Innovation, collaboration, disruption: the future of the air cargo industry

The question isn’t whether established companies operating in the transportation and logistics industries will be affected by disruptive developments, but rather when and how they will be affected and what the consequences will be. That’s how Wolfgang Lehmacher, head of the Supply Chain and Transport Industries at the World Economic Forum, cut right to the chase in his keynote speech at the 2017 Frankfurt Air Cargo Innovation Lab.

What trends and technologies are changing the role of traditional logistics and its players in the value-added chain? During a live vote held at the second joint event organized by Fraport AG and the DVV Media Group, almost two-thirds of around 100 participants agreed that big data, e-docs, blockchains, the Internet of Things (IoT) as well as cloud and online services will have the greatest impact on the air cargo industry. In his keynote speech, Jeremy Salomon of the International Air Transport Association (IATA) emphasized that the e-commerce boom is also a driver and a risk to the air cargo market at the same time. He made an urgent appeal that “we must keep pace and be innovative together” in light of a development which he described as the “final wake-up call” for the air cargo industry. That’s how Amazon, for example, went from being an online retailer to an air cargo operator with its own fleet and soon its own hub within just one year. Felix Kreutel, who has led the Cargo division at Fraport since October 1, 2017, summed up the session: “The event made it abundantly clear that the new players and their business models will change the air cargo industry over the long term. In this context, it’s all the more important for us to open ourselves up to these players and jointly explore strategies on how we can benefit from this development.”

According to you, which one of these 7 groups do you think will impact our industry the most and represent the biggest challenge to our cargo industry in the future?
  • 63.8 % – Group 1: Big Data, e-docs, Blockchain, IoT, Cloud, Online services
  • 8.5 % – Group 2: AI & Cognitive, Robots, Augmented reality, Virtual reality
  • 2.1 % – Group 3: Smart Tates, Wearables for animals
  • 0 % – Group 4: Screening, Biometrics
  • 10.6 % – Group 5: Drones, Airships
  • 8.5 % – Group 6: 3D Printing
  • 6.4 % – Group 7: Cyber Security

Business models must be further developed or modified

Dr. Carsten Dreher of the Freie Universität Berlin used IBM, DaimlerChrysler and Electronic Arts as examples and showed how they have successfully adapted established business models to new market developments – to the professor of innovation management, the three examples are proof that “even elephants can still learn to dance”. In his opinion, only the things that you cannot do yourself are disruptive – a point that gives way to another key insight from the 2017 Frankfurt Air Cargo Innovation Lab: innovations usually come from the outside, not from within. Ari Kestin – from Norwegian start-up Nimber, which operates an online platform for collaborative delivery services – believes companies from the air cargo industry have to think outside the box and consider more than just their own structures, and, if necessary, even rethink their business model. In this context, Marcel Frings from Saloodo! pointed out that platforms would bring a new dynamism to the market. Out of disruption (the destruction of one’s own business model), evolution will come in the form of a further development of one’s own approach, said the CCO of DHL’s new freight market.

“We haven’t quite reached the point where we want to be,” stated Dr. Anselm Eggert from Lufthansa Cargo, referring to the air cargo industry and naming electronic airway bills as an example. While these are still waiting to established, the e-ticket has already been a standard in the air passenger industry for quite some time now. “What would take weeks or months for us to do takes just a few days for start-ups to complete,” he added. FIEGE representative Völlnagel therefore sees start-ups as an “extended workbench.” He considers it vital to collaborate and, if necessary, cooperate with competitors in order to promote innovative business models. However, Thomas Blank (CEO of Kerry Logistics) thinks that platform solutions for new market participants are merely additional options for existing business models that will not make them entirely superfluous over the next ten years.

Virtual reality solution in practice: IATA’s Ramp VR accurately reproduces the working conditions of ramp agents and improves the training conditions by eliminating disruptive external influences.

The Tech Stage was another highlight at the 2017 Frankfurt Air Cargo Innovation Lab. Participants were able to experience and test out the latest technologies and innovations here, such as drones and VR glasses. Karel Kural from HAN Automotive Research demonstrated how drones can assist truck drivers to handle their vehicles in distribution centers. The ‘Ramp VR’ glasses, a virtual reality solution which IATA uses for training purposes in ground operations, could also be tried out. Dr. Ralf-Maximilian Jungkunz from Fraunhofer IML painted a picture of how the future of the air cargo industry could look: for example, self-driving e-trucks could be used within the next five to ten years to deliver goods to the airport which would then be further transported by means of driverless transport systems.

