QUARTERLY MAGAZINE AIR FRANCE-KLM CARGO VOLUME 21 ˆ NUMBER 25 ˆ JUNE 2006

cargovision

Preparing for Change

People Make a Difference
Under One Roof

PANDORA’S
BOX
 cargovision editorial cargovision contents

© Richard Levine/Alamy
SHELF LIFE Developing packaging, page 4

We are in the midst of a global contest, with people everywhere making products that they
hope we will buy. You see this in the supermarket: which country grew the fruit you are about
to purchase? In your home: was your TV set built by Hungarians or Koreans? And
on the street: just look at the international content in the auto you drive.
4 PANDORA’S BOX
Packaging sells products once they are on the shelf. But it also facilitates freight handling,
reduces damage and pilferage, and ultimately controls unit costs. Several industries are
developing packaging that does it all.

Interestingly, the competition for your money began long before these products appeared in
our local stores. Someone believed you might buy his product because you liked the look of
the box. But which box? Yes, that’s a good box, but will it still look good when it gets to the
store? And how many of them will fit on an aircraft pallet? Uh-oh, we need to stack them
high to keep the landed cost acceptable. What’s that? You can’t stack them any higher or
they’ll crush?
Suvarnabhumi
With these dilemmas in mind, we decided to devote this issue to packaging. It has broad yet
subtle cost implications for all participants in the supply chain. And because regulators play
a large part in deciding how you package your pharmaceuticals or fresh produce, we decid-
ed to discuss that topic as well.
14 PREPARING FOR CHANGE
Bangkok’s new airport, Suvarnabhumi, is due to replace Don Muang airport later this year.
Cargovision spoke with Kovit Thanyarattakul, chairman of Multi Air Services in Bangkok,
about the prospects for Thai airfreight and Bangkok’s new airport.
19 U-TURN
Searching for leaner logistics and lower landed costs, auto builders found China. Now they like
Eastern Europe. Cargovision explores this change and its effect on the air cargo business.

An even more familiar issue is the competition for cheap manufacturing labor and supplies.
The epicenter of this struggle keeps shifting to new regions. China has led the manufacturing 20 PEOPLE MAKE A DIFFERENCE
race for some time. In this issue, we learn why some manufacturers are finding love in Philippe Gallon manages AF-KL Cargo in Abidjan. He understands the subtle nature of Africa’s
Eastern Europe. business climate. It irritates him when people explain a service failure with the comment,
“Well, this is Africa.”
The role of AF-KL Cargo in these multilayered struggles is to provide effective transportation
for various participants. Although our forwarding partners usually plan their customers’ logis-
tics, we can now offer them a wider range of options via our aligned networks, operating 24 UNDER ONE ROOF
through Charles de Gaulle and Schiphol. Our progress in collocating customer service func- What exactly does integrating local customer service teams involve? Cargovision spoke with
tions under one roof is a topic that we believe will offer you a first taste of what lies ahead for Jan Krems Jan Krems who is overseeing the integration of customer service offices throughout AF-KL
the customers of AF-KL Cargo. Cargo’s network.

JEAN CHARLES FOUCAULT

Senior Vice President Sales & Distribution
Air France Cargo-KLM Cargo
08 news & datelines
22 Carsten Pellicaan
26 country file
28 market monitor
30 postscript
31 information and colophon

COVER IMAGE
Pears being harvested

© Peter Titmuss/Alamy
© Jochen Tack/Alamy

2 cargovision | JUNE 06 cargovision | JUNE 06 3

 PANDORA’S
BOX

© Richard Levine/Alamy
Packaging sells products once they are on the shelf. But it serves other purposes
before that: it facilitates freight handling, reduces damage and pilferage, and ultimate-
ly controls unit costs. Several industries that rely on airfreight are developing packag-
ing that does it all.

BY KAREN E. THUERMER

© J. Marshall-Tribaleye Images/Alamy
■ Packaging serves multiple purposes, but the
primary goal is to sell what’s inside the box.
However, few companies consider how effective
packaging can reduce airfreight handling and
costs. After all, optimal packaging protects the
contents and can affect the profitability of a com-
pany’s entire supply chain. “Depending on how
far a company wants to go with quality packag-
ing, it can generate more reliable logistics sys-
tems and greater profit,” says Rogier van Beu-
gen, commercial director of Fresh Logistics at
AF-KL Cargo. Many products are affected by the
way packaging helps or hinders airfreight han-
dling and costs: fresh produce, high tech goods
and pharmaceuticals, for example. Each has its
own circumstances and requirements based on
its supply chain model.
FRESH FLIGHTS
In the food industry, the UK firm Blue Skies of
Pitsford, Northamptonshire, finds that by slicing,
dicing and packaging foods at the source, they
can prepare and ship certain perishables by air
and deliver them into the hands of wholesale and
retail customers in Europe within 36 hours of har-
vest. Workers in Ghana, South Africa, and Egypt
first process food items and then seal and pack
them in custom-made plastic tubs stored in chill
rooms. Next, they pack the tubs into cardboard
boxes and load them into aircraft containers for
their journey in the plane’s temperature-con-
trolled cargo hold. “The fruit needs to be shipped
in a controlled environment,” says George
Hutton, operations manager at Blue Skies. “We
used the Envirotainer units before, but found
them too expensive and difficult to handle.” Cost
is a critical component of Blue Skies’ business
model, and every expense is scrutinized. “Our
pockets are only so deep,” Mr. Hutton says.
“And airfreight is expensive.”
When fresh produce travels in individual pack-
ages, it takes up more room in an aircraft than it
does when flown loose in large boxes. “But if you
ship an entire pineapple, 70% is thrown away lat-
er as waste,” Mr. Hutton explains. “Instead, we
throw away that 70% in Ghana and ship just the
bits and pieces.”
The labor cost to process perishables is much
cheaper in Africa than in Europe, and the ready-
to-eat product commands a higher price. Both
packaging and airfreight are major cost items for
all shippers of time-sensitive perishables. Fresh
fish, in particular, requires delicate handling.
Frozen salmon, shellfish, sushi-grade tuna and
other expensive seafood commonly travels in
Envirotainers, but the less expensive varieties are
packed in Styrofoam boxes with wet ice and
stacked onto pallets.
“The Styrofoam boxes have a lifespan of about 2
or 3 days,” Mr. van Beugen says. “Norway, the
source of many salmon shipments, generally uti-
lizes the best boxes. The business from Africa
involves less expensive fish. It is not as well

cargovision | JUNE 06 5
cargovision pandora’s box
organized and the box types vary. This can
diminish the quality of the product.”
FIT TO FLY
Fierce competition in the consumer electronics
business makes speed to market a paramount
concern. Manufacturers face constant pressure
to meet the replenishment demands of their
retailers. “Today it’s hot, tomorrow it’s not,” says
Hans van Wijngaarden, business manager for
Philips Applied Technologies, the supply chain
arm of Royal Philips Electronics in Eindhoven. “If
movement within the supply chain takes more
than three months, price erosion can be more
than 30%, particularly for new digital products
such as LCDs.” Consequently, electronics manu-
facturers carefully consider how to ship their
products. Given the industry’s tight margins, cost
is important. Packaging density can have a major
effect on cost. “We can identify the reasons why
high-end customers need to prevent damages,”
says Wim Lagendijk, quality manager at AF-KL
Cargo. They use consumer packaging increas-
ingly as a controlled way of achieving the short-
est time to market. They plan deliveries to limit
stocks and reduce both costs and out-of-date
articles. Some firms produce on a just-in-time
schedule so they can replenish their stock levