CHAPTER - I

INTRODUCTION AND DESIGN OF THE STUDY

INTRODUCTION

As far back as humankind can recall, the goods that people wanted were
not produced where they wanted to consume them or were not accessible when
they desired to consume them. Food and other commodities were widely
dispersed and were available in abundance only at certain times of the year.
Early people had the choice of consuming goods at their immediate location or
of moving the goods to preferred site and storing them for later use. However,
because no well developed transportation and storage systems existed, the
movement of goods was limited to what an individual could personally move,
and storage of perishable commodities was possible for only a short time. This
limited movement-storage system forced people to live close to the sources of
production and to consume a rather narrow range of goods.

Even today, in some areas of the world, consumption and production

take place only within a very limited geographic region. Striking examples can
still be observed in some countries of Asia and Africa, where much of the
population lives in small, self sufficient hamlets, and most goods needed by the
residents are produced in their immediate vicinity. Few goods are imported
from other areas. Production efficiency and the economic standard of living are
generally low for this type of economy. A major reason for this is the lack of a
well-developed and inexpensive logistics system that would encourage an
exchange of goods with other producing areas of the country.

As logistics system improved, consumption and production began to

separate geographically. Regions would specialize in those commodities that
could be produced most efficiently. Excess production could be transported
through Sea, Air or land economically to other areas, and needed goods not
produced locally were imported.
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1.2 AIR CARGO SCENARIO
About forty percent of world trade (in value terms) moves in cargo
planes and in cargo holds of passenger aircraft. Airfreight is suitable for
perishable goods; it may also include light, high-value commodities such as
semiconductors and electronic components essential to running industry or
fulfilling an inventory shortfall (and unexpected consumer demand).

The Indian air cargo industry, which registered a ten per cent growth in
the first-half of the current fiscal, is in the process of attuning itself to global
developments and tackle crucial issues such as infrastructure and related
problems, according to Air Cargo Association of India (ACAI).

The Indian air cargo industry had registered a fourteen per cent growth
in the last fiscal and has already grown by ten per cent in the first six months of
the current year, with prospects for a higher end of the year performance than
last year. Exports and imports by air totaled Seventy thousand tons. Shipments
by air were valued at around $ Seventeen billion to $ Eighteen billion.

Various aspects of the air cargo industry including international trade,

supply chain management, logistics and distribution and meeting client
requirements as the business becomes more comprehensive and complex.

General standards in the industry have been raised and in India, there is
a much more professional approach and the picture is positive. Infrastructural
problems remain a major impediment in India and we hope that this crucial
aspect is looked into seriously by the concerned authorities.

Growth in air freight services to and from India, especially in the wake
of the burgeoning trade in the pharmaceutical and gems and jewellery sectors,
has been attracting new and existing airlines in this space. But inadequate
airport infrastructure continues to be a major roadblock, which is stifling the
growth in air cargo traffic vis-à-vis the potential available.

2
 Apart from the national carriers, Indian Airlines and Air India, new
entrants such as Jet Airways, Go Air and Kingfisher Airlines have charted out
plans to play a bigger role in the air freight market.

A spokesperson of Air India said there was substantial growth potential

in the air cargo segment, and the national carrier had chalked out a business
plan for the segment.

The airline has a Seven to Eight per cent share of the air cargo market in
the country. In 2004-05, air cargo business generated revenues of Rs Five
hundred crore, representing 10 per cent of the total revenues. The airline hopes
to raise cargo revenues to 15 to 20 per cent of the total in three-four years. The
airline has currently leased belly space on Falcon Aviation to meet demand on
the Kerala-Gulf and the India-Germany sectors. Further, two of its A310
aircraft are scheduled for conversion into freighter aircraft by September 2007.
As the airline takes delivery of its new fleet in the last quarter of 2006, its cargo
capacity would also increase. Besides, A-I may augment its cargo capacity by
leasing B747-400 aircraft, he said.

GoAir, one of the new player in airline industry is looking to

commoditize this business as more customers look to transport cargo by air.
The airline was pushing forward with plans for air cargo services and may
finalize its strategy in a month's time.

The air freight cargo has steadily risen from 4.16 lakh tonnes in 1998-99
to 4.91 lakh tonnes in 2000-01, 5.84 lakh tonnes in 2003-04 and over 6.20 lakh
tonnes last fiscal. The major commodities being air freighted out of India are
garments, machinery, components, pharmaceuticals, dyes, chemicals and
perishables such as fruit, vegetables, flowers, fish and meat.

In the domestic sector, Boeing had estimated that the domestic air
freight market was in excess of 1.88 lakh tones in 2003, which could go up to

3
2.25 lakh tonnes in 2005. In fact, the domestic market received a shot in the
arm in the first half of 2005, following the announcement that Indian Airlines
would convert five of its Boeing aircraft into freighters and operate them from
a hub at Nagpur. For several years, Blue Dart Aviation had been the country's
sole dedicated cargo airline, operating for its parent courier company, Blue
Dart Express.

A recent study by Drewry and APL Logistics has revealed that India's
air cargo traffic could be reasonably expected to register annualized gains in
the Eight ten per cent range over the next five to ten years. Clearly, this is
good news for the airline service providers, which are now seeing more return
cargo - a fact that will help the overall market to grow. And not only that, but
the rising cargo flows have resulted in improved freight rates, with further rises
expected in the current fiscal.

1.3 NEED FOR THE STUDY

In today's competitive business environment, transportation is no longer

simply a method of transporting goods, but rather the most vital element in
effectively managing and operating the supply chain. Transportation through
air is increasing day by day. There are several factors such as Speed,
Frequency, Global coverage contributing to the above .More and more players
are coming to the Air Cargo Industry.

Strong demand for faster delivery of goods by shippers is creating

numerous challenges for the air cargo industry. Specifically, volume growth is
expected to remain on a steady and strong growth path of 6% for the next 20
years. This burgeoning increase significantly outpaces any other modes of
transportation. Despite this strong projected growth, the air cargo world is, and
will continue to be an industry in transition.

4
 Air cargo is challenging, complex and plagued by many factors. First,
lack of governmental regulations coupled with a fluctuating petroleum index
has put noteworthy pressure on the carriers. Shipper demands are on the
increase and are expected to become more demanding. Intermediaries or
"middlemen" have created a new marketplace in the eWorld. Shipments
continuously changing hands still make tracking very difficult. The industry
suffers from competing with very thin margin.
In the above scenario it is necessary to know the Freight Forwarders perception
towards the various aspects of air cargo activities. Hence the study has been
undertaken.

1.4 SCOPE OF STUDY

The study is to find out the Freight Forwarders perception towards Air
Cargo services.

To know the perception level of freight forwarders, 30 companies where

contacted and data relating to the preference level towards Air Cargo services
were collected. The problems faced by the Freight Forwarders in the industry
were also analyzed.

The scope of study is limited to the Freight Forwarders dealing with Air
India limited.

1.5 OBJECTIVES OF THE STUDY

 To study the potential of Air Cargo services in logistics.

 To analysis the criteria of Freight Forwarders in selecting particular Air
line.
 To study about the various problems faced by Freight Forwarders in Air
Cargo industry.
 To assess the present and the future trends of the Air Cargo market.

5
  To give suggestions to improve Air Cargo services.

1.6 RESEARCH METHDOLOGY

Research methodology is a way to systematically solve the research

problem, why the research has been defined. What data has been undertaken
and how the research has been designed. What data have been adopted, why
particular techniques of analysis for data have been used a lot of other queries
are answered when we take the methodology concerning a research problem to
study.

Methods of data collection:

Primary Data have been collected for the study. The researcher met the
respondents in person and collected the data by administering the
questionnaire. The view of the respondents were recorded and taken into
consideration. Personal interviews were conducted for the purpose of collecting
data.

Secondary Data is generally obtained when the information is gained

from an secondary source or not collected primarily. For this study the
information was also collected from various journals relating to the logistics
and websites.

Statistical Tools

To analyze the data collected from the respondent’s two statistical tools
were used. Simple Percentage Analysis and Rank Analysis were used

Sampling Tools
Primary and secondary methods were used to collect the data. Primary
data were collected through questionnaires and secondary data from journals
6
and websites. The research was conducted in Chennai, Tamil Nadu. The
respondents were contacted personally.

Sample Size
A sample size of 30 respondents has been taken for the study.

Sampling Techniques
Lottery sampling technique was adopted for selection of samples.

1.7 LIMITATION OF THE STUDY

 The study was limited to the Freight Forwarders dealing with Air India
limited.
 Respondent’s cooperation was a limitation for the study.
 The secondary data collected from the public source like websites and
magazines can be analyzed by any.
 Time was another deciding factor.

CHAPTER SCHEME

CHAPTER I
Gives the introduction about air cargo followed by the need for the
study, scope for the study, research methodology and limitations of the study.

CHAPTER II
Gives the details of the company profile – AIR INDIA

CHAPTER III
Gives an overview of logistics which includes air cargo documents and
E-logistics.

CHAPTER IV
Gives the detail idea of the fact and figures obtained from the Analysis
of the questionnaire.

