Episode 10: The air freight industry with Wissam Madi

How has the air freight industry developed over the past 10 years?

In this week’s episode of Freight to the Point, Helena Wood is joined by Wissam Madi, VP Global Airfreight at Zencargo to discuss how the industry has evolved over time and the impact COVID has had on the air freight industry.
This episode explores:

The shift in demand for air freight over the past decade
How businesses should include air freight into their planning
The tough conversations shippers may have with management when discussing air freight costs

Resources

COVID-19 page – https://www.zencargo.com/resources/category/covid-19/
Zencargo’s freight forwarding page – https://www.zencargo.com/freight-forwarding/

Hello, and welcome to today’s episode of Freight to the Point, a podcast from Zencargo. I am Helena Wood, and today we are really excited to be joined by Wissam Madi, our very own VP of Air from Zencargo. Wissam joins us with over 18 years of air freight and logistics experience and is coming in from our, I’m going to call it our Netherlands studio, Wissam, seen as you’re coming in from the Dutch office, and just for a bit of a special effect, it sounds like you’ve got the odd airplane flying over you. I think you’ve arranged that especially for our recording today so we really know exactly where your expertise lies. But Wissam, we’re very excited to have you here today. Thank you for joining us.

Yeah, my pleasure. Yeah, nearly sitting next to the runaway. So, it’s good for air freight.

Good for air freight, and you must have the perfect view. Wissam, let’s get freight to the point. Tell me a little bit about how you got into this magical and wonderful world of logistics. How did you get into the industry?

Well, I was in university finishing my degree in business, and I went to this career fair, and I honestly had no clue about logistics. I like trading a lot, so my family was in trading business, but I was looking through all the different companies that are in the career fair. You see, obviously, lots of banks and financial institutions, and then I bumped into a company that moves freight from point A to point B, and basically to me, this was, okay, trade, moving stuff, and exploring and traveling, and this is the first thing that just got me thinking, “Wow, this is something nice. Those people move stuff. They travel a lot,” and that’s what got me excited about the industry in general.

So, it was the bright lights and the potential of the travel. I like how you also talk about the kind of family ties of that background of trade and wanting to maybe continue some of those family lines.

Yeah, yeah, definitely. I mean, when you buy and sell, in many cases, it’s what happens apart from this transaction which makes it very, very exciting. Right? How do you get your products there? How do you find the supplier? What do you do if you have an issue with the supplier, and in a way, when you start looking at what we do in the logistics industry, we do work with lots of people who are trying to solve those problems and try to support them, and in a way, you are in the middle of it when you’re in the transportation business.

Which is really interesting and I suppose you’ve told us a bit about what it was about logistics and freight, that kind of sparked your interest in the beginning. I suppose the interesting question is: why have you stayed? Why have you stayed and what’s forced you or helped you specialise in air as a mode?

Actually, that’s a question somewhere through mid my career so far, I did ask myself this question. It’s always good in your career to sometimes take a pause and check is this what I want to keep doing? Or do I want to change? I think first you look at passion, where’s your passion, and once you find your passion in certain industry, I think it’s a bit difficult to change it. Still good to question and make sure you’re on the right track. So, what got me interested is this fast pace of things moving, and I think also a bit of luck, we are in a situation. I mean, 10 years ago, you didn’t hear much about logistics and freight forwarding and transportation and shipping lines. Just because of all the events going on, we are in the spotlight. You see supply chain in the spotlight heavily.

So, I think one of the things that also encouraged me is you become more and more of value in organisations which is good, than you know that your work that you’re doing is driving value, and then to just do a jump into air freight, it’s just, in air freight, it’s very quick that you can make an impact. Things move fairly quickly. Things change really quick, and I like this fast paced environment. It just keeps me going, keeps me motivated. So, I like all the aspects of logistics, but specifically air freight is just this fast pace that I like.