Collaboration is also the key word here: according to Dr. Jungkunz, robots will not replace humans. Instead, robots will assist us in our work much like a butler would – at least for the next ten years, that is.

Three Questions for Wolfgang Lehmacher

Director, Head of Supply Chain and Transport Industries at the World Economic Forum

Why are cities such as San Francisco, Boston, Singapore and London leading development of innovative logistical products and services?
Because technology and innovation constitute an important policy focus in those places. The government has made them the core of its long-term strategies and promotes them with programs and legislation. The “national culture” is an important factor in this context: Is it supportive of the industrial activities and tests, or does the population criticize this? Another aspect is the educational and training system: San Francisco, Boston, Singapore and London have world-class institutions that are also supported by the business world. Virtually all innovation powerhouses have a high proportion (20 to 50 percent) of immigrants in their population. For well-educated people and the widely differing viewpoints and approaches they bring with them from around the world to be able to creatively exchange ideas, they need a good – and especially a digital – infrastructure.

What can we in Germany learn from these places and where do you see the greatest need for action?
Germany is thorough and conservative. These values are appreciated all over the world. They are conducive to reliability and quality, but not to innovation. We can nevertheless learn from the leading innovation locations. It is important to note here that usually cities – rather than countries – promote innovation: Cities have more leeway and room to maneuver. First of all, the city’s government needs to provide good governance. This includes clarity, courage, and commitment. The benefits of innovation should be made clear to the population. Structures need to be streamlined. Small pilot projects should not require months of talks and ten or more permits – which was unfortunately the case with some of the projects I worked on. We need to strengthen the educational system – business could get more involved in this area. Innovation needs capital: This could be provided by governments on a larger scale and companies could be granted tax incentives for promoting start-ups. The infrastructure should be continuously developed.

Online marketplaces, sharing economy models, and data platforms for information exchange were topics of discussion at the Frankfurt Air Cargo Innovation Lab. In your estimation, which approach is most likely to bring disruptive change to the airfreight sector?
In my opinion, online marketplaces are the greatest potential disruptive force in airfreight. They can be created by start-ups or by logistics companies that reinvent themselves. The special feature of online marketplaces or e-commerce platforms is the platform effect, which forces the development of monopolies. As a result, the leading platforms acquire a lot of market power, which then makes life more difficult for suppliers, including the airfreight sector. Airlines can prevent this by using the online marketplace as a strategic tool. This offers them considerable potential for growth.

Text by Benjamin Klare
Photos: Tim Wegner, World Economic Forum
Graphic: VoxVote

Here you can download the list of participants and the presentations of the speakers as a PDF file.
(Please note that we are not allowed to publish all presentations)

Innovation and the economy
Jeremy Salomon, IATA Manager, Regional Communications & Regional Affairs Europe

Leapfrog yourself or being leapfrogged –
Cornerstones for successful innovation management by established companies

Professor Dr. Carsten Dreher, Professor for Innovation Management, Freie Universität Berlin

Pitch with innovators: Let’s talk future
Murat Karakaya, Chief Marketing Officer, Cargosteps
Ari Kestin, CEO, Nimber
Johanna Bellenberg, Director Marketing & Communications, Picavi

Which country is leading the charge in logistics innovations?
Wolfgang Lehmacher, Director Supply Chain and Transport, World Economic Forum

Platforms create dynamism and added value! Or are they just destroying traditional business models?
Dr. Philip von Mecklenburg-Blumenthal, Senior Director Marketplace, Freightos
Marcel Frings, CCO, Saloodo!
Dolores Pellegrino, Project Manager, Bosch Service Solutions

Innovation showcase/techstage
Short presentation of tech innovations from:
Roger Hillen-Pasedag, Director Strategy, Innovation & CR, Hermes Germany
Karel Kural Msc, M.Eng Research Engineer, HAN Automotive Research
Kim Kian Wee, Assistant Director APCS Training and Innovation, IATA
Dr. Ralf-Maximilian Jungkunz, Head of department aviation logistics, Fraunhofer-Institut für Materialfluss und Logistik IML