Article • 03.06.2024
More Speed for E-Commerce
Digitalization "at its best"
The current e-commerce boom calls for a new mindset for air cargo processes. Up-and-coming online marketplaces such as Temu and Shein are driving this change. Their concept of direct sales relies on fast air freight.
For the newly-generated quantities of e-commerce goods sold by shopping apps from China, there is only one means of transportation that can get the goods to the recipient quickly enough: airplanes. Every day, an estimated 70 wide-bodied cargo planes loaded with parcels take off from China for cross-border shipments. This figure was cited by McKinsey partner Ludwig Hausmann at the IATA World Cargo Symposium in Hong Kong in March 2024. Moreover, he categorized them. A total of 200 cargo planes are allocated to air freight transport in China on a daily basis. Hausmann also predicted that the share of e-commerce in global air cargo transport could rise by a quarter between now and 2027 and could even increase by a third in the future.
The logistics sector must adapt to the new volumes resulting from e-commerce. The digitalization and automation of processes beyond company boundaries play a central role in this. DAKOSY board members Ulrich Wrage and Simon Lembke are in direct contact with the players. Lembke clarifies: "It requires flexibility to meet the special requirements of logistics, customs clearance and last-mile transport in e-commerce." The main reason lies in the concept of direct trade, which is used by companies such as Temu (with a seven percent market share in cross-border e-commerce) and Shein (a nine percent market share). The goods are delivered directly from the manufacturer to the end consumer without temporary storage and bypassing intermediary trade stages. This comes at a cost, namely a longer delivery time ranging from ten to fourteen days. In order to make this attractive for the customer, the supply chain must be optimally timed and automated. In particular, this applies to customs processes.
A volatile market - every cent counts
The margins in the low-price segment are sometimes in the penny range, or even fractions thereof. To survive in the market, volume is essential. According to estimates by McKinsey, approximately 8.2 billion e-commerce shipments were transported across national borders in 2022. "Price and speed also determine the choice of service provider for handling, customs clearance and distribution. The market is very volatile. As soon as capacities can be sourced at a lower price, retailers switch service providers and even airports. The stakeholders need to be prepared for this," assesses Wrage. "E-commerce logistics providers should make sure they are working with tailor-made customs software that allows online retailers to be connected quickly and easily," advises Wrage.
The same benchmark, whether a package or a container
In view of the tight deadlines, e-commerce retailers can't afford to lose any time when it comes to customs clearance. This runs in the background, in a matter of seconds and invisible to outsiders. Lembke confirms: "Our customs software ZODIAK GE steers parcels through the customs processes and performs them automatically without the need for manual involvement." There are not many providers who, like DAKOSY, can handle all three customs procedures that every parcel must go through in the import process to Europe. Specifically, these are the ICS2 security procedure, the summary declaration and clearance for free circulation. "From a single data record, we can process all customs procedures and link them together," says Wrage, illustrating the high degree of automation. DAKOSY customers also benefit from the fact that the service provider applies the same standards to its software applications across all sectors. "In terms of quality and speed, we don't differentiate between a single package or a whole container," explains Wrage. Added to this is the high level of expertise in the area of data exchange across multiple interfaces, another core product of DAKOSY.
In air cargo, the e-commerce segment includes all goods with a value of up to 150 euros per parcel. This segment is treated differently for customs purposes. For instance, no customs duties are incurred up to this value limit. In 2022, customs created a separate IT application, ATLAS-IMPOST, to process this high-volume business through customs with a high degree of automation.
"Our customs software ZODIAK GE steers parcels through the customs processes and performs them automatically without the need for manual involvement."
In Germany, the key hubs for e-commerce are currently Frankfurt, Leipzig/Halle and Cologne/Bonn airports. DAKOSY's automated customs solutions are firmly established at all these locations.
Cologne/Bonn: An overview of automation at e-com Logistics
One DAKOSY customer is the fulfillment service provider e-com Logistics, which handles between 2,000 and 4,000 parcels a day at Cologne/Bonn Airport, arriving on a tight schedule in the early hours of the morning – and coming mainly from Turkey. "All shipments have to be processed by 11:30 a.m. at the latest so that they can be passed on to the CEP service providers on time," says e-com Managing Director Volkan Sentürk, explaining the precise time frame. Online retailers are in competition with brick and mortar businesses, which is why same-day processing is a crucial requirement in order to remain competitive.
Customs clearance is automated. "The only information required for the customs system is the customs-related raw data for the consignments, which we transmit to DAKOSY in Excel format." Manual corrections are only necessary for roughly ten or twenty shipments per day. Sentürk is particularly impressed by the straightforward ZODIAK GE interface. He points out: "A variety of filter options, including status messages for ICS2 and customs clearance, give us a good overview." He is informed directly about the status of any mandated customs inspections. The targeted parcel can be identified among thousands of units so that the delivery of all other parcels is not affected by the delay. Sentürk also plans to start handling parcels via Frankfurt Airport in the future - the gateway on the Main is particularly interesting for parcels from China and India.
Frankfurt Airport has enormous potential as an e-commerce hub
DAKOSY customer ViaEurope recently decided to establish its fourth European e-hub at Frankfurt Airport. After a short test phase, the service provider has already been processing more than one million e-commerce shipments per month via the new location since March of this year. Via Europe manages customs clearance via DAKOSY (link to 'Best Practice'). Its Managing Director, Stephan Asbreuk, attests to Frankfurt Airport's great potential. In addition to its central location, there is an excellent digital infrastructure for the quick and automated freight and customs processing of large volumes of e-commerce shipments. For Wrage, the arrival of Via Europa is an indication of Frankfurt Airport's development as an e-commerce hub. For the DAKOSY board member, the trend is already evident: "The demand for customs solutions at the site is increasing."
Airport operator Fraport also recognizes that it has struck a nerve and that Frankfurt is increasingly attractive as an e-commerce hub. Its Vice President Cargo Development, Max Conrady, is convinced: "The combination of cargo space in passenger aircraft (belly capacity) and dedicated cargo aircraft offers e-commerce shippers a high degree of flexibility." In order to meet the increasing demand in this segment, investments are planned to increase storage and handling capacities in line with market needs. Feedback from market participants shows Conrady that fast and efficient customs clearance processes are another decisive argument for choosing Frankfurt as a location.
The e-commerce segment is also firmly established at Frankfurt Airport in the FAIR@link Cargo Community System. A module (FRA-OS) is integrated into this system which greatly facilitates e-commerce processing. Participants at Cargo City Süd are permitted to present consol import shipments to customs with a time delay if they are connected to the IT platform. All relevant customs information is collated in the FRA-OS module. In addition, every movement of the freight within the airport premises is tracked electronically and in real time so that it can be monitored digitally and transparently by customs at all times.
In planning: Early detection of anomalies with the help of AI
Overall, Wrage and Lembke consider the level of automation in e-commerce to be very far advanced - especially in online marketplaces and the retailers behind them. The logical step to reach the next level of digitalization is the introduction of artificial intelligence (AI). With reference to DAKOSY, Wrage explains: "We are preparing for the recognition of anomalies with the help of AI." He outlines a use case: "As a rule, logistics companies acquire all customs-relevant data from shippers or suppliers. With the use of AI, we could perform a preliminary check and recognize whether the tariff classification, goods description and declared value match. Due to the huge amounts of data in e-commerce, there is great potential for training AI functionalities."
„Due to the huge amounts of data in e-commerce, there is great potential for training AI functionalities."