Which is really interesting because we had one of our earlier episodes of the podcast, we spoke to Laura Odell who’s in your team, and when we asked her a similar question about why she loved air freight in particular, she said almost exactly the same thing as you which is the pace is fast, there’s lots of change, there are regular challenges, but I think there’s almost an adrenaline rush in that work which I can hear in the way that both of you have described working specifically in air. If I think about my own experience of working in startups and scaleups, when people ask me why I love working in businesses like this, I often say something similar which is they move very quickly, the pace of change is high, the chance to have an impact on outcomes is high. So, maybe there’s that sort of duality between those of us who like to work in a fast pace and to be challenged regularly. Maybe we should all get into air, air cargo or startups, or maybe you’ve found both.

I would work on that.

And obviously, you’ve been in the space for a long time, and you mentioned that logistics in general is in the spotlight right now which is you’re totally right. We’re having, I think it’s probably not right to use the word halo effect because it comes with lots of positive connotations, whereas supply chain’s not always in the spotlight for the right reasons. People are talking about it, but sometimes because they’re complaining about why they’re waiting for their sofa or the new television over the dinner table. But we’ve definitely seen that logistics as an industry and freight has moved into the public sphere over the last couple of years, triggered by COVID, and then the domino effect of everything that’s been impacted by COVID, and it’s now really having a measurable and tangible impact on people who are buying and consuming as individuals. But I’d love to take a bit of a step back and sort of ask you based on your experience, what other changes or general evolution you’ve seen in the industry and specifically with an air angle over, let’s say, the last 10 years?

Well, I think air freight has been, I mean, the core of air freight is the carriers that actually carry the physical goods, and there has been lots of development in the last 10 years. I mean, the dynamics of the carriers changes, it used to be a market which heavy on some US and some European carriers that operated in a certain model. And then over the last 10 years, even bit more, you got new carriers, new carriers out of China that have a different way. They hub and they move much faster in many cases. You have carriers from the Middle East who came up with those models of hubbing in a different area. So, how air freight became branched out and interconnected changed. It became a much wider industry. You started to reach more and more areas.

You have more of more of those concepts of hubs coming up, and while in many cases before, if you talked to someone about moving a shipment, they would say, “Well, it needs to leave an airport and land in the next airport.” Now, it became normal that a shipment passes by two, three airports seamlessly in many cases, and this is a normal way. So, the business has expanded, branched out, became more complex. This is on the carrier side. On the freight forwarding side, this has always been a very fragmented market. You always have lots of big players, medium size, small players, but obviously, what you have seen recently is the market is still open for new players coming up. You start seeing the digital angle coming in, and actually coming in a very serious way on all levels where customers see the value of the digital aspect of the freight forwarding. So, this started pushing the whole industry in a more dynamic, more technology-driven perspective.

Which is really interesting, and I think when I speak to other people on this podcast and I look at the industry, one of the trends that we hear about and we read about is that COVID and then other thing that was associated with COVID accelerated the pace of change which was already starting to happen, which I think your answer kind of implies. There were steps in place that meant this was all coming, supply chains becoming more sophisticated, the way in which carriers work changing, the ways in which freight forwarders, for example, interact with the carriers changing. To what extent do you think the advent of COVID changed the ways companies interacted specifically with air freight? Were they thinking about air differently, and do you think any of those changes are here to stay?

Definitely they were thinking about air differently from two aspects. Number one, in terms of it’s still there. It’s still a concept which is avoid as much air freight as possible. Obviously, air freight costs more. What COVID forced is no, you cannot avoid it. In many cases, you have to do it because what COVID did is put us all in this pressure capsule where whatever you did in a year, you had to do in a week. And then just, if you look at it, air freight is all about quick transit time, quick movement. So, air freight became something on top of their agenda. In many cases, it also became on top of the agenda because it means more spend. So, this is a big area where the dynamics and companies have started to change, and because companies had to make the shifts that quick in their supply chain, it became really something that they need to look into on a day to day basis. This is one side.

The other side of it is because the market was more stable, you would forget about an air freight. You could sign a contract with a carrier for a six months validity or a one-month validity, and obviously, once you lock in a rate for one year, you’re not going to look at it every week and see what’s going on. What COVID did is all the schedules were off, and it’s the same as a passenger. Right? You go, you don’t find connections anymore. Suddenly, flights are taken out, an airport shuts down, you need to drive six hours to another airport which means most of the contracts and all those agreements were just put on hold, and this made it a daily thing where every day you needed to negotiate the rate. Every day you needed to see how much you’re paying for air freight, and definitely this also brings it on top of your to-do list.

