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What do we do now?
An age-old axiom says, "No news is good news;" can it be argued, then, that, "The same news is no news?" Reviews of air industry periodicals, web sites and various other media outlets are on auto-pilot, covering the same basic themes as they have for months:
- IATA reports international cargo down (13.5% in November 2008) and they predict a 5% decline in 2009;
- Foreign flag carriers continue to lose money, especially Asian carriers;
- US carriers may see increased profits in 2009, mostly based on declining fuel costs;
- Hong Kong and other major airports report declining volumes;
- Singapore Airlines is reducing flights due to decreased demand;
- The list goes on!
Despite these dismal reports, there were some bright spots found in recent news: for example, British Airways and Swiss Cargo reported profits as opposed to losses, while awards for best carrier and customer service were distributed for 2008.
While perusing the pages of trade publications, it's also impossible not to notice that "conference season" is upon us; one can't open the Journal of Commerce or Traffic World without seeing full page advertisements for maritime, breakbulk and US exporters conferences, logistics and supply chain forums, and the "be all and end all" conference to take place in Bangkok (after all): the World Air Cargo Event. One might venture to guess that considering the expected revenue declines in 2009, attendance levels at some of these event venues may be reduced from previous years.
So what's the so-called "flight plan?" What are transportation service providers going to do in 2009 as we see customer supply chains slow down, decreased ocean traffic effecting related surface industries, air freight diversion to water and automotive plants on hiatus for weeks and months? If you look to the trade press with those questions, you won't receive any definitive answers. The Journal of Commerce weekly magazine dedicated a two-hundred page issue to these very concerns, asking shippers and industry leaders what they believed 2009 would bring. Other than settling on the Clinton mantra, "It's the economy, stupid," there were a lot of speculative guesses, but certainly no "crystal balls."
That is because no one does know, and how can we expect them to? The global economy is so intertwined that it seems industry experts and insiders are waiting to see who and what will go first. For example, in order for China to reach their reported 2006 and 2007 export levels, other economies are going to have to improve; to acquire the capital to buy those goods, jobs must be created to provide a source of disposable income. In order to create these jobs, companies must experience revenue increases fueled by increased demand. In the meantime, we're all stuck in neutral.
Examine enough opinion pieces, listen to enough executives and use history as a guide to determine that there are at least some proactive strategies we can take in 2009 while we wait:
- Be Innovative - How did we make money in the past? We came up with new ideas or dusted off some old ones. For example, an inventive new idea in 2008 was Shipco Transport's Air/Sea solution for the ever-congested inbound Australia lane; fly freight to Singapore using available capacity and finish the journey on the water. Admittedly, the idea came at a time when the economy slowed; however, it was still an idea that may yet one day become a solution.
- Customer Service - Don't take one account for granted, as there are thousands of forwarders out there with an insatiable appetite for new business. Service, service, service should be the mantra, making customers feel genuinely appreciated and valuable. After all, if we can't service the customer, rest assured that someone else will. We've given partnerships a lot of hype in the past - it's time we meant it.
- Communicate and Collaborate - Regardless of our self-important job titles, we're all in this together; organizations must enforce communication integration in order to talk to carriers, vendors, and customers and work collaboratively in driving cost out of the operation while designing the best possible transportation plans for customers. Revenues are lean and mean - it's time for us to act that way.
- Don't Overreach - You know what you do best and how you made a steady stream of success for yourself - revisit those talents. The phrase "going back to basics" is a truism. Every Spring Training season, ball players go over (and over) the fundamentals. Look at your processes and procedures and take the time now to fix any glaring gaps.
- Corporate Philosophy - Take the time to remind yourself and your team of the core values, defining traditions and philosophies that serve as the mortar for your company. Ensure that your corporate culture continues fostering fairness, loyalty, honesty and integrity while enjoying what they do even during the tough, tumultuous times. (See this month's featured book)
While we collectively wait for whatever it is that will spark the global economy into action, we can at least get our house in order so that when we're at full speed in 2010 or 2011, we're prepared instead of frantically trying to fix the leaking roof once it begins to rain.
