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Companies responded to the recession of the mid-2000s with an ever-vigilant focus on saving on transportation fuel costs, and they made it a priority to look at sea and land shipping instead of air to save on spending. Since then, new supply chain strategies, such as in-sourcing manufacturing and locating goods production closer to large consumer bases, have also reduced reliance on air cargo. As a result, air cargo traffic slowed in 2011 and experienced further contraction worldwide in 2012 of around 2 percent.
But for the electronics industry, air cargo continues to play a vital niche role — not as the transportation mode of choice for most shipments, but as a transportation option that makes sense in certain situations, such as:
- Shortened times to order fulfillment or inventory replenishment. You might ship your electronics products and components primarily by sea, where freight is least expensive, but in a high-demand situation like the holidays, it can make sense to complement your ocean shipping strategy with air cargo if you have to rush inventory replenishments to keep pace with unplanned, surging demand; or if there is a desire to get initial product offerings (such as smartphones or tablets) into the market quickly to establish their brand presence for consumers.
- Logistics diversification that delivers “best speed.” Strategically, air cargo should stay on the list of transportation options when time to market is of the essence.
- Rapid delivery of prototypes. Air cargo is the best choice of transport when it is necessary to quickly route product prototypes or redesigns to their manufacturing destinations.
- Serving new and emerging markets. Gartner research estimates that emerging markets are a $30 trillion opportunity for companies, and that they are the primary business growth area in this century. Gartner says that supply chain leaders will be held responsible for the success or failure of business growth in these markets, based upon the capabilities they put in place. These emerging markets include both BRIC (Brazil, Russia, India, China) and MINT (Mexico, Indonesia, Nigeria, Turkey) countries as well as Vietnam, Egypt, and South Africa. Many of these countries lack a well developed internal infrastructure that will support full truck and rail logistics, and some are not readily accessible by sea.
Air cargo plays a vital role in these markets as a way to overcome shipping and logistics complications. It can ensure that goods reach these new markets and establish brand footprints in these markets before competitors' products make inroads. How important is time-to-market in these areas? With a rising middle class taking root in countries like Indonesia and India, Gartner projects that the fastest rate of growth of mobile electronic devices will be in these markets. Getting to emerging markets first will be important, even if it means that more expensive air cargo is needed to deliver the goods.
“In my opinion, what is needed is a paradigm shift in the way in which the industry looks at air cargo,” said Radharamanan Panicker, group CEO, Cargo Service Center India, in a blog. “Perhaps we already witnessed a mindset change at Air Cargo India this year. It was heartening to see stakeholders such as shippers wanting to play a more integral role in the air cargo supply chain. Air cargo is the catalyst for fast economic growth and sustainable development. The road to the future of air cargo may be long and winding, but there is light at the end of the tunnel.”
The International Air Transport Association (IATA) talked about the air cargo advantage in May 2014, when it reported that air carriers saw their capacities rise 8.1 percent. IATA attributed the increase to an upswing of activity in developed economies, and increased volumes of sales in emerging Asian and African markets.
For electronics manufacturers, the key now may well be to ensure that air cargo is strategically integrated into both the supply chain and the transportation mode choices that are made, and which also should be premised on time-to-market and the risks of not getting to market, as well as on pure cost.
“Companies responded to the recession of the mid-2000s with an ever-vigilant focus on saving on transportation fuel costs, and they made it a priority to look at sea and land shipping instead of air to save on spending.”
Mary, the mode of transportation depends up on urgency and cost. Air transportation is not cheaper when compare with shipping, but economical if we are planning well in advance. Air transporting is good for speedy delivery. That's the reason Amazon plans to introduce Drone for commercial delivery.
“Air cargo plays a vital role in these markets as a way to overcome shipping and logistics complications. It can ensure that goods reach these new markets and establish brand footprints in these markets before competitors' products make inroads.”
Mary, if time is major factor then Air shipping always has an edge over other mode of transportation. This speed can achieve only if both receiving and sending facilities are located close to the Air strips. If its long way to travel towards the air strip then at the same time it can be transported to the destination through surface (Road and within same state)
An excellent point, Jacob–because so many high-growth markets have infrastructure issues that go beyond getting the goods in to an airport!
Exactly–and this is why companies shoudl be open minded about turning to air when the circumstances demand it.
“An excellent point, Jacob–because so many high-growth markets have infrastructure issues that go beyond getting the goods in to an airport!”
You are very right MARY. Approach to this infrastructure facility is the key.
“Exactly–and this is why companies shoudl be open minded about turning to air when the circumstances demand it.”