Which is really interesting, and I can imagine for the professionals working in this space, whether they were shippers within retailers or freight forwarders, or maybe even anyone working directly at the carriers, it sounds like this possibly triggered a real step change in what actually working in this space looks like, the skills required, the stakeholders to manage, the ways in which we communicate. So, what do you think a shipper’s role looks like now when it comes to interacting with air? What has changed, and how might any shippers listening to today’s podcast better prepare to manage the air portion of their overall freight package?

So, I think first thing is to look at as a shipper what are the things that you cannot live without, what are the core things which need to happen. So, for example, you cannot have a stockout in a certain location. To not have a stockout, what percentage of your freight needs to be there? So, it all goes back to sort of planning how many new products you need to launch in a certain period of time. Right? So, and this is basically an air freight move.

So, what you need to start doing more and more as a shipper and see what will be moving by air, budget for it already, rather than making it as an expense that you need to approve as an exception, and really look at your product portfolio and see what are the products that will be moving for air the next year or for the next two years because things will continue. Disruption will continue. They will always have a new norm. Everything you read now about is about this new norm. So, there’s something true about this. So, just really planning, making sure what are the things that you need to avoid, and seeing, okay, what can air freight solve, and already putting this in your planning, in your budget, in how your systems work, just making it part of everything, rather than an exception I call an air forwarder to carry a shipment because I had to do it next week.

So, would it be fair for me to sum that up and basically say that we need planners to move from being reactive in the way that they work with air to being much more proactive?

Correct. And obviously this differs by industry. There are some industries by nature that air freight is in them a more proactive way. When you look at moving medicines and temperature-controlled product, these are industries that have always very, very proactive on air. They have to do it. So, what’s happening now is, in a way, industries like retail are becoming similar to those industries where they have to also become proactive when they plan for air freight. So, yes, basically, it’s whatever you are moving now, you can really walk into a showroom and find no products on the shelf if you do not get a portion of this freight by air.

Which is interesting, and I think it comes back to a point we talk about quite a lot on this podcast which is the role of a shipper or a supply chain planner, or whoever it is that’s making these decisions within a business and the way in which they now need to navigate those decisions. So, previously, in a world where rates were more manageable, space and availability was more predictable, outcomes were, in theory, more predictable. I think probably we know they didn’t always come through, but the role of the shipper was very different, whereas today, with volatility becoming this norm, rates being so high, and the spotlight shining on supply chain, I imagine there might be shippers listening to this podcast who find themselves in very different meetings and conversations now than they would’ve been in the past. Managing senior stakeholders being held highly accountable to the budgetary decisions that they’re making.

Do you have any advice for those people on how to better navigate that? So, for example, I think a sort of truth that we know about air freighters is it is more expensive. Of course, it is, but it doesn’t mean it’s the bad decision or the wrong decision. So, how might a shipper really advocate for decisions to proactively use air in their business? Would you give them any advice?

Always give options. When you use air freight, there are a couple of factors. Yes, it is expensive, but when you’re paying for something, it’s easier to sell it to your management when you can pay less, right, because there’s a fact, but it’s how you deal with the fact and how efficient you can be. So, it’s very important to sit and talk to your partners to understand how the market is, and it could be that you have to move something by air freight, but why not looking into a more deferred air freight option? Why not looking into trucking it to another airport which might increase a day in transit time, but reduce this air freight rate by 10%, or why not looking into, for example, moving part of it by sea. Lots of retail moves now in sea-air, for example.

So, when you sit with your management, you’re already having a tough conversation. You already know that the company has to pay more. There’s more spend, in a situation where you also might have some customers who are unhappy because there’s stock not available which everyone wants to avoid. When you present air freight, it’s always to present options, and these are options on multi-model. These are options on more deferred services. These are maybe options on consolidating products on air freight and waiting a bit more to be able to have a bigger load, and even sometimes trying to find products that can mix better, or just have six, seven options saying, “It is going to cost us $6, but we can do it at five as well. It might be two days longer flying from another airport,” and this makes the discussion much more objective, much more structured, and then people will really understand it.