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CHAPTER V
Gives a detail description of the Findings, Suggestions and Conclusion
of the study.
CHAPTER - II
AIR INDIA – PROFILE

Air India is India's national flag carrier. Although air transport was born
in India on February 18, 1911 when Henri Piquet, flying a Humber bi-plane,
carried mail from Allahabad to Naini Junction, some six miles away, the
scheduled services in India, in the real sense, began on October 15, 1932. It
was on this day that J.R.D. Tata, the father of Civil Aviation in India and
founder of Air India, took off from Drigh Road Airport, Karachi, in a tiny, light
single-engine de Havilland Puss Moth on his flight to Mumbai (then known as
Bombay) via Ahmedabad.

He landed with his precious load of mail on a grass strip at Juhu. At

Mumbai, Neville Vintcent, a former RAF pilot who had come to India from
Britain three years earlier on a barn-storming tour, during which he had
surveyed a number of possible air routes, took over from J.R.D.Tata and flew
the Puss Moth to Chennai (thenMadras)viaBellary.

Tata Airlines
Tata Airlines, as Air India was then known, consisted of one Puss Moth,
one Leopard Moth, one palm-thatched shed, one whole time pilot assisted by
Tata and Vintcent, one part-time engineer, two apprentice-mechanics and
unlimited optimism.

In 1933, the first full year of its operations, Tata Airlines flew 160,000
miles, carried 155 passengers and 10.71 tones of mail. Tata Airlines was
converted into a Public Company under the name of Air India in August1946.

Going Global
8
 By the beginning of 1947, Air India turned its attention to the
international scene. Towards the end of the year, an agreement was reached
with the Government of India for the formation of Air India International
Limited to operate international services. At Air India's request, the
Government agreed to limit their capital participation to 49 per cent, subject to
an option to acquire, at any time, a further two per cent from Air India.

Air India International, which was registered on March 8, 1948,

inaugurated its international services on June 8, 1948, with a weekly flight
from Mumbai to London via Cairo and Geneva with a Lockheed Constellation
aircraft.

Nationalization

The early '50s saw the financial condition of various airlines operating
in India deteriorate to such an extent that the Government decided to step in
and nationalize the air transport industry and accordingly two autonomous
Corporations were created on August 1, 1953.

Indian Airlines was formed with the merger of eight domestic airlines to
operate domestic services, while Air India International was established to
operate the over seas services. The word 'International' was dropped in 1962.
Effective March 1, 1994, the airline has been functioning as Air India Limited.

From a total of three stations served at the time of nationalization, Air

India's worldwide network today covers 44 destinations by operating services
with its own aircraft and through code-shared flights.

2.4 CURRENT SCENARIO

Today, Air India’s modern fleet of Boeing and Airbus aircraft carries
just about everything.
From emeralds to elephants.
Pins to pigments.
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 Shrimps to super computers.

That’s why when you think of trading with India, or from India, Air
India is your logical choice. An option which lakhs of corporate and
international enterprises have made. Air India have the infrastructure and the
network to ensure smooth transportation and delivery of cargo, worldwide.

Air India's cargo operations give you a capacity advantage, combined

with a 13-city network in India alone. So you can arrange for hassle-free
and direct Customs clearance both for your Export and Import cargo. In
India, we fly to Mumbai (Bombay), Delhi, Chennai (Madras),
Thiruvananthapuram, Hyderabad, Bangalore, Kolkata, Ahmedabad,
Goa, Kochi, Kozhikode and Lucknow.

Internationally, Air India has tied up with various foreign airlines and
trucking companies. This enables us to carry your cargo between Helsinki to
Sydney or between any two points on the globe. To support Air India’s Cargo
operations, AI have a highly skilled and experienced team of professionals
backed by our Training Division of international repute to constantly upgrade
skills of our personnel.

At AI warehouse in Mumbai, They have developed an indigenous

system of inventory management for cargo handling of import/export
functions. This takes care of the entire management of cargo, supports
Electronic Data Interface (EDI) messages with Indian Customs and replaces to
a great extent existing paper correspondence between Customs, Airlines, and
the custodians. This also replaces manual handling and binning of cargo at the
warehouse in Mumbai by Air India in our role as custodian and helps to
identify large number of pieces for one Air Waybill with different weights and
commodities binned in separate locations, track and identify arrival of part
shipments under the same Air Waybills on different flights and maintain
information on House Goods for a consol Air Waybill at the House Bill level
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2.3 CARGO
Air India’s first cargo flight carrying postal mail from Karachi to
Mumbai via Ahmedabad was operated by Mr. J.R.D.Tata on October 15, 1932.
This in fact heralded the commencement of Air India’s operations.

Air-India’s modern fleet of Boeing and Airbus aircraft can carry cargo
of varying nature-heavy machinery, computer hardware, dyes and chemicals,
livestock, gems and jewellery, postal mail, courier. We specialize in carriage
of Dangerous Goods. AI possesses the infrastructure and expertise to ensure
smooth transportation and delivery of cargo worldwide.

2.4 TYPES OF CARGO

Air India's Cargo operation flies everything; to just about anywhere. Not
very surprising, when you consider how far and wide Indians have settled. Vast
populations have settled in the Gulf, the US, UK, Africa and the Far East. It is
to enable them to maintain links with their friends and families back home.
And to let the entrepreneurs conveniently go about their business, that Air India
has fine tuned its cargo services to their needs.

An active member of IATA, Air India carries all types of cargo

including dangerous goods (hazardous materials) and live animals, provided
such shipments are tendered according to IATA Dangerous Goods Regulations
and IATA Live Animals Regulations respectively.

So if you have something you'd like to fly down to or from India, but
aren't sure if we will, here's the complete list of the airline's cargo operations.

Perishables
Air India is the largest carrier of perishables in India. We are also the
largest handler of perishables in the country. With almost three decades of
experience in handling of vegetables, fruits, meat and met products, seafood,
dairy products, etc., our own experienced staff will continue to secure
11
perishables exports at international airports where it serves our commercial
interest.
Air India as handling agent handles our own flights as also flights of
other airlines at Mumbai, Delhi, Kolkata and Chennai

Automated Message
We have developed software for automatic communication of export
details directly to customers. The information pertaining to consignments
uplifts on flights will be automatically transmitted to the email address of the
customer concerned. If a consignment is moving via transit point on Air-India,
a second message is generated on departure of the flight.

Unaccompanied baggage can be booked at any of our offices on the Air

India network. For quick Customs clearance you may approach the Customs
authorities at the concerned airports with the assistance of our offices.

AIR INDIA ON THE UPSWING: LARGER FLEET AND EXPANDED

NETWORK
Air India is India's finest flying Ambassador. The urge to excel and the
enthusiasm which characterized Air India's first flight, way back on October
15, 1932, is quintessential even today - thanks to Air Indians who have kept
alive the tradition of flying high.

New Thrust
Air India has expanded its fleet by inducting 21 aircraft - three
B777-200ER, five B747-400s, one B747-400 Combi and 12 Airbus 310s on
dry lease during the past three years. Induction of these dry-leased aircraft,
pending delivery of 68 new aircraft by 2011, has enabled Air India to enhance
frequencies to many of its existing destinations and introduce several new
flights. This includes introduction of:

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  A daily service on the India-Paris-Newark sector;
 A daily flight to Los Angeles via Frankfurt;
 Flights to Shanghai from Mumbai via Delhi-Bangkok;
 Flights to Seoul from Mumbai via Delhi-Hong Kong;
 Terminator flights to London from Mumbai and Ahmedabad;
 Thrice-weekly flights on the Delhi-Amritsar-Birmingham-Toronto
sector;
 Thrice-weekly flights on the Delhi-Dhaka-Kolkata-London sector.

Phenomenal Growth
The preceding three years has seen phenomenal growth on the European
and US sectors. Since December 2002, not only has the network been expanded
to cover Newark and Los Angeles in addition to New York and Chicago in
U.S., the capacity has also been increased from 10 to 28 flights per week – a
daily service to all the four destinations. Likewise, flights to UK have been
increased from 10 to 24 – 21 of these to London and three to Birmingham.
Frequencies have also been significantly enhanced on the South-East Asian and
Far-east routes.

Fleet Acquisition
Air India has placed an order on Boeing Airplanes Company for
acquisition of 68 new aircraft – 50 for Air India and 18 for Air India’s low
budget subsidiary airline - Air India Express. The 50 aircraft ordered for Air
India include eight B777-200LR Medium Capacity Ultra Long-Range aircraft;
15 B777-300ER Medium Capacity Long-Range aircraft; and 27 B787 Medium
Capacity Long-Range aircraft. For Air India Express, 181-seater 18 B737-
800W aircraft have been ordered. The phased induction of these aircraft,
commencing November 2006, will be completed by 2011. The 50 aircraft
ordered for Air India will have all the modern amenities for passengers on
board.
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 Keeping in view the intense competition, both from Indian carriers who
are now allowed to fly abroad and from international airlines operating to
India, Air India has appointed Alia Group as Brand Consultants. Their scope of
work includes almost every aspect of airline functioning, particularly areas
which have customer interface. This exercise will help Air India in enhancing
its brand identity in India and abroad. Simultaneously, Air India has also
undertaken a Rs.400 crore Product Up gradation Programmed for change of
seats in the Economy Class of 14-owned aircraft – six B747-400s and eight
A310s and introduction of digital in-flight entertainment system for individual
passengers in all Classes – First, Executive and Economy. This is in addition to
the changes that Air India has already effected in First and Executive Class of
its Boeing 747-400 aircraft.

New Subsidiary Airline

Air India has also launched a new subsidiary airline – Air India Express,
effective April 29, 2005. Air India Express, with three aircraft in its fleet,
presently operates 38 flights per week from five points in India –
Thiruvananthapuram, Kochi, Kozhikode, Mumbai and Delhi to six destinations
in the Gulf – Abu Dhabi, Dubai, Al Ain, Muscat, Salalah and Sharjah. Air
India Express, with its attractively low fares, will help make travel affordable,
thus spurring growth in travel.

Financial
Air India’s total paid-up Capital is Rs.1,538.4 million. The Government
of India has taken a decision to offload a part of the equity. M/s DSP Merrill
Lynch has been appointed as Advisor-Initial Public Offer.

The airline has been profitable in most years since its inception. In the
financial year ending March 31, 2005, Air India has made a net profit of
Rs.960 million; earned revenue of Rs.76, 300 million - representing a growth
of almost 20 per cent over the previous year.

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 CHAPTER - III
LOGISTICS

The word “logistics” is a derivative of the French word ‘loger’ which

means the art of transport, supply and quartering of troops. Essential a military
concept, it is now commonly applied to marketing management. Fighting a war
requires the setting of an objective and to achieve this objective meticulous
planning is needed so that the troops are properly deployed and the supply line
consisting, inter alia, weaponry, food, medical assistance etc. is maintained.
Similarly, the plan should be such that there is minimum loss of men and
material while at the same time capable of being altered if the need arises. As
in the case of fighting a war in the battlefield, the marketing managers also
need a suitable logistics plan that is capable of satisfying the company
objective of meeting profitably the demand of targeted customers.

There are many terms often used interchangeably in literature and in the
business world for marketing logistics. The most acceptable view is that
logistics is concerned with physical and information flows from raw material
through to the final distribution of the finished product. In other words:

Material Management + Physical Distribution are Logistics.

With the expansion of international trade and the development of

different modes of transport over the years that followed “Freight Forwarding”
has been an integral part of Logistics. Freight forwarding services may often
range from routine and basic tasks such as booking of space or custom
clearance to a comprehensive package of services covering the total
transportation and distribution process.

Among the different modes of transportation, namely, road, rail, air,

water transport used for physical movement of goods in international trade,

15
ocean or sea transport plays a proverbially important role. This is due to the
fact that road and rail transport, though very important as link transport, though
very important as link transport are more suited for shorter distances and in
cases where either the exporting or importing countries are having geographical
proximities or where the use of sea transport is not possible. Air transport
however plays an essential role in international transportation. So far use of air
transport in international transportation is concerned it has made rapid strides
in recent years but in only value terms of total world trade and not in terms of
volume or quantity due to space limitation as only the comparably higher
freight cost in case of a majority of commodities. The pre-dominance of ocean
transport over modes in international transportation system is due to the fact
that it has comparatively cheaper freight rates, particularly over longer
distances. The fact that about 75 per cent of the total international goods traffic,
accounting for almost two-thirds of the value of international trade, moves by
sea establishes the predominance and importance of ocean transport in physical
distribution of overseas trade.

The world sea trade services forecasts that the trade, estimated 4088
million tons for 1996, will expand by an average of 3.9 per cent / year over the
decade, reaching 5675 million tons by 2006. Dry bulk cargo and oil tanker
cargo are projected to increase at a rate of 4.9 percent and 1.6 per cent per year
to 1955 million tons and 2080 million tons respectively by 2006. The combined
containerized and other general cargoes, whose average annual growth rate is
estimated at 6.6 per cent, are likely to reach 1640 million tons by 2006.

3.2 INTERNATIONAL AIR TRANSPORT

Air Transport - The appropriate mode of transaction generally depends

on market location, speed and cost. Any cost-benefit study of air cargo
evaluates itself in comparison to alternative methods of distribution. The prime
factor considered in any such analysis is the true value of the time saved by the

16
delivery of goods by air. Among many factors of comparison while deciding
upon the mode of transport, the following are some of the important points to
be considered are:-
 Period of credit availed of
 FOB value
 Value of goods in transit (generally the final price)
 Insurance cost percentage
 Warehouse cost percentage
 Duty payable
 Economic order quantity
 Reorder point
 Stock out cost
 Packing cost
 Transport cost
 Average transit time
 Maximum transit time
 Minimum transit time.

To move goods between continents, sea or air transport are resorted to in

most cases. And when speed is essential air transport is preferred. A coast-to-
coast shipment via air requires only a few hours contrasted to days with other
modes of transportation when the need is urgent or when delivery must be
quickly completed, air transport serves the purpose. But quick delivery costs
more. So generally a trade-off between the two, speed and cost is taken up,
which allows other elements of logistical design, such as warehousing or
inventory, to be reduced or altered accordingly. Air Transport still remains
more of a potential opportunity than a reality. Air transport capability is limited
by lift capacity (ie., load size constraints) and air craft availability.

No particular commodity dominates the traffic carried by air freight

operations. Perhaps the best distinction is that most air freight is handled on a

17
emergency rather than a routine basis. Firms typically utilize scheduled or non
scheduled air cargo movements when the situation justifies the high cost.
Products with the greatest potential for regular air movement are those having
high value or extreme perish ability. When the marketing period for a product
is extremely limited - such for Christmas items, high-fashion clothing, or fresh
fish - air transport may be the only practical method for logistical operations.
Routine logistics products such as parts or consumer catalog items are also
candidates for air freight.

The fixed cost of air transport is low compared to rail, water, and
pipeline. In fact, air transport ranks second only to highway with respect to low
fixed cost. The fixed costs of air freight are associated with aircraft purchase
and the requirement for specialized handling system and cargo containers. On
the other hand, air freight variable cost is extremely high us a result of fuel,
maintenance, and the labour intensity of both in-flight and ground crews. Since
they require wide-open space, airports are generally not integrated with other
modes of transportation, with the exception of highways.

There is no one ideal transportation mode. Each mode has its own
inherent or special hazards involved. Under the sea transport, hazards include
the wave impact, exposure to sea, water damage, damage due to vessel
movement (like rolling, pitching, surging and swaying). Hazards in air transit
include ground handling, changes in atmospheric pressures and temperature.

Air cargo offers the following advantages in market exploitation -

 It creates new markets or brings new markets within reach and extends
markets. For example, perishables market is expanded on the availability
of improved refrigerated air cargo service.
 Air transport extends the use of mobile production facility. There are
instances when it is more economical to move a production centre from
one distribution area to another than it is to move bulky goods from a

18
 central production centre.
 Air transport spreads seasonal demand. With the introduction of air
cargo, the whole world can be regarded as the home market and the peak
demand spread over a larger period.
 Packing cost for air transit are relatively lesser than ocean transport,
since the goods are in transit for a lesser time, and also the hazards are
relatively lower.
 Apart from providing a high level of customer service, air transport,
particularly helps in savings in distribution costs. The minimization of
distribution costs is linked with quicker delivery, which results in
economies in the cost of financing and stock holding.
 Significant packaging cost savings can be realized to offset the higher
air freight rate compared with surface transport. Being ideal for
palletized consignments, a substantial volume of merchandise is now
moving by air on pallets which aids handling, reduces packing needs,
facilitates stowage and lessens risk of damage/pilferage.
 Because of the lesser time in transit, the locking of funds in the
inventory in transit is minimized and inventory turnover is also fast.
Quick transport reduces amount of capital tied up in transit and in stock
provision. This facilitates prompt financial settlement eliminates need
for extensive warehouse reduces risk of stock piling, and thereby
obsolescence and deterioration.
 Air transport comes handy in delivering perishables in prime condition.
Sending of samples for quick decision making, high fashion clothing,
parts, consumer catalog items, perishable like fresh fish, quick
replacement of broken machinery and other such urgent demands can be
fruitfully met out by using air transit. In cases of opportunity costs like
lost sales and customer dissatisfaction, which adversely affect profit,
these costs can be minimized with air transport.
 Simplified documentation system is followed with importance given for
one document namely, air waybill. The IATA air waybill is, acceptable
19
 on any IATA airline thereby permitting flexibility. There is common
code of liability conditions to all IATA accredited airlines.
 Major airports world wide tend to be situated in the centre of
commercial/industrial areas compared with the major seaport. In
consequence the airport can in many situations be closer situated to the
industrial/commercial market which has a competitive advantage in
terms of lower collection/distribution cost.

Constraints in Air Transit:

 Limited capacity of air freighter and overall dimensions of acceptable
cargo together with weight restrictions are constraints on air cargo.
 Very high operating expenses and initial cost of aircraft when related to
overall capacity.
 Service is vulnerable to disruption when fog prevails, particularly in
airports with less modern traffic control equipment.
 Air freight relies on road primarily as feed distributor services.
Moreover, airports are sparsely located and not all have Customs
clearance facilities as they only serve domestic flights.

Traditionally, airlines have considered the cargo as a byproduct of

passenger transportation. The advent of freighter and combi aircraft saw this
industry assuming a new status. Today, there are several airlines which are
dedicated exclusively for the movement of domestic and international freight
by air. Airfreight, therefore, has assumed great significance in the physical
distribution and logistics process.