Mary, cost is also a factor. The best option is stock it well in advance. This type of planning will help them to avoid a last minute rush and can negotiate for a better price.
Air cargo will always have an important place in supply chain startegy. But with fuel prices going up and air being a costly medium, the cost factor will always come in when talking about this medium. But less time taken and less risk always works in its favor.
Good comic relief!
Many companies are choosingto operate with scant inventories, Jacob–a vestige of the mid-2000s recession. I agree that they should reconsider. You can actually save money (and improve service) if you project where a little extra inventory may be needed–and have it there.
“Many companies are choosingto operate with scant inventories, Jacob–a vestige of the mid-2000s recession. I agree that they should reconsider. You can actually save money (and improve service) if you project where a little extra inventory may be needed–and have it there.”
Mary, scant inventories means? You mean stocking less than actual requirement.
“Air cargo will always have an important place in supply chain startegy. But with fuel prices going up and air being a costly medium, the cost factor will always come in when talking about this medium. But less time taken and less risk always works in its favor.”
SP, you are right about costing. There is no doubt that air cargo services are very costly when compare with other shipping modes.
What I was actually thinking of was putting in a little inventory over requirements by using preditive analytics to anticipate demand spikes.
A good example is a smart phone manufacturer who plans to launch a new version of a product right before the holidays–and puts in a little inventory above requirement that anticipates aggressive sales in certain targeted areas.
@Rich What I believe he means by “me too” is an admission that the technology did not originate in Canada. Their innovation would have to come in the form of its application to manufacturing.
Finding more environmentally friendly materials is something that is in the works for 3D printing. Many items can be printed in nontoxic plastics. Plastic printing also opens up opportunities for more efficient recycling, as it cuts out the necessity of transportating containers see 3D Printing Plastic — Distributed Recyling and Distributing the Benefits.
@Rich It's just a bit more complex than that. PLA filament is considered green because it's completely biodegradable and compostable. Ialso produces no harmful fumes or noxious smells during printing.The plastic itself is completely nontoxic and considered safe for food products; however, the dyes some use on it are not.
@Rich I know that standards vary across countries. That's true even for food. Did you know that a number of ingredients commonly used in American foods are banned in other countries? See http://www.shape.com/blogs/shape-your-life/13-banned-foods-still-allowed-us. And these are things we eat not just what put the food into. Personally, though, I believe in individual choice and accountability. I avoid buying things with artificial colors, but I don't demand that the government remove them from stores.
@Rich that is a way to go, but I'd think it's much more consistent with the directions set by countries like Germany (which outlawed toxic plant sprays over a decade ago) than Canada.
After I wrote this, I did a quick search on German 3D printing and found that German Rep Rap announced a filament up to such standards this past May. From http://www.3ders.org/articles/20140502-german-reprap-offers-nylon-filament-pa6-for-3d-printing-robust-models.html: “The Nylon-PA6 filaments are produced in Germany and contains no heavy metals or toxic substances, the company says. The base materials and colouring dye are selected according to FDA and European food regulations. ” Some of the comments there say that such filament was available before, just without the fanfare.
It is very difficult why not people understand 3D printing is not for mass production. It is good for prototype and may be sometime for low volume. But no no for mass production.
3D printing can be employed innovatively for some production. But it is not panacea for all. Cananda needs to do dispense with many more ills surrounding it.
@_hm You're absolutely right; 3D pringint is not at all efficient for mass production. Even though there are now techniques that allow multiple items to be printed at the same time on the same machine, you still don't have anything like the economies of scale to be found in other forms of production. Consequently, each unit price is on the high side. However, what Southway is proposing is not a shift to producing consumer items through 3D printing but using its abilities to improve the machines that are used in mass production. That is what can increase efficiency and contribute to the possibility of bringing manufacturing back — but only if the other component of what he calls the three-legged stool are also in place. So it's not a panacea. The title I had put on this piece was actually even more qualified than this one, as I presented it in the form of a question: “Can 3D printing bring manufacturing back to Canada?”
@Ariella: Another point is that person operating 3D printers are pretty expensive as compare to person operating conventional machinary. You need to consider that spped of 3D printer is 1/3 or less.
Most improtant thing is that all this in text book literature. No one has yet convincingly proved that 3D printer concept does work against conventional production.
@_Hm I'm not sure what you mean by proving it works. It does work for particular purposes and is not intended as a replacement for mass productions. 3D printing has improved things ranging from jet engine parts http://www.cnbc.com/id/101633194 that are lighter and more efficient than traditionally produced parts to prosthetics that cost just $50 to produce rather than $42K. Granted, these are not items intended to be sold by the thousands. As far as I know no one has suggested that 3D printing is intended for that. What Southway suggests is that it can be useful in coming up with more efficient machines to be used in production of the final product.
