying First Class

The cargo operation of Korean Air is busy as an alternative to crowded ocean shipping lanes.

Flying goods by air is the last—and priciest—option for many manufacturers and retailers to move products through a global supply chain already snarled by pandemic-driven closures of Chinese seaports and widespread labor shortages. (Airfreight accounts for less than 1% of global trade by weight but more than 30% by value).

But the global air cargo sector is flying planes at almost 90% of capacity as record amounts of goods crisscross the globe, bound for consumers and parts-hungry manufacturers, reports The Wall Street Journal (Aug. 30, 2021).

Packed planes pose a challenge for shippers, airlines and airports entering the traditional peak U.S. season for moving goods, when demand increases for consumer electronics, household items and clothing ahead of the holiday-shopping spree.

Pinch points include overflowing airport cargo warehouses, spilling goods into off-site facilities and exacerbating the shortage of staff to sort, load and unload jets. Sometimes the cabins of repurposed passenger planes are used for cargo.  Car tires packed between the seats of repurposed passenger jets are among the cargo now being flown that once traveled by sea.

“The entire supply chain seems to be full,” says one industry expert. The share of global airline industry revenue for freight traffic has doubled to around 30% from pre-pandemic levels. Soaring shipping prices have made freight a profit center for many airlines, offsetting some of the airline industry losses.

The near shutdown of many airlines in 2020 removed most of the 50% of global air cargo capacity that is usually in the bellies of passenger jets. Cargo carriers pulled idled jets from desert storage, and passenger planes were repurposed to carry goods in cabins to help meet demand for personal protective equipment. The combination of inventory restocking and ocean-cargo logjams boosted the appeal of airfreight.

Auto and machine parts for JIT supply chains, consumer electronics, fresh food and flowers and high-end apparel have traditionally filled planes. Now companies are sending cheaper items with increasing scarcity value. Airfreight prices in recent years have run 5 times that of ocean shipping; the multiple is currently 12.

Classroom discussion questions:

  1. What are the 6 shipping systems outlined in Chapter 11 of your Heizer/Render/Munson text and what are the advantages of each?
  2. Why is airfreight so important right now?

Video Tip: Demand and Capacity Management in the Air Cargo Industry

The COVID-19 pandemic is a health and humanitarian crisis, and it is also an economic shock, reports Accenture (May 8, 2020). The aviation and air cargo sectors have mobilized in a big way to help supply personal protective equipment (PPE), hand sanitizer, ventilators and other desperately needed items for combating COVID-19. The crisis is shining a light on the importance of logistics and supply chain management for helping save lives, but also for bringing staples and food to populations sheltering in place. Air transport is being heavily relied on because many emergency supplies are located overseas, or across the country, and air is the fastest mode for getting them to where the outbreak is spreading.

This 12 minute video provides a fascinating glimpse how the world’s airlines have had to prepare for shocks in capacity and demand management, the topic of Supplement 7 in your Heizer/Render/Munson text.