The total exports and imports of India in 1995 and 96 by air was 286000
and 129000 tonne respectively, which clearly highlights the substantial
imbalance in the movement of goods by air. For air exports, Delhi continues to
be the main gateway, but as far as imports are concerned Mumbai emerged as
the hub.

20
 In keeping with the growth of the airfreight movement, airlines have
dedicated substantial capacity in their fleet for the movement of freight. The
country's national carrier - Air India - with its modern fleet of Boeing and
Airbus aircrafts carries around 1,000 tonnes of freight ex-India per week to
various destinations worldwide.
Apart from their passenger flights, many international airlines such as
Cathay Pacific, Ethiopian Airlines, Singapore Airlines, British Airways,
Swissair, Saudia Cargo, KLM Royal Dutch Airlines and exclusive cargo
carriers like FedEx and UPS are operating dedicated scheduled freighter
services from and to important hub airports in India.

Cargo handling infrastructure at the major airports in India is severely

affected by lack of modernization, particularly inadequate space, lack of proper
cold storaging facilities, outdated equipment, pilferage and theft. For instance,
in Mumbai and Delhi, which are the major hubs for airfreight, the space
provided for customs examination is extremely limited, thereby hampering the
process of speedy clearance and movement of goods. The prospective growth
areas for the movement of airfreight are the inland airports like Bangalore,
Ahmedabad, Hyderabad, among others.

Air Cargo Tariff Structure:

Freight is the reward payable to the carrier for the carriage and arrival of
goods in a mercantile or recognized condition, ready to be delivered to the
merchant. The freight charges depend on the forces of supply and demand. The
demand for a particular international transport service mode is basically
derived from the demand for the commodities carried, and is, therefore affected
by the elasticity of demand for these commodities.

Airfreight operative on regular scheduled international services are

decided collectively by the airlines attending their usual twice-yearly traffic
conferences. These are held under the aegis of the International Air Transport
Association (IATA) which adopts a policy of parity on level of rates on
21
individual services/ routes. The rates reflect market conditions and service cost.

A major share of the air freight market is now conveyed under agent
sponsorship involving consolidation arrangements. A properly compiled tariff
should encourage the movement of all classes of cargo to ensure the best
balance between revenue production and the full utilization of the transport
unit. IATA controls airfreight rate formulation insofar as major world airlines
are affiliated to it, which represents about 98 per cent of international airfreight
services. IATA has no influence on internal domestic flight airfreight tariffs or
charter flights.

The significant aspect of IATA affiliated airlines is that no competition

is permitted on air freight rates, that i.e., parity prevails, and competition is
permitted only on service quality, frequency etc. Air Freight Rate
Classification: Basically, there are six types of airfreight rates in existence.

Air cargo is charged by weight except where the volume is more than
366 in3/Kg. In such cases, volumetric charges apply and each unit of 366 in3 is
charged as 1 Kg. Same individual rates do not necessarily apply in both
directions, thereby reflecting the differing market situations.

Changes in rate level are normally negotiated through the IATA

machinery. The exceptions are the Government Mandatory Rates which are
introduced through bilateral/multilateral negotiations by the Governments, on
the basis of national considerations and regulations and if export of certain
commodities is to be encouraged.

Specific Commodity Rates:

They are heavily discounted rates applicable on specific commodity,

between two points, say Bombay and Paris. It is not possible to send goods at
these preferential rates to alternative destination even where the alternative
airport is on the same route and nearer to the airport of origin.
22
 Against this, freight all kinds rates carry a combination of different
commodities. These rates favour consolidation.

SCR also called as "Co-Rates" account for seventy five per cent of the
cargo carried out of India. This type of rate has done much to stimulate air
freight development and by encouraging quantity shipments has produced cost
savings in documentation/handling/ packaging. The rates are market oriented
and take into account actual demand requirements. They recognise the varying
ability of the user to pay for air transportation according to his requirements.
This approach results in discrimination and is not always related to the cost of
transportation.

The minimum quantity allowed at each rate is 100, 300, 500 and 1000
Kg. Hence a consignment of 85 Kg will be charged at 100 kg rate.

Classification Rates (Surcharges and Rebates)

i. Newspapers, periodicals and books are carried at reduced rates.

Special rates are available on application to the airline.
ii. For Human remains, regulations vary from route to route. Prior
application is necessary to the airline.
iii. Valuable Cargo.- gold, platinum, diamond, legal bank notes,
securities, share coupons, travelers cheque, are charged at 'under 100
kg', air cargo rate plus a 100 per cent surcharge.
iv. (iv)For live animals, prior arrangements must be made. Stringent
regulations apply regarding documentation / travel facilities and
conditions. A shipper's certificate for live animals is required.

Valuation Charge:

A declaration of value must be made. Where goods have declared value

for carriage per kilogram higher than a certain level, a valuation charge will

23
apply in addition to freight charges. For example, if declared value is more than
certain 11.80 / kg, charges for carriage will be on a weight or volume basis plus
a valuation charge based on the amount by which the value for carriage
exceeds the value limit in £ / kg., that is, per £ 100 pro rata of declared amount.

General Cargo Rates:

These are the basic rates and fall into three categories as below:
 Minimum charges
 Normal rate - the "up to 100 kg." rate
 Quantity rate - applicable on the various minimum quantities called
break-points.

Cabot age:

Term used for goods carried when points of origin and destination are
both within the sovereignty of UK, where special non-international rates may
apply.

The carriage of U.K. cabotage traffic cannot be carried by foreign

airlines without special permission.

The listed territories under U.K. Cabotage are, Anguilla, Ascension

Islands, Bermuda, British Virgin Islands, Brunei, Caicas Islands, Cayman
Islands, Dominica, Falklands Islands, Gibraltar, Montserrat, Nevis,
St.Christopher, St.Helena, St.Vincent, Turks Islands.

Unit Load Device (ULD) Rates:

This applies to any type of container, container with an integral pallet, or
aircraft pallet whether or not owned by an IATA member, and whether or not
considered to be aircraft equipment.

Aircraft ULDs

24
 Such units are integral part of the aircraft. Aircraft ULDs can be loaned
to shippers and agents for loading purposes provided the shipper or agent can
prove that he is equipped to handle them.

Non Aircraft ULDs

They must be registered with IATA and conform to IATA standard
specifications. Non aircraft ULDs in order to be eligible for rating incentives
must be owned by a shipper or agent.
Rating of ULDs
Two methods exist - Method A and Method B.

Method A:
In order to qualify for bulk unitization rates, the cargo must be carried
from origin to destination in the same ULD. The charge for the consignment
shall consist of a flat minimum (pivot) charge for a specified pivot weight
above which an additional charge (over-pivot rate) per kilo will apply. Charges
for airlines owned aircraft ULDs shall be based on the actual gross weight less
the actual tare weight of the ULD. Charges for non-aircraft ULDs shall be
based on the actual gross weight less the actual tare weight, but not more than
the IATA tare weight allowance for the particular ULD.

Method B:

Charges are based on actual weight of the shipment, but not less than the
minimum chargeable weight for the particular container used. Tare weight
allowance is applicable. A discount is also granted under this programme,
which refers to each type of non-aircraft ULD. The amount of discount can be
deducted from the weight charge, but shall not exceed 10% of the charges
applicable to the consignment carried in the ULD.

Discounts and tare weight allowances only apply when shipments are
delivered to the airline packaged in registered shipper owned, standard size
non-aircraft units. In no case shall the charges established under Method A be
25
applied cumulatively with the discount authorized under rating Method A or B.
Dangerous goods, live animals, or human remains will not be accepted in a
ULD rated either under Method A or B.

Charges

Payment of Charges:
Paid at the time of dispatch, by cash, cheque or credit card. Regular
shippers make use of credit facilities, which are usually available from most
major airlines. This enables freight charges to be billed for settlement on
monthly basis.

Charges Forward:
Goods despatched to most countries may be sent, "Charges Forward",
i.e. cartage, export fees and freightage payable by the consignee. Goods cannot
be sent, charges partly prepaid and partly forward. Charges forward are not
available on domestic routes, where all charges must be prepaid. This service is
not available for perishable goods or live animals.

Disbursements
Most airlines will charge 10% with a basic minimum fee for collection
from a consignee of any disbursement shown on the air waybill. Disbursements
will not usually exceed the freight charges shown on the air waybill. When the
issuing carrier cannot collect the amount from the consignee, it will be charged
to the shipper or agent.

Perishable Cargo
Prepaid freight is charged for perishable cargo. Cargo subject to
regulations relating to carriage of dangerous goods must be offered separately
and clearly indicated in the shippers declaration.

All these air freight rates exclude customs clearance charges, road/rail
collection, distribution, warehousing, demurrage etc. For special / large
26
consignments an aircraft can be chartered. Rates vary according to market
conditions and other factors. The shipper conducts his negotiations through an
air charter broker found on the Baltic Exchange or direct with an airline or
airfreight forwarder.

Air Freight Consolidation:

There has been a substantial development of airfreight consolidation
over the years. Freight forwarder (usually referred to as the agent) has a
contract with an airline on specified flight to provide consolidated cargo for
allocated cargo hold space which he undertakes to fill. The consolidated
consignment may involve up to thirty consignments including differing
consignees and consignors.

Each consignment is destined to be for same area / region. Cargoes are

mixed subject to their compatibility. Limitations are imposed on weight and
general dimensions of the cargo. Agent prepares a cargo manifest to
accompany the air waybill throughout the flight and issues house airway bills
to individual shippers. The agent is able to charge an inclusive rate, which is
much lower than consignment sent as an individual parcel.

Details of the schemes

 It is particularly attractive to exporter who dispatches small
consignments.
 The agent usually takes care of documentation.
 Airline is able to concentrate on providing a quality airfreight flight
service and becomes less involved in marketing the service involving
contact with individual shippers.
 The agent promotes the service- a feature of it is the competitive
inclusive rate structure compared with an individual package despatched
under IATA fare structure arrangements
 It enables airline to obtain the maximum income from the allocated
accommodation earmarked for the agents.
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  It enables the airline to plan ahead since consignment collection is duty
of the freight agents.
 The airline usually permits the cancel/change of pre-booked cargo space
upto 36 hours before departure time.
 It permits the shipper to avoid the minimum freight rate regulations
found in the airline (IATA) approved rate structure.
 Packing cost is substantially reduced.
 Consolidated consignments tend to result in quicker customer clearance.
 Encourages freight forwarder to maximize profitability through an equal
spread/mix of high and low-density cargoes.
 Encourages use of ULDs.
 Its general competitiveness and favourable quality of service facilitates
the development of international trade.

3.3 IATA
The International Air Transport Association:

IATA was founded in 1946 by the airlines of many countries to meet the
problems created by the rapid expansion of civil air services at the close of the
Second World War in 1946. It is the successor in function of the previous
Intentional Air Traffic Organization arranged at “The Hague” at the very dawn
of regular air transport in 1919.
1
As a non – governmental organisation it draws its legal existence form
an Act of the Canadian Parliament given Royal Assent in December 1945. In
both its organisation and activity, IATA has been closely associated with the
International Civil Aviation Organisation (ICAO) also established in 1945, the
international agency of governments which creates world standards for the
technical regulation of civil aviation.

IATA is a voluntary, non – executive, non – political and democratic

28
organization. Membership is automatically open to any operating company,
which has been licensed to provide scheduled air services by a government
eligible for membership of ICAO.

Airlines directly engaged in international operations are active members,

while domestic airlines are associate members. The voting procedure of IATA
are unusual when compared with those of other international organisations.
Each airline has a single vote regardless of its size. All decision must be
unanimous. No decisions are effective without the approval of the interested
governments. Thus any single airline or any single government has the power
to veto any decision.

ITATA is concerned with much more than traffic matters. It has

committees dealing continuously with technical, legal and financial issues.
IATA through these committees promotes standards of safety, comfort and
efficiency. Rules and procedures govern airlines in all parts of the world. An
effort is made to simplify and standardize the documents which must flow from
one airlines to another. The association publisher’s manuals of Revenue
Accounting Practices which aim at the standardization of the reporting of costs,
profits and losses. The IATA Clearing House in London settles monthly
accounts for interline revenue transactions, making it possible for each airlines
to pay and collect debts in a single settlement. The airline have achieved a great
deal of standardization through IATA.

IATA member airlines adopts the first standard procedures for handling
interline traffic at an IATA Traffic Conference in 1947, and these have been
developed further rover the years through the executive IATA Traffic Services
machinery.

The IATA Traffic Conferences:

The steps in establishing traffic on international routes are different from
those of domestic routes. Before the tariffs are filed with the respective
29
governments for approval, the airlines meet together to agree on a pattern of
rates. These rates apply to all the carriers concerned. Unless all agree, no
decision is binding. And the government has the final say on whether the
agreements can be maintained. The normal practice is for the airlines to reach
an agreement after considerable give-and-take in the Traffic Conferences and
for the governments to approve those agreements. Occasionally the conferences
fail to reach an agreement or one or more governments fail to sanction the
agreements, but such failures of agreement are the exception rather than the
rule. Furthermore, soon after a conference has failed to achieve an agreement,
the airlines and governments become quite uncomfortable with the possible
anarchy in rates which might ensue; thus they soon reconvene to avoid this
possibility. It is also the practice of each airline to refrain from vetoing an
agreement affecting territories outside its main routes.

The world is divided into three areas for the purpose of the Conferences.
Area No. 1 covers the Americas, Area No.2 covers Europe, the Middle East
and Africa and Area No.3 covers the rest of the world. Meetings deal
separately with the relations between Area No. 1 and Area No.2, No.2 and
No.3 and No.3 and No.l. But the most important work takes place in the
Composite Conference covering the whole usually held every two years.
Individual airlines make recommendations of tariff changes at these
conferences. Traffic working groups and cost committees make careful studies
of prospective traffic and cost of operation. The agreement reached by past
conferences consists of over 1000 resolutions covering rates between 60,000
pairs of points in the world network.

Among the criteria of rate-making considered by the Conferences are

the following: (a) Operation costs (b) Traffic potential (c) Local economic
conditions (d) Type of traffic to be moved (e) Seasonal nature of the traffic (f)
Competition from non-IATA carriers such as the Steamship Companies.

The work of the Traffic Services is grouped under 3 main functions as

30
detailed below:

Passenger Services Conference:

This conference of all IATA Trade Association members meets annually
for the purpose of approving industry developed new standards and changes to
existing standards in all passenger service fields, and directing the policies and
activities of the committees, boards and working groups which report to it.

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Cargo Services Conference
This conference of all LATA Trade Association Members meets
annually for the purpose of approving industry developed new standards and
changes to existing standard in all cargo service fields, and directing the
policies and activates of the committees, boards and working groups which
report to it.

Air port Handling Committee:

This committee holds annual meeting, which all LATA Trade
Association members may attend for the purpose of approving industry
developed new procedure and changes to existing procedures in all airport
handlings, matters, and directing the policies and activities of its sub
committees.

A major post war accomplishment was accomplishment was the

integration or the routes of individual airlines into a coordinated world air
network over which passengers, baggage and cargo, with a minimum of
documentation.

The smooth functioning of this network depends on standardization and

inter line arrangements among the worlds airlines. Today 25 to 30 per cent p
passengers and cargo moving internationally are carried interline at the
applicable through fares or rates form origin to final destination. This is made
possible through the detailed provisions of the IATA Multilateral Interline
Traffic Agreements – Passenger and cargo.

These Agreements provide for the mutural acceptance of documents the

most important of which are the standard IATA ticket and airway bill. As a
results, all point son many individuals airline, not only in the over all
operations of IATA member airlines, but also as a factor in international
commerce. Apart from the inherent advantage of speed, it unique characteristic
is simplicity. Not only do the goods move in a matter of hours between any two
32
points in the world, they also move on a single airway bill by any combination
of services, at known price, in one currency and subjects to standard
conditions.

3.4 DOCUMENTS USED IN CARRAIGE OF GOODS BY AIR

The documents used in carriage of goods by air are:

 The Air Way bill.
 Master Air Way bill/House Air Way bill.
 The Shipper’s Letter of Instructions.
 The Commercial Invoice.

THE AIR WAY BILL

In case of export by air the basic transport document is an Air Way Bill. This
document is prepared in three original parts with some copies as required.
 The first part marked “For Carrier” is signed by the consignor (seller).
 The second part marked “For Consignee” is signed by the consignor and
the carrier and accompanies the goods.
 The third part is signed by the carrier is handed over to the consignee
after the goods and accepted for carriage by the air carrier (i.e. sent to
the importer just, like the B/L)
Functions:
The main functions of an Air Way bill are outlined below:

Contract of Carriage
The Air Way bill is an evidence of the air transport contract established
between the consignor and the carrier. It is signed by the shipper or its agent
and also by the carrier or his agent. When the same agent is acting on behalf of
the shipper and at the same time on behalf of the carrier, the Air Way Bill has
to be signed twice.

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Proof of receipt of goods
This serves as a receipt for the goods delivered to the carrier as proof
that shipment handed over was in good condition unless otherwise noted and
also that the shipping instructions, as contained in the shipper’s letter of
instruction, are acceptable.

Freight bill
It may be used as a bill or invoice, since it may indicate charges to be
paid by the consignee, charges due to the carrier’s agent, etc.

Certificate of Insurance
The Air Way bill may also serve as a certificate of insurance purposes if
the carrier is in a position to insure the shipment and is requested to do so by
the shipper.

Customs Declaration
The Air Way Bill serves as the basic document to be presented for
customs clearance.

Guide to the airline staff

The Air Way Bill is a guide to the staff of the carrier since it facilitates
handling, despatch and delivery of shipment. It contains instructions as to
where and whom the cargo should be sent and, if payment is to be made on
delivery and who should pay- it accompanies the goods so that they can be
identified.

OTHER SUPPORTING DOCUMENTS

The Shipper’s Letter of Instruction

This is a document used by the shipper to give all the details and
instructions concerning a particular shipment. The shipper signs the document
in order to give authorization to the agent to sign the Air Way Bill on his behalf
and to certify that the contents of the consignment are properly identified.
34
The Commercial Invoice
This is a document issued by the seller to the buyer of the goods. It is
often used by the customs authorities at destination to determine the true value
of the goods on which duties will be assessed. It also serves as the basis for
consular documentation.