What’s very important is always as a logistics professional in the company is make sure you link what’s happening in logistics to what’s happening in the world around you. All those extra costs, all those necessities to move freight in all those crazy, crazy ways is just because of a conflict here or of a lockdown there, and this is something everyone sees on the news. So, I would always start the discussion, for example, on freight out of Shanghai of explaining the situation. Just open CNN or a news channel and look at how Shanghai is from a lockdown perspective, and then have the discussion about why we have to move air freight, why is the rate that expensive out of Shanghai. We’re very close to what’s happening in our everyday life.

That makes a lot of sense. I think there’s some really useful practical tips there for shippers, and I hope they’re able to use them. We spoke a little bit about process and how to prepare for a meeting and how to manage stakeholders, and I’m going to try and ask you this question in a way that it’s not too slanted towards Zencargo because that’s going to be an obvious part of the answer, but are there any tools or systems that businesses could and should look at today to make this planning process easier when it comes specifically to air?

Data comes first. No matter the tool you’re using, you need the right data. It’s now really important because now you are looking into different things that change. So, you want to decide which product you want to move in a more expensive mode, which product can wait more. So, you really need to have proper data about your product. That’s number one. Number two, you need to have visibility about what’s going on at your suppliers. You’re making decisions on different time zones within the hour where you tell a supplier, “Split this order, move to pallets by air, the rest, keep them in an ocean container.” If you don’t have a good platform or collaboration tool that you can communicate with the supplier, you’re just dealing with thousands of emails. Things will be complex. Things will go wrong.

So, definitely also the third aspect is you’re doing lots of shifts. So, if we wake up tomorrow and our factory is in Hanoi, and there is a lockdown in Hanoi, the companies might say, “Okay, we have to find another supplier in a week’s time.” If you have a system where all your data is there, where you can easily migrate, just whatever you do to another suppliers, you can do the switch maybe in a week or two. If you don’t have this data, if you don’t have it in a structured platform, and if you don’t have a good collaboration with all the different parties that are part of this chain, it’s going to be a very difficult change.

Sometimes we just think it’s moving a factory. You’re moving your factory. You’re changing the carrier. You’re changing your customs broker. You need to look at what licenses you have, and especially in air freight, usually a shipment moves in a day or two, so there’s not much time. So, again, a tool should be always, you have your data good, you have it in one platform as much as possible, and you can collaborate in a way that’s not complex with all those different stakeholders.

Sounds like the dream when you put it like that. I think if people were working in that way, it would be much easier.

Exactly. Well, a few years ago, all you would say on air effort is we need visibility of where the flight is. This is now secondary. This is now what happens to decide to put something on the flight.

It’s amazing the way things have shifted, and hopefully, the outcomes of that drives your businesses. We see many businesses having much more positive outcomes because they start with that good data. They get the visibility, they make good decisions, and then the cycle just keeps on serving, doesn’t it?

I’m going to ask you a couple of challenging questions, Wissam, and I think you might want to get your crystal ball out because they’re future focused, and the first is possibly the harder to answer which is given the relationship between really, especially air freight and what’s going on in the world, so you kind of hinted at it in your last answer, lockdowns across the world, lots of them in Shanghai, maybe there are more coming in Southeast Asia, conflict which closes airspace or puts sanctions in place, what else do you think might rock the boat over the coming months and years, and how best can shippers prepare for this kind of volatility because it just keeps on happening at the moment?

I really need a crystal ball for this one. So, I mean, definitely now we know what could happen if there’s a pandemic, and this is one area that we always need, whether it’s COVID or again, I don’t know what, but this whole thing that happened with COVID, it was something new to everyone, and I think now this becomes part of the pack when you set up your contingency plans and all your fallback procedures. So, I don’t think COVID is out yet. Now, even in Europe, we’re hearing again about cases surging up in different countries. So, we never know where there will be lockdowns. Will they be in different regions? We haven’t dealt yet with a full lockdown in Africa, for example. So, this is an area that didn’t experience this, like what we experienced in Shanghai. So, this is one thing that never know what will happen.

The conflict that’s going on in Ukraine, what will happen? Could this expand? Could there be other impacts related to it? There’s a very big impact on the trucking industry from this, and trucking is an industry which is very close to air freight. Everything that flies from an airport to the other is delivered by a truck, and is picked up by a truck. We are two industries that are heavily reliant. So, this is another area. Problems with workforce. We see now lots of issues happening in airports because of there’s no availability of handlers. In many cases, it opened up situations related to wages. So, I do actually expect some disruptions coming up from more strikes at airports because now everyone start looking and say, “Okay, maybe we’re not fairly compensated at certain airports,” and we hear now of lots of things in the pipe that happened. A couple of months ago here in the Netherlands, there was a big strike.

So, labour related challenges, and I think down in the future, more and more, we will have challenges, and we will have maybe some restrictions related to sustainability, and the impact air freight has on the environment, in terms of certain carriers losing maybe their licenses, not being able to fly certain fleets which could remove capacity out of the market. There might be some lows that if they’re passed, there are certain carriers that might lose their flying rights and this will also have an impact on the market.

Well, it’s interesting you bring that up because that was going to be my next possibly prickly question which is regarding air freight and sustainability. It’s probably stating the obvious to say that the two are not necessarily the world’s happiest bedfellows. Air freight is highly polluting. Sustainability is a priority for many businesses in the wider world at the moment. How can shippers who might be in businesses that have a very clear sustainability agenda, maybe they’re working towards becoming a B Corp, is there a happy marriage between air freight and sustainability?

So, it always starts with try to use less air freight. This is the starting point. It’s a little bit when you’re going on vacation, you usually check if you can drive or you can go by train in many cases. Right? This is the first step if you want to think from a sustainable perspective. So, having the right tools to make sure you are shipping by air only what you have to ship by air. I think by itself from a mentality culture, perspective is the right step to do. Right? Lots of things shipped by air don’t need to be shipped by air. They’re just shipped because you just had to move everything because you were late on planning. So, just focusing on this area has a good impact on your sustainability agenda as a company and as people. Right? We’re all now focusing on sustainability because it’s something very important. This is one area.

The other area is the whole industry, air freight started to realise as well the importance of sustainability. Same as the shipping lines. So, you have two factors from an asset perspective to consider over here. Number one, the type of the plane which was indeed my point earlier. Newer fleets are coming with engines that burn less fuel, are more efficient. So, I think more and more a factor will be considering maybe certain airlines or certain routes that have more efficient assets flying. And the other thing, there are now types of fuel which are less harmful to the environment. Doesn’t solve the problem, but makes the impact less. And the third point is also making sure to offset your carbon which you can do an any mode of transport which is making sure there is an offset investment or an offset plan.

So, it’s not much different from everything other than in air freight you really see the impact on the environment, and I think if you focus on those blocks, reduce it as much as possible. Make sure, if I can because this is also a budget thing, if I can get more budget to use airlines or carriers which have newer fleets, less consumption, and then continue focusing on my carbon offsetting in the right way, I think this is the only way to approach it because to stop air freight, I don’t think it will happen, but definitely, there will be a reduction in air freight.

Great. Again, some really practical steps that people can actually take, and a very clear answer which I think makes it clear to me that there is a way that this can happen that is, it’s hard to say more sustainable, but sensitive to sustainability priorities than otherwise that things are happening right now. Wissam, I could keep talking to you about air freight and the industry all day. You’ve got so much great advice, but I’m conscious around our time, and I want to ask you a question that we talked all of our guests about, and it’s part of our sort of Zencargo ethos, and it’s ship happens. It’s a busy industry, lots of volatility, lots of change. I mean, there are things get tough, and that’s why we use ship happens as one of our sort of slogans. So, Wissam, can you tell us about a ship happens moment in your career? Any of the stories that you like to share?