Not sure if 3D Printing can bring back manufacturing back butit definitely will open up lot of manufacturing possibilities locally looking at the demand. 3D printing is going to be very useful for time to market and shortening design milestones.
@Rich that is bound to happen, as they continue to drop in price. Just like 2D printers, they will be affordable enough for every computer user to have one.
@SP yes, I would venture to say it is one of the most transformative innovations of this century.
@SP yes, I would venture to say it is one of the most transformative innovations of this century.
@SP yes, I would venture to say it is one of the most transformative innovations of this century.
@Rich I don't wish to sound like I'm quibbling, but there is a differene between production for the masses and mass production. As I said, I'm certian, 3D printers will become much more common, and people will be able to print certain things they want on demand. But the more advanced form of 3D printing that will require machines that cost 6 figures will still be too expensive for most individuals and even businesses to acquire for themselves. The printing process on them is also too slow for real mass production. But they can be instrumental in producing other machines designed for greater efficiency. In much the same way that GE uses 3D printing to produce engine parts that are lighter and more efficient, engineers can use it to produce machines that are more efficient, whether by enabling better heat management or through some other desired trait that cuts down on production time.
“What I was actually thinking of was putting in a little inventory over requirements by using preditive analytics to anticipate demand spikes.”
Mary, you may add additional stock. It's a good option but for companies it's like a dead investment till the time it gets enchased. For them rotation of money is important than investments.
“The relatively young country faces some of the same problems the US does, namely taking a major hit to manufacturing hubs as a result of globalization. While there is no magical remedy for that situation, applying new technology, including 3D printing, can help the industry get back on course”
Ariella, why it's looking only for 3D printing, any particular reason? They can be looking for other types of industries too.
Any new technology when its introduced first its very expensive and then later on as the demand grows the cost comes down and availability of the technology gets very common. The same will happen with 3D. Just have to wait and have patience.
This is a calculated risk and depends on how much companies believe in their predictive analytics. No one want to increase carrying costs.
@Jacob, I agree with you on that but then in what ways is air transportation economical when its not cheap.
@Rich “Remember 200 MHz processors? ” Honestly, no. You have to conceive of the 3D printers rather like 2D printers. There are different types of printer. Some are affordable enough for home and small business use, but some print jobs require a much bigger printer that you're not going to attach to your desktop. That's why printers are still in business. Likewise, there will be a lot of inexpensive 3D printers used by individuals in the future. But the huge machines will still be out of reach of most and only purchased by businesses that focus on making prototypes or providing other specialty 3D printed items for individuals and businesses.
@Jacob perhaps so. I did frame the question around 3D printing though as I saw articles that quoted Nigel Southway on the potential the technology held for manufacturing in Canada.
@Rich quite so. Southway's view is not that it is a magic bullet but that it can be part of one of the legs of the stool he posits — and remember there are two additional ones.
“This is a calculated risk and depends on how much companies believe in their predictive analytics. No one want to increase carrying costs”
Mary, exactly and depends on reserve cash.
“I agree with you on that but then in what ways is air transportation economical when its not cheap.”
Adeniji, no way it's cheaper but if time is a critical factor it can help you a lot in saving it.
I agree with you. As you know majority of consumers would want to have these gadgets all at once, just euphoria of having new techy things.
@Wale true, some people feel they just have to have the latest in tech toys.
“”While there is no magical remedy for that situation, applying new technology, including 3D printing, can help the industry get back on course.””
Rich, thanks for the clarification and it seems that its one among the new technology.
“I did frame the question around 3D printing though as I saw articles that quoted Nigel Southway on the potential the technology held for manufacturing in Canada. “
Ariella, yes I think its good for manufacturing and production industry.
“Any new technology when its introduced first its very expensive and then later on as the demand grows the cost comes down and availability of the technology gets very common. The same will happen with 3D. Just have to wait and have patience.”
SP, why its become expensive. it's a business trick; since there is no completion they used to keep the premium at high level, so that they can maximize their profit at a lesser time. When real competition starts, they start declining prices with raining offers.
Very nice article @Ariella,
3D printing – printer of course is a revolutionary tool but I can see that only from the consuming prospective (at the moment). I doubt if 3D printing could bring manufacturing back as the reasons why companies are abroad will remain.
(By the way I didn't know that exist 3D printers that can print other material apart from plastic)
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