In addition there may be other documents required by the customs

authorities of the exporting and importing countries, which should be submitted
with the Air Way Bill.

AIR CARGO AGENCY

The air cargo intermediaries are the necessary link between

shippers/consignees on one hand and the air carriers/airlines on the other.
Essentially, these intermediaries fall into the following categories:
a. IATA CARGO AGENT – A forwarding agent approved by airlines
belonging to IATA and approved by them to act on their behalf.
b. AIR FREIGHT FORWARDER, who may or may not be an IATA cargo
agent, often, specializing in consolidation or group age services.

IATA CARGO AGENT

In order to obtain IATA registration, a freight forwarder has to meet the
following criteria:
a. Provide proof of his ability to develop air cargo business.
b. Possess the requisite physical and material resources including suitable
working premises.
c. Employ qualified staff including at least two specialists to handle
dangerous goods, having passed the relevant examination prescribed by
IATA.
d. Having adequate financial resources.

Each country provides, through its national airlines, the basic

investigating body which reports on the agents’ compliance with established
35
standards. An agents’ certificate may be suspended by arbitration committee in
cases of violation of IATA rules.

Services to the shipper:

The services that the IATA agent provides to the air shippers are:
a. Providing facilities for the acceptance or collection of export shipments
from clients.
b. Preparing airline documentation, i.e. completing Air Way Bills
including all charges on these, and ensuring that invoices and
commercial documentation meet all the requirements for movement by
air and for the custom authorities.
c. Checking that export and import licenses are in order and comply fully
with government regulations.
d. Ensuring that exporters of dangerous goods, in compliance with IATA
and government regulations, supply packing certificates.
e. Arranging carriage and booking space with airlines and scheduling
delivery of goods at airports.
f. Arranging insurance for clients.
g. Tracing the movements for consignments.

In addition the air cargo agent may act as a transport consultant to the
sipper/exporter in all matters relating to the promotion of his business. He
charges his customers the published airline freight rates and also his fees for
the other services rendered by him.

Services to the airline:

The air cargo agent has to present the goods in a “ready for carriage”
condition to the airline in order to obtain a commission. The services to the
airline are as follows:
a. To issue the Air Way Bill in accordance to the instruction of the shipper.
b. To complete all documents which should accompany the Air Way Bill
and check them for each consignment.
36
 c. To mark all packages of each consignment with the name and address of
the consignee.
d. To pack each consignment properly to withstand all normal handling
during transportation – dangerous goods and live animals must be
packed in accordance with the applicable regulations.
e. To label the packages using cargo identification labels including
standard labels for special consignments (perishables, live animals and
dangerous goods) to be affixed to each package.

The responsibility of the IATA cargo agent to the airline ends when he
has handed over the cargo and the documents to the carrying airline ready for
carriage. He is entitled to a five percent commission on the transport charges in
respect of the export cargo from the airline.

3.5 E-logistics
What is e-logistics? As the two parts of this compound word suggest,
the simplest and most obvious answer is: "the logistics of e-commerce".

Introduction
Logistics has a paramount part to play in e-commerce development. An
as a matter of fact direct sale implies that the last and only intermediary
remaining between on the one hand the net-selling producers and their
customers, and on the other hand the large distributors and their customers, is
the logistics expert. This gives the latter a strategic weight of paramount
importance.

Internet producers and distributors are ready to pay full price to keep
logistics blameless for three reasons the logistics expert they entrust their
parcels with becomes in a wider sense their actual representative towards their
customers. Discarding intermediaries generates savings to purchase efficient
logistic services. On the Internet as well as in standard mail order business,
customers pay for all or part of the transport.
37
 Disappearance of intermediaries such as wholesalers and especially
retailers has direct side effects on transport, information, warehousing and
ancillary services such as co-packing and co-manufacturing.

Discarding intermediaries will help get rid of mid-chain buffer

inventories. These producers-sellers will have to manage their inventories and
will increasingly entrust logistics experts with this task.

But how does the logistics of e-commerce differ from "conventional"

logistics? To our knowledge, there is no clear, precise definition of e-logistics.
This is a problem, because we must define the term if we want the entire e-
logistics operating process to satisfy the expectations of e-merchants and their
customers.

In the coming months, we will see that the logistics "menus" of B2C and
B2B e-merchants will become fuller, offering the customer a range of logistics
options.

3.5.1 Tracing
The logistics operator
Within the framework of his services the logistics operator is the first
involved in tracing for two reasons. Number one is practical: he must be in a
position to identify and trace transport or warehousing of the parcels he deals
within his daily operations. Number two is urged by his endeavors for
certification: like any ISO 9000 certified company, the logistics companies
must have integrated tracing into their process.

The logistics operator's customer

The logistics operator's customer also needs his contractor to master the
tracing of the goods he has entrusted him with. First of all he must fully trust
his logistic contractor's tools and techniques as he has to make daily decisions
according to the elements notified to him by his subcontractor (give the right

38
piece of information, to the right person, at the right time, so that he can make
the right decision). For instance the "delivered in conformity" event will trigger
the consignee's invoicing operation. Then the certification coherence obviously
requires the customer to show evidence that his products ID is assured from the
origin of the spare parts to the delivery phase. Moreover quality of his
contractor's tracing allows him to partly meet another ISO 9000 standard
requirement: appraising his subcontractors.

The logistics operator's customer's customer

The logistics operator's customer's customer may also be interested in
his supplier's subcontractor's tracing quality. A merchant awaiting delivery of
items needed for an advertising campaign will attach much importance to the
reliability of the "delivery alert" event, which means that the goods will be
delivered within the next minutes. In case of a cyber sale, the (email)
confirmation from the carrier that the parcel will be duly delivered the next day
between 7pm and 8pm, is an item of information of paramount importance to
the cyber buyer.

Is the logistic operators tracing common to the whole logistic trade ?

The answer is no. It is true that the definition of tracing given by the ISO 8402
standard does not fully meet the expectations of the players involved in the
logistic operation. Every logistics operator offers some type of tracing
according to his own organization, his own information systems and his own
industrial gear.

The different types of tracing

These days the essential information medium is the barcode sticker.
Thanks to these barcode labels stuck on the parcels, the logistics operators
identify the physical flows. Chips are still very expensive and tough to master.
The sensors whose mission it is to identify each chip passing along, transmit
information up to the tracing system which can hardly make a decision in case
of, say, a parcel lying across two racks at the same time : which vehicle was
39
this parcel stuffed in? The right one or the wrong one? Today, GPS parcel
tracing only refers to the carrying vehicles. This type of tracing is mainly used
for road haulage longer than three days, with no transshipment and in
hazardous areas.

A posteriori tracing
A posteriori tracing is based upon automatic event information. The
carriage events are thus automatically transmitted. Only the "erratic" (e.g. short
shipped) parcels are scanned and provide some counter-information replacing
the information automatically created. This type of tracing is pragmatic as
parcels are not held back. However the basic events are not generated in real
time but within a time likely to exceed several hours, which however meets
most customers' needs. The drawback of this type of tracing is that the
information flow does not originate from the physical flow, which sometimes
generates basic tracing incoherence. Lastly, the times associated with the
events are not the actual times, which markedly penalises deliveries. For
instance delivery may well have been carried out at 1130am while the basic
time will read 0630pm, the time the driver arrived back from his round.

Real time total tracing

Real time total tracing will look obvious to some, but is far from
operative in everyday facts. As a matter of fact real time total tracing also
known as tracking, requires identification to rest on real time physical parcels,
at every significant stage of either warehousing or carriage (significant means :
a physical location shift or a shift in the means). The organization has to be
faultless and the bays must be geared with automated systems as it is of the
uttermost importance to fill out the "event" box in real time, but it is of even
greater importance to deliver in time. Data recording is computerized and
information is available on the Internet for the up-to-date users. Filing is thus
very simple (magnetic tapes or CD-ROMs). The transport document may be
scanned and transmitted to the customers through either the Internet or a fax.

40
Open tracing and closed tracing
There is a big difference between open and close tracing, for in open
tracing the tracing basis is offered to the customers. Both the customer and his
logistics operator have the same level of information. This tracing requires the
logistics operator that offers it to perfectly master both his operations and his
associated information system. Any mistake is recorded forever in the
customers' database. Closed tracing has obviously a limited interest as the
customer has to ask his logistics operator to give him the information he needs.
Whether by phone or by fax, this approach is difficult to manage as from ten
shipments a day. Moreover, even though he may deeply trust his logistics
operator, the customer does not get direct information and consequently may
think that some of the information he receives is not always totally true, for
instance in case of a posteriori tracing.

E-commerce focused tracing

A vital technical tool in case of a cyber sale, tracing is a tool vital to all
players in the supply chain. It is the crucial link between buyer and seller, since
once the sale is settled it becomes the only link between the customer and his
supplier. As the logistics operator further becomes the seller's representative
with the cyber buyer, his services must be blameless. Any misdelivery or
damaged parcel is bound to dissatisfy the final customer that might lose interest
in the seller's website. To sum up, these tracing tools are reliable and
necessarily based on the notion of real time.