Sure. Yeah, although lots of crazy things happened the last couple of years because of COVID and all those urgent things, this story is not in this period. It’s much before. I mentioned at the beginning the reason I liked air freight is the speed. Right? The impact you do, how quick you have to react. And once in my career, I was sitting in a desk which does aircraft on ground. So, basically whenever you’re grounded, you’re sitting in the plane, there’s a part missing, what we don’t always naturally think of as lots of those parts are flown out immediately from somewhere else, as either someone goes, carries it, it gets on a plane, or a chartered plane is moved for it to get it there, and you’re paying millions while the plane is grounded, apart from people being upset.

And once were I was dealing with this case of a flight that was grounded for a part that was missing, same time, I was getting messages from some of the executives I deal with that they’re at an airport stuck because their plane cannot move. There’s something technical wrong in the plane. And then when we were just talking with couple of colleagues about I don’t know what’s happening with those guys, they’re always unlucky when they’re flying, and they might miss their meeting, and then we made the link. We were dealing with the shipment. We were talking to those guys on WhatsApp. Then we made the link, and we noticed that the part we were moving was the part that’s needed for that plane to fly, and these are one of the moments which you know that something always goes wrong, and in many cases, what you do has really big impact on getting things moving. In this case, getting 220 people flying. So, you see the impact.

It’s almost double jeopardy with the pressure.

Small things happen in this industry. You don’t notice the impact you do.

Oh, that’s great. It’s nice to have such a personal story.

Obviously, there are things always that happen which are of much grandiose, like getting vaccines, lots of stories and effort those days which are amazing. But yeah, that’s one that I keep remembering.

Oh, thank you so much for sharing that, Wissam. Now, it’s time to get that crystal ball out one more time and then we’ll get onto our quick-fire questions. Is there anything, Wissam, that you would particularly like to see change in the supply chain space? And it can be as it pertains to air or more generally.

Yeah, more sharing, especially of data and knowledge. There’s lots of knowledge sitting between the parties, and there is also lots of data, and this data is needed to make those decisions. In many cases, whether it’s shippers to forwarders or forwarders to carriers and vice versa, the amount of data shared is too minimal which makes it difficult to make those very quick decisions, or you need to start taking more subjective decisions, and I think what I would like to see more is more data sharing and more collaboration in terms of data. I think it’s the right time to do this because more and more we see that the tools are becoming available. In many cases in the past, the tools were not there. But to me now, if we have the tools, if we have collaboration forums, then it’s the perfect timing to start sharing more data openly. It’ll help everyone make smarter decisions.

That makes a lot of sense, and I think you’re right. This should be the moment for that, and hopefully that drives really, really good outcomes for everyone involved in the overall network and chain. Wissam, thank you. Now, I hope you’re sitting tight. Maybe you want to be on the edge of your seat.

It’s time for our quick-fire question round. We ask all of our guests a series of quick-fire questions, and we hope that you can run through them in one or two word answers. So, Wissam, let’s start from the top. First question for you is would you rather that your supply chain be agile or resilient?

Agile.

Three words to describe the air industry?

Quick, changing, futuristic.

Great. Is there any job in the supply chain space that you would like to try for a day?

Moving the crane in port, the container crane.

Ooh, interesting one. I thought you might have said pilot. I quite like that one though.

It’s too difficult for me.

And what is the number one lesson that you have learned from working in supply chain?

Talk to people.

I love that. Great. Well, Wissam, thank you so much. I feel like I’ve learned absolutely loads about air today, and I really hope our listeners have had loads of actionable takeaways as well. So, thank you very much, Wissam, to you.

Thank you. Was good.

And thank you also to all of our listeners for tuning into this episode. Don’t forget to like, review, and subscribe to the podcast, and if you have any feedback on today’s episode or would love to get in touch with Wissam, please reach out to us. You can find us through Zencargo on LinkedIn. We love talking to you. A reminder that we’re also hosting our supply chain summit, Navigate on the 7th of July at 2:00 PM, British summertime. It’s our quarterly Navigate conference, and it’s all around inviting leading supply chain experts to talk about what’s happening in the industry and their predictions for the future. Hopefully, they’ve got as much to share as Wissam has shared with us today. Simply sign up for Navigate by going to navigate.zencargo.com. But that’s it for today. Wissam, thank you so much, and thank you to all our listeners.

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Episode 10:The air freight industry with Wissam Madi