Two years ago the initiative looked close to collapse, but now Cargo 2000 is on the verge of transforming the way airlines and forwarders work together
Conceived as a way to get airlines and forwarders co-operating to create seamless processes, Cargo 2000 was a worthy initiative that nearly sank without a trace. 'Why are we still talking about Cargo 2000 in 2002?' demanded one of its big freight forwarder members in January of that year. Many of his peers agreed with him, that Cargo 2000 was too slow and going nowhere.
The fact that it did not disappear is almost entirely due to Ron Cesana, who took over as project director in 2001. Cesana has shaken up Cargo 2000 and put it back at the top of the air cargo agenda. The line-up of a September meeting of the Cargo 2000 board in London said it all. In attendance were the cargo bosses of United Airlines, Delta Air Lines and Cathay Pacific, and top executives from forwarders Exel, Schenker, Danzas and Yusen. 'Where else would you find a line-up like this for a meeting about quality?' asked Cesana.
Cargo 2000 was initially an IATA-sponsored interest group, although in fact IATA has had little involvement beyond giving the group a legal framework. It was originally conceived as the response of the 'traditional' air cargo industry of forwarders and shippers to the threat of the integrators - the big express operators like DHL and FedEx.
Its impetus was partly a 1996 Unisys study which showed that the average air cargo shipment took six days and involved over 40 different processes. This chain was highly fragmented, and when problems occurred, forwarders and carriers argued about whose fault it was rather than how to put it right. The contrast with the seamless door-to-door service of the integrators was glaring.
Cargo 2000 aims to halve the number of processes in the chain, and to create a 'route map' for each shipment, saying what milestones it must pass and when. The idea is that if a shipment fails to pass that milestone, an alert will be triggered.
Cesana compares the route map to the stages a passenger has to go through in his journey. 'He wants to know what time is departure, and then what time he has to be at the airport, when he will be out of customs, and what time he will get to his final destination. It is exactly the same with the route map, except that cargo cannot talk.'
So far, so good. But what nearly sunk the initiative was a plan to manage all the information flows needed on a common data platform. Carriers and forwarders, who had each invested a fortune in their own IT systems, baulked at the cost. So the common data platform was scrapped, but the route map retained. Cargo 2000 now defines the processes, and audits members against agreed standards, but it is up to individual carriers and forwarders what IT systems they use to achieve them.
Three phases
To make implementation easier, Cargo 2000 was split into three phases. Phase one covers airport-to-airport processes. Phase two is door to door. Both of these phases will only track consolidated shipments, however - that is shipments moving under master air waybills drawn up by forwarders. Phase three, the ultimate goal, will have piece-level or house air waybill tracking - that is, tracking for each shipment in the consolidation.
Like levels in a computer game, the phases get harder as they go along. It is a measure of how difficult even minor process changes are to implement in air transport that Cargo 2000 members are still on phase one. The number of master air waybills measured has jumped in the past year, however - from 1,000 a month in August 2002 to 22,500 in the same month in 2003 - and Cesana says phase one is now in place at 200 locations and on 750 trade lanes.
He insists phase one has already proved its worth, with a 50% increase in shipments flown as booked on lanes where the new process has been implemented. Roger Gibson, vice-president for cargo at United Airlines and chairman of Cargo 2000, says it is using the methodology to push its flown-as-booked performance up to 95%. 'Ultimately, we want to be north of 98%,' he says.
United's financial woes notwithstanding, Gibson says he has no trouble justifying Cargo 2000 to his board. 'If we can get our performance higher than 98%, we will be doing a better job than the integrators. That will mean more revenue through our channel,' he says.
Shippers - the manufacturers and exporters who are the ultimate end customers of air freight - are the audience that really needs to be persuaded, however. In the mid-1990s, about the time Cargo 2000 was being founded, the European Shippers Council, exasperated with service levels from air cargo, came up with a concept of key performance indicators which air freight providers needed to meet. Other shippers bodies, such as the USA's National Industrial Transportation League, also endorsed this approach.
Under Cesana, Cargo 2000 has been tailored to conform with these shipper benchmarks, covering areas such as on-time departure, quality of air waybills, and how quickly freight is ready for collection.
Some of this data is already available through conventional forms of track and trace, but the problem here is not that there is too little data, but too much. Shippers generally do not want to know that a dozen shipments left on time - only that one failed to do so. Cargo 2000 offers timely information on such failures, giving carriers and forwarders the chance to sort out problems and ensure they are not repeated.
Cesana's contribution to Cargo 2000 has been the insight that even this kind of data is of limited use to shippers unless there is some sort of standardised measurement of performance. 'Quality is the language the shippers speak,' he says. 'They are tired of performance claims not backed up by data.'
Change of focus
Quality measurement can help carriers and forwarders too, as Kenny Tang, general manager for cargo with Cathay Pacific points out. 'Rather than focusing on what went wrong, we now focus on how to make things right in the first place,' he says.
All of this is a major culture change for an industry which until recently prided itself on personal relationships and deals done on a handshake. Tony Charaf, senior vice-president cargo with Delta, sees the rise of Cargo 2000 as evidence of 'a new breed of leadership' in air cargo. 'It is a leadership that understands that keeping a score card is a competitive edge, rather than hiding its mistakes,' he says.
There are signs that this message is also trickling out to former sceptics too. Cargo 2000Õs membership consists of 15 airlines and nine forwarders, supposedly representing 65% of air cargo traffic. But there are several big names not in the list: China, Japan, Northwest and Singapore Airlines being the most prominent. Cesana says he is talking to all these carriers, and that Singapore Airlines should make a decision soon. Jim Friedel, president of Northwest's cargo division, says Cargo 2000 is 'becoming a more attractive option' as it gains critical mass. 'We are fully occupied implementing our e-booking platform CPS at the moment, but in summer 2004 we will have the resources to consider taking on Cargo 2000 or another quality or efficiency project,' he says.
The Cargo 2000 board is also ratcheting up its membership drive, targeting groups it previously ignored, such as smaller forwarders and ground handlers. The joining fee has been scrapped and membership fees reduced. The aim is to firmly entrench Cargo 2000 as the industry standard.
All this, however, cannot hide the fact that a difficult moment for Cargo 2000 is approaching and one that could ultimately decide its long-term relevance. While phases one and two only involve tinkering with IT systems, phase three - piece-level tracking - involves a fundamental shift. To implement it, carriers and forwarders will need to invest in completely new IT systems. Cesana himself describes the move from phase two to phase three as being 'like candles to electricity'.
IT platform
Are Cargo 2000 members sufficiently committed to make this step? Patrick Moebel, US president of forwarder Schenker, for one, says it will be changing its IT platform to meet the requirements of phase three, but whether other forwarders and carriers follow suit remains to be seen.
Cesana is hoping the impetus might come from an unlikely source - the US Transport Security Administration (TSA). 'Phase three is all about the flow of information parallel to a shipment, and that is just what the TSA is interested in,' he says. 'We have approached the TSA and suggested the information they need could be incorporated into phase three.'
Cesana says the TSA seemed receptive, though it has not given a definite answer so far. He remains hopeful, however. ÒI believe it's a no brainer that without phase three, implementing security would be close to impossible, he says.
The contrary could well be true, however. So what if the TSA does not endorse phase three? Then, Cesana admits, a likely scenario is that phase three might only be implemented at major hubs. 'We would just have to see how it goes,' he says. 'We need someone with vision.
PETER CONWAY LONDON
Source: Airline Business