An A to Z tracing
When sales are settled on the Internet, tracing must begin as from the
sales recording, prior to the notion of logistic follow-up. Thus the first series of
events must deal with Purchase : purchase record, checking the method of
payment, settlement validation, etc. The second part is relevant to production,
if any : planning, production launching, production under process, finished
product. Then appear the logistics-related events : order processing, packing,

41
shipping. Lastly, carriage follow-up : collection, departure from spot A, arrival
at spot B, reshipment from spot B, arrival at spot C, Customs clearance in
conformity, delivery in conformity. If the goods are returned following the
consignee's refusal to accept delivery, it is vital to connect the return with the
original shipping operation. Moreover tracing may also last further than
delivery : the carrier might also link with delivery the consignee's comments
about the global service.

An Internet sales argument

Tracing/tracking for any Internet purchase is undoubtedly a first class
selling argument as it validates the sale. In addition it involves the notions of
dream and desire. The buyer follows step by step each and every stage of his
order. This follow-up arouses his excitement in the same way as the one he
would feel on touching, grasping the desired product in a "standard" store. The
shipment follow-up thus widely exceeds the mere scope of the logistic service.
It is a hallmark between merchant sites and will be used as an actual sales
argument. Therefore tracing, or better, tracings put forward by logistics
operators are manifold. Each web merchant must be particularly watchful about
the type of tracing used by his e-logistics operator, as the follow-up will
become a full selling argument.

3.5.2 Warehousing
Warehousing requires from the e-logistics expert the management of a
depot, store or warehouse in which the goods will be put by. The warehouse
location is important as it will have an impact on the on carriage lead time and
on the transportation costs. It is generally better for the warehouse to be located
within the bar center of its distribution perimeter.

The warehouse must be computerized with the following main

functions: integration of internet orders, inventory management and access to
all statistics on the internet. Within the framework of a B2C cyber sale, the
most sensitive warehousing operation is undoubtedly order processing as any
42
single mistake will unavoidably end up in a dispute with the end customer,
which is bound to generate his dissatisfaction. The logistics expert must have
earned deep know-how in the picking technique (singling out one or more
items). Processing an order of 3 full load pallets does not require the same
expertise as processing an order of 50 items from 50 origins. In the same way,
the e-logistics expert must be capable of meeting co-manufacturing and co-
packing needs. Although these warehousing services are recent they meet an
actual need.

Co-manufacturing consists in gathering several items on the storage spot

so as to create a new single item. This technique allows inventory reduction by
cutting down the number of items as only the basic references are stored. Co-
packing is linked to packing: the logistics expert's mission is to prepare packing
or over packing on the storage spot. Its goal is also to hinder item management
to the sole unit references notwithstanding pack units.

3.5.3 Transport
Transport services are numerous. First and foremost it is thus necessary
to define the features of the flows to be carried. As a matter of course,
according to the weight, volume, price, number of parcels, lead time
compliance and places of delivery, the transport service will be different. Every
carrier is a leader in one or more services, but none is competitive in all of the
services. If only one e-logistics expert is wished to be dealt with, the following
two points must be taken into consideration : First of all one must assess
whether he may meet by his own means the transport service matching the flow
description. For instance if 80% of the flow matches shipments of three parcels
weighing 10 kilos to be delivered within 48 hrs to domestic destinations, an e-
logistics expert present in the whole country must be chosen. The second point
deals with the e-logistics expert's capability to subcontract the remaining 20%
of the flow. If 5% of the flow has to be shipped to Japan he must have an
agreement with a specialist in this destination. Knowledge of transportation of

43
the goods entrusted is also to be taken into account, as even though two parcels
look alike, the operation means are not always the same depending on whether
books, computers or white products are being shipped.

Management of returned goods is not an obvious topic to be thought

about in the first place. Yet the e-logistics expert's techniques must be mastered
in order to avoid return operations under bad circumstances and over lengthy
time limits. Return operations imply that the goods shipped must be identified,
collected, packed (if the original packing is unusable) then on carried to some
reprocessing place for the return operation. This service is intricate and requires
a particular competence from the e-logistics expert. Lastly, actual expertise in
Customs operations is needed for goods being shipped into or out of the EU.

3.5.4 Ancillary services

The e-logistics experts' ability to propose to their customer’s ancillary
logistic services also becomes a selection criterion. The e-logistics expert pilots
both physical and information flows. He is thus bound to become a global
contractor whose job begins the minute his customer has sold an item. He thus
will have to tackle sales supervision, manage orders via the Internet, phone,
fax, mail or mail order business. Therefore he will invoice on his customers'
behalf, set up sales statistics and analyze outgoing items, i.e. sales over a given
period of time. He will have to offer furniture or computer-related assembly
services. He will be responsible for the after sales service in his customers'
name, as well as for conducting satisfaction surveys with the end buyers. He
will increasingly be his customers' advisor since he will be holding the key
figures related to the market, the suppliers, and the consignees. Logistics has
steadily improved these years, from a military, narrow scope concept (in the
60's) to a widely spread locution these recent years. Today the new logistics
experts have the prerequisite qualities to become e-logistics experts. Failing
which new intermediaries will appear. They will be located between the e-

44
commerce player and the logistics players. They will master the information
flow and tender ancillary services yielding large profit margins.

3.5.5 Information systems

As the logistics expert is becoming the only intermediary between the
producer-seller or the distributor and the buyer, one may easily imagine the
importance of information quality for these three players.

Information needed by seller

It is crucial that sellers know in real time whether the goods have been
delivered and above all whether this delivery is consistent. This information is
essential to be certain their customers' requirements have been met.

Information needed by logistics expert

He must be efficient; he is bound by a private in deed. Not only must he
get information as quickly as possible to be in a position to react swiftly, but in
addition he must render real-time accounts to his customer. The carrier will
have to make an appointment by email with the customer to deliver goods to,
so as to settle the day and time of the driver's arrival

Information needed by customer.

Once the purchase order has been placed via the Internet, the customer
wishes to receive the goods he has just bought ASAP. He will follow on the
seller's website the progress of his order processing (e.g. : manufacture, tests,
packing, shipment and delivery).
The e-logistics expert's job is brand new and first of all rests upon the
knowhow of today's logistics expert. However the formers competence is well
ahead of the latter's. The e-commerce-biased logistic service comprises four
modules: warehousing, transport, information systems and ancillary services.
The first two are well-known and mastered by all logistics professionals. The
last two are new and require not-always-inborn qualities from the players in the
trade. However the e-logistics-biased warehousing and transport services must
be targeted towards e-commerce needs. The novel information systems and
45
ancillary services have started to be integrated by the logistics experts, but the
way left ahead is long to become a full sized e-logistics expert and requires
thorough work.
CHAPTER - IV
ANALYSIS AND INTERPRETATION

4.1 Table
TABLE SHOWING THE TYPES OF SERVICES

Types Respondents %
Export 6 20
Import 0 0
Both 24 80
Total 30 100

From the above table it is found that 80% of respondents are doing both
export and import, 20% is doing export alone and no respondents are doing
only import.

46
 4.1 EXHIBIT
TYPES OF SERVICES

47
48
 4.2 TABLE
THE EXPERIENCE OF FREIGHT FORWARDERS IN EXPORT/
IMPORT

Types Respondents %
Below 5 years 5 16.67
5-10 years 6 20
10 years and above 19 63.33
Total 30 100

From the above table it is understood that 16.67% have experience

below 5 years in export and import business. 20% have 5-10 years experience
and majority of respondents have 10 years and above experience with 63.33%.

49
 4.2 EXHIBIT
EXPERIENCE OF FREIGHT FORWARDERS IN EXPORT/ IMPORT

50
51
 4.3 TABLE
EXPERIENCE IN CARGO HANDLING THROUGH AIR TRANSPORT

Types Respondents %
Below 5 years 4 13.33
5-10 years 7 23.33
10 years and above 19 63.33
Total 30 100

The above table shows that 63.33% of total respondents have 10 years
and above experience in doing cargo handling through air transport. 23.33%
have 5-10 years experience and 13.33% have below 5 years experience.

52
 4.3 EXHIBIT
EXPERIENCE IN CARGO HANDLING THROUGH AIR TRANSPORT

53
 4.4 TABLE
TABLE SHOWING THE LINE OF BUSINESS

Types Respondents %
Domestic 0 0
International 19 63.33
Both 11 36.66
Total 30 100

The above table shows that 63.33% of total respondents do the

international line of business. No respondents are sending cargo only in
domestic. 36.66% are sending cargo to both international and domestic sectors.

54
 4.4 EXHIBIT
THE LINE OF BUSINESS

55
 4.5 TABLE
THE MODE OF TRANSPORTATION MAINLY USED

Types Respondents %
Sea 0 0
Air 10 33.33
Both 20 66.66
Total 30 100

From the above table it is understood that 33.33% of the total

respondents are doing air cargo only. Majority of respondents are doing both
sea and air cargo services with 66.66%. None of the respondents are sending
cargo only through air.

56
 4.5 EXHIBIT
MODE OF TRANSPORT MAINLY USED

57
 4.6 TABLE
HOW FREQUENTLY FREIGHT FORWARDERS USE AIR CARGO
SERVICES

Frequency Respondents %
Daily 26 86.67
Weekly 3 10
Fortnightly 0 0
Monthly 1 3.33
Occasionally 0 0
Total 30 100

Majority of respondents are transporting cargo through air daily with

86.67%. 10% of respondents do air cargo on weekly basis and the rest 33.33%
send cargo through air on monthly basis.

