Are you optimizing your cargo capacity to its maximum?

Daria Jemli

1 July 2020

Cargo

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1. Introduction: what is a “full flight”?

Among the many differences between flying freight and passengers, there is one that has a major impact: goods are not “units” like passengers.

It seems obvious, but yet when we report performance for airlines, what you usually see is this figure:

And this is where we start having a problem.

First, flights are most of the time constrained by volume, not weight.

Second, “Weight Capacity” is theoretical, the real figure varies depends on how much fuel is needed, how much luggage is carried for the passengers on board, etc.

For these two reasons, taking the maximum between the two LF values (weight and volume) on each flight works well. This is sometimes called “Dynamic LF” (name used by CLIVE, for example – see this article or this one).

The simple conclusion is that looking at weight only when taking decisions or assessing performance is like buying a house just based on how many bedrooms it has.

2. Optimizing capacity (commercially)

If we consider that optimizing cargo capacity is about achieving the highest possible revenue or margin, then maximizing the Dynamic LF is a key tool to do that.

The other one being, of course, properly setting your price.

Let’s take a simple example, of two different shipments (with same O&D and same product):

When submitting a quotation or booking request for these two shipments to a given carrier, it is likely that a forwarder would get the same price for both. Yet, that is not the optimal decision, as you will see looking at how they are palletized:

Shipment A buildup :

Shipment B buildup :

As it is unlikely you will find cargo to fit the ULD that are the fullest, it means that:

• Shipment A is basically taking 1 ULD
• Shipment B is basically taking about 1.5 ULD

That is a 50% difference in operational volume, which as we saw, is the key to optimizing capacity. Considering this, do you still think the same price should be offered in both cases?

At Wiremind, we do not. And during these times, we think that more than ever, you should value the capacity you are offering at the right price. Of course, this depends on many more factors, primarily O&D, product, market conditions, etc.

But the volume aspect is too often overlooked, while its impact is significant on the revenue that your flight is generating, not to mention the operational quality: if your reservation system handles both shipments in the above example the exact same way, and accepts/rejects them based on their theoretical volume only, you might have a problem of unwanted overbooking at the time you are doing your buildup.

3. The issue with dimensions

One major concern for this ‘operational volume approach’ is that it relies on the fact that dimensions are:

1. known
2. reliable

While they are more often known at booking stage than at quotation stage, there still is an issue with reliability. There is no doubt about the fact that the industry as a whole would gain in efficiency if dimensions would be known and communicated between all stakeholders from the beginning of the shipping process, but also that any update or change is shared as soon as the data is available.

From an airline perspective, having a “reliable” set of shipments booked 2 days before departure can make a difference both in overall quality (through better anticipation leading to less offloads – which is good for freight forwarders too) and revenue optimization (knowing your remaining capacity more accurately is a condition for good pricing strategy).

But one does not need to hope for a day where 100% of the bookings will be reliable and simple to handle: first, because this day will not come – second, because cargo would not be as fun if it did! Yet, you can already make a difference by working with what you have.

Even if a new approach applies to 50% of your activity, it does make sense to try it.

At Wiremind, we talk on a regular basis with airlines & forwarders that have implemented or are thinking to implement digital solutions that help them make the most of their capacity, at all stages: quotation requests, booking management, pallet buildup and flight planning.

Feel free to reach out to us to get a free demo of our solutions !