Companies are shipping more items by plane to meet customers’ rising expectations for rapid delivery, prompting a scramble for cargo space that has sent airfreight rates soaring and pushed Amazon and others into the airline business. Global airfreight traffic climbed almost 9% this past year.
The cause is twofold: As online shoppers come to expect faster home delivery of everything from smartphones to paper towels, passenger jets and dedicated cargo planes are picking up more kinds of cargo traditionally carried by container ships, trains and trucks. At the same time, strong global economic growth also is spurring demand for goods long ferried by air, such as automotive and manufacturing parts.
Those factors are creating some of the stiffest competition for air-cargo space in years, reports The Wall Street Journal (Jan. 10, 2018). To meet the rising demand, Amazon has started its own airline and some air-cargo operators are searching for older, idle jets to convert into freighters. Amazon has used its current fleet of about 30 use Boeing 767 jets primarily for its fastest Prime delivery service, and is adding 10 more planes this year. The dedicated fleet has allowed it to extend the window for guaranteed 2-day delivery from 6 p.m. on the East Coast to as late as 11 p.m.
Demand for new smartphones from Apple and Samsung last year pushed up airfreight costs. Elevated semiconductor shipments, an airfreight mainstay, also have been gobbling up cargo space. And increasingly, manufacturers are loading toys, clothing and other products onto planes to meet shorter delivery windows and leaner retail inventories.
Airport cargo terminals are now teeming with items such as dog food and spaghetti sauce. “We’re shipping more and more of what you might consider to be everyday basics,” said a UPS spokesman.
Classroom discussion questions:
- What can operations managers do to better control shipping/logistics costs?
- What technique in Supplement 11 (Supply Chain Management Analytics) could be used in this situation?