About CSCMP
Founded in 1963, the Council of Supply Chain Management Professionals (CSCMP) is the preeminent association for individuals involved in supply chain management. CSCMP provides global educational, career development, and networking opportunities to over 9,000 members.
Their goal is to:
- Provide opportunities for supply chain professionals to communicate in order to develop and improve their supply chain management skills
- Identify and conduct research which adds to the knowledge base of supply chain theory and practice
- Create awareness of the significance of supply chain to business and to the economy
Book Review: The Living Code - Embedding Ethics into the Corporate DNA
By Muel Kaptein
Of the 200 largest organizations in the world, more than 80% currently have a corporate code of conduct. An ever larger number of smaller organizations also have a code or are in the process of developing one. While in the 1970s and 1980s, companies had to explain why they had a code; today, they are cross-examined if they don't have one. A company has to have very good arguments to convince stakeholders that they can do without a code.
A business code is a measure for success: success as manager, employee, team and for the organization as a whole. Unfortunately, many codes are underutilized. And many simply fail, with serious repercussions for the organization.
This short and accessible book presents a model to create, develop and embed business codes. The validated model enables managers and organizations to better manage their codes as well as their performance. The author articulates why a code of conduct is necessary, what it should cover, as well as demonstrating through practical tips and examples how to make full use of it. What is required to breathe life into a code and keep it that way? How can you live your code?
Illustrated with results from an empirical study of the Fortune Global 200, the ideas developed are based on the worldwide experience of the consultancy firm KPMG. The author works in the field of developing, implementing and monitoring of codes, as well as conducting intensive academic research in the last 15 years in his capacity as (associate) professor of business ethics.
The Living Code is a unique book and will be essential reading for those who want to make a success of their code or are considering developing one. Readers will learn just how rich and threatening a code is and what it could mean for their organization, their team and themselves.
Review taken from: www.greenleaf-publishing.com
The Living Code mentioned in Air Cargo World Online, January 2009
A Move Toward Veggie Power Aloft
WASHINGTON - Burned by the cost of jet fuel, the aviation industry is trying everything from algae to camelina and jatropha as alternatives, but specialists say that some of the new fuels, which include coal, might simply trade one set of problems for another.
Continental Airlines recently tested a fuel made from algae and jatropha, a tropical shrub with an oil-bearing seed, in a Boeing 737 jetliner, in a two-hour flight beginning and ending in Houston.
The flight was the first airline trial of algae, and, perhaps more important, the first use of biofuels in a twin-engine jet. (Air New Zealand flew a four-engine Boeing 747 last week with one engine on a 50 percent biofuel mix, and Japan Airlines will do the same in a few weeks as part of a series of tests including the flight on Wednesday.)
If the new fuel caused an engine to fail, that would be a bigger challenge in a plane with two engines than in one with four.
Continental plans to have the crew turn off and restart the right engine, the one running on the 50-percent blend of ordinary jet fuel and plant-based fuel. The crew will simulate breaking off an approach and going around, which demands high power from the engines, among other maneuvers. On board will be two pilots, a flight engineer and, because this is an experiment, 157 empty passenger seats.
Although jet fuel prices have dropped with crude oil, industry executives say they are determined to become less dependent on a single source of fuel in case prices rise again.
"It's hard to plan a business, and buy expensive pieces of equipment that last for 20 or 30 years, when you have total uncertainty about the cost of your biggest expense," said John P. Heimlich, chief economist of the Air Transport Association, the trade group of the major airlines.
At Pratt & Whitney, the engine manufacturer, Alan H. Epstein, vice president for technology and environment, said, "It's the first time in the history of jet aviation that the world is seriously considering going to a totally new fuel."
Mr. Epstein made the comment when oil cost more than $100 a barrel and repeated it Tuesday, when oil was back in the $50 range. Pratt, a unit of United Technologies, which has tested alternate fuels in its engines and others in the aviation industry, asserts that they will pursue alternatives even in a period of low prices.