58
 EXHIBIT 6
FREQUENCY OF FREIGHT FORWARDERS USING AIR CARGO
SERVICES

59
 4.7 TABLE
THE COMMODITIES THAT IS DEALT MOST BY FREIGHT
FORWARDERS IN EXPORTING

Commodities Response
Engineering/machinery 26
Leather goods 18
Perishable goods 3
Valuable Goods 5
Garments 23
Pharmaceuticals 18
Finish Leather 16

From the above table it is understood that the commodity which is

exported the most is engineering/ machinery goods. Next comes the garments
and leather goods. Perishable goods are the least exported commodity.

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 4.7 EXHIBIT
THE COMMODITIES THAT IS DEALT MOST BY FREIGHT
FORWARDERS IN EXPORTING

61
 4.8 TABLE
THE COMMODITIES THAT IS DEALT MOST BY FREIGHT
FORWARDERS IN IMPORTING

Commodities Response
Engineering/machinery 24
Leather goods 9
Perishable goods 1
Valuable Goods 9
Garments 11
Pharmaceuticals 5
Finish Leather 6

From the above table it is understood that the commodities which is

imported the most is engineering/machinery goods. Garments come next and
leather goods and valuable products come third. Perishable goods is the least
imported product.

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 4.8 EXHIBIT
THE COMMODITIES THAT IS DEALT MOST BY FREIGHT
FORWARDERS IN IMPORTING

63
 4.9 TABLE
TABLE SHOWING THE EQUIPMENT AND FACILITIES USED FOR
TRANSPORTING CARGO FROM WARE HOUSE TO AIRPORT

Types Respondents %
Own vehicles 4 13.33
Hired vehicles 21 70
Both 5 16.66
Total 30 100

The above table shows that majority of the respondents choose hired
vehicle to transport the goods from ware house to airport own vehicle is opted
by 13.33% of total respondents. 16.66% of respondents used both hired and
own vehicles.

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 4.9 EXHIBIT
THE EQUIPMENT AND FACILITIES USED FOR TRANSPORTING
CARGO FROM WARE HOUSE TO AIRPORT

65
 4.10 TABLE
TOTAL TONES OF CARGO HANDLED PER MONTH

Type Respondents %
Below 100 18 60
100-200 6 20
200-400 6 20
400 and above 0 0
Total 30 100

Above table shows that 60% of the total respondents handles the cargo
below 100 tones per month. 20% each respondents handle cargo from 100- 200
tones and 200-400 tones per month.

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 4.10 EXHIBIT
TOTAL TONES OF CARGO HANDLED PER MONTH

67
 4.11TABLE
THE CUSTOMS HOUSE AGENTS OWNED BY FREIGHT
FORWARDERS

Types Respondents %
Yes 21 70
No 9 30
Total 30 100

From the above table it is understood that 70% of total respondents have
their own customs house agents. 30% says they don’t have their own customs
house agents.

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 4.11 EXHIBIT
THE CUSTOMS HOUSE AGENTS OWNED BY FREIGHT
FORWARDERS

69
 4.12 TABLE
FREIGHT FORWARDERS PREFERENCE TOWARDS AIRLINES

Airlines Respondents
Singapore Airlines 22
Lufthansa Airlines 19
Cargo Lux 9
Qatar Airways 7
Malaysian Airlines 4
Sri Lankan Airlines 2
Air India 4
Emirates 4
AirFrance 5

From the above table it is understood that Singapore Airlines is

preferred by most of the respondents. Lufthansa comes second with a total of
19 respondents and Cargolux comes third with 9 respondents.

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 4.12 EXHIBIT
FREIGHT FORWARDERS PREFERENCE TOWARDS AIRLINES

71
 4.13 TABLE
FREIGHT FORWARDERS PREFERENCE TOWARDS AIRLINES IN
RESPECT TO COMMODITY THEY SEND

Airlines Respondents
Singapore Airlines 19
Lufthansa Airlines 16
Cargo Lux 9
Qatar Airways 7
Air Lankan Airlines 5
Air India 4
Air France 4
Malaysian Airlines 4
Emirates 3

It is understood from the above table that Singapore Airlines is opted by

majority of the respondents on commodity wise. Lufthansa is the second
popular airlines with 16 respondents, Cargolux comes in third.

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 4.13 EXHIBIT
FREIGHT FORWARDERS PREFERENCE TOWARDS AIRLINES IN
RESPECT TO COMMODITY THEY SEND

73
 4.14 TABLE
WHETHER THE CUSTOMERS OF FREIGHT FORWARDERS
IMPOSE CONDITIONS WHILE SELECTING A PARTICULAR
AIRLINE

Types Respondents %
Yes 22 73.33
No 8 26.66
Total 30 100

73.33% of total respondents says that their customers impose conditions

to choose airline for transporting cargo. 8% says their customers don’t impose
any conditions to choose air lines.

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 4.14 EXHIBIT
WHETHER THE CUSTOMERS OF FREIGHT FORWARDERS
IMPOSE CONDITIONS WHILE SELECTING A PARTICULAR
AIRLINE

75
76
 4.15 TABLE
THE COUNTRIES RANKED BY THE FREIGHT FORWARDERS

Countries I II III IV
USA 12 8 5 1
Europe 19 10 1 -
Gulf countries - 5 13 6
Other Asian
- 4 6 13
Countries

Countries Average (%) Rank

Europe 1.4 I
USA 1.96 II
Gulf Countries 2.93 III
Other Asian Countries 3.33 IV

From the above table it is understood that majority of the exports is to

Europe with USA ranking second, Gulf Countries third and fourth is Other
Asian Countries.

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 4.15 EXHIBIT
THE COUNTRIES RANKED BY THE FREIGHT FORWARDERS

78
 4.16 TABLE
WHETHER THE FREIGHT FORWARDERS FREQUENTLY SWITCH
OVER FROM CURRENT AIRLINE TO OTHER AIRLINES

Types Respondents %
Yes 23 76.66
No 7 23.33
Total 30 100

The above table shows that 76.66% of the total respondents switch over
from current airline to other frequently. 23.33% of respondents stick to a
particular airline for transporting cargo.

79
 4.16 EXHIBIT
WHETHER THE FREIGHT FORWARDERS FREQUENTLY SWITCH
OVER FROM CURRENT AIRLINE TO OTHER AIRLINES

80
 CHAPTER - V
FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS

 It is observed that majority of freight forwarders are doing both export

and import activities
 Majority of the freight forwarders have more than 10 years experience in
the forwarding business.
 Majority of the freight forwarders are doing cargo handling through air
transport for more than 10 years
 No freight forwarders are doing domestic operations alone.
 Majority of the freight forwarders used both mode of transportations,
through air and sea.
 It is observed that majority of freight forwarders do air cargo
transportation on daily basis.
 It is observed that the goods which exported the most by freight
forwarders are engineering/ machinery goods.
 The goods which are imported the most is engineering/ machinery goods
by freight forwarders.
 Majority of the freight forwarders prefer hired vehicle to transport the
goods from ware house to airport.
 Its observed that majority of freight forwarders handles cargo below 100
tones per month.
 Majority of the freight forwarders have their own customs house agents
 It’s observed that Singapore Airlines is preferred by majority of freight
forwarders.
 Its observed that majority of freight forwarders customers impose
conditions in choosing the Airline for transporting goods.

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  Rate, service and transit time are the factors which influence the
customers of freight forwarders to choose the Airline.
 USA ranks first among the countries to which the freight forwarders
send goods.
 Its observed that majority of the Freight Forwarders switch Airlines
frequently
 Rates, customer requirements, destinations, transit times are some of the
factors which influence the freight forwarders to choose the Airlines.

SUGGESTIONS

 Frequent off loadings should be stopped by the Airlines

 Airlines should cover more destinations

 Loss through Transshipment should be avoided

 Missing goods from ware house should be avoided

 Proper customer service should be provided by Airlines

 Frequent failure of online system should be rectified

 The documents should be processed without any delay in customs

office.

 Lack of Appraisal Officers and employees should be rectified

 Airline authorities should remove the interference of other agents

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CONCLUSION

India is well on its way to becoming an airfreight hot spot, but the air
cargo sector has still to be accorded the recognition rightfully due to it as an
industry. It is evident that within the next five years the air cargo scenario is
expected to undergo a dramatic transformation.

Air cargo transport has undergone a lot of change over the past decade.
The capacity now available in India has stabilized the pricing and there are
various options available with so many feeders/carriers coming into India.
Besides, regular airlines have increased their total number of flights. All this
has contributed to making rates economical. Thus, there are prime services,
differed services and economy services. On the other hand sea-air movement,
considered a good concept, has almost petered out

The trade has been expressing fears about the possibility of traffic
moving out to neighboring countries including Bangladesh and Pakistan, if
infrastructure remains the government’s low priority. Thanks to their lower
taxes, fees and kerosene prices these countries, which already offer a
competitive advantages, could easily wean away air traffic from India.

Documentation has reduced tremendously over the past few years with
the introduction of computerization and EDI in stages by the authorities. The
trade feels there is much that needs to be done to streamline operations and cut
down delays.

83