The three test flights involved several airlines; the Boeing Company; three engine makers, Pratt & Whitney, Rolls Royce and General Electric; and the fuel maker, UOP, a subsidiary of Honeywell. The companies will use the data to try to get the fuel certified as a drop-in replacement, meaning no changes would be needed to engines or other plane parts, or to the fueling infrastructure at the airports.
The International Air Transport Association has a goal of 10 percent alternative fuels by 2017. The Federal Aviation Administration is also encouraging the new fuels.
But the impact on price is uncertain. At Continental, David Messing, a spokesman, acknowledged that the price of the replacement fuel and of the fuel to be phased out were in flux.
"Until you have a full-scale producer and consumer market for biofuel, I don't think you know the price," he said. And economists say that biofuel added to the jet fuel supply, like ethanol added to the gasoline supply, will rise and fall in price with the value of the conventional fuel it displaces, at least until it is available in very large volumes.
So far, the volumes are small. Continental's algae comes from a Hawaiian company called Cyanotech, which raises it as a nutritional supplement.
One oil substitute is already used in large volumes. Sasol, the South African coal company, for years produced semi-synthetic jet fuel, half from petroleum and half from coal, and pumped it into airliners leaving Johannesburg. In April 2008, the British Ministry of Defense approved the use of 100 percent synfuel, clearing the way for many airlines to use it.
The fuel has some advantages over traditional jet fuel, including extremely low sulfur levels, but when production is considered, jet fuel from coal produces substantially more carbon dioxide than jet fuel from oil.
Using a process similar to Sasol's, a refinery in Qatar, in the Persian Gulf, is making a jet fuel substitute from natural gas. The process makes economic sense because the oil that is saved has more value than the coal or natural gas that is used.
Proponents say that because natural gas has relatively little carbon compared with its hydrogen content, its greenhouse gas production is not as bad as that of ordinary jet fuel. But environmentalists say that it substitutes one disappearing resource, natural gas, for another, oil.
At UOP, Jennifer S. Holmgren, director of renewable energy and chemicals, said fuel made from jatropha had only about half as much carbon dioxide effect as fuel from petroleum. This is significant because the European Union is trying to bring the airlines, including American airlines that fly trans-Atlantic, into a carbon dioxide reduction system. The American airlines are resisting, asserting that aviation rules must be made on a multinational basis, but they are seeking low-carbon fuels they can use.
Environmental advocates strongly favor low-carbon fuels, but only if they do not compete with food production.
And that turns into a trick question. Jatropha, for example, grows wild in tropical regions, on land not suitable for crops, and has a seed from which oil can be extracted. But the airlines and the F.A.A., in trying to make sure their efforts are an environmental improvement, hired a Yale researcher to see where the plant grows. His initial conclusion was that while jatropha could be grown on marginal land, it produces a lot more oil on cropland. That suggests that if it becomes popular, airlines will have to be careful to not squeeze out crops.
Another possibility is camelina, which produces a tiny, mustard like seed from which oil can be extracted, It does not require extensive fertilization. Palm oil has also been tested.
The New York Times
January 7, 2009
Japan Airlines to fly with camelina
Japan Airlines says it will be the first Asian carrier to fly using a sustainable biofuel refined from the energy crop camelina. This month, it will use a blend of 50 percent biofuel and 50 percent traditional Jet-A jet fuel on a B747-300 aircraft. The biofuel component will be a mixture of three second-generation biofuel feedstock's: camelina, jatropha and algae.
Camelina, also known as gold-of-pleasure or false flax, is an energy crop, given its high oil content and ability to grow in rotation with wheat and other cereal crops.
"Our feedstock selection was based on firm sustainability criteria designed to avoid the mistakes of preceding biofuel generations," said Boeing Biofuels Program Manager, Tim Rahmes. "Working together with Japan Airlines and our other industry partners, we've successfully partnered to create a next-generation, plant-derived jet fuel blend that has replacement fuel qualities that meet or exceed all of the current jet fuel specification properties."
Air Cargo World Online
January 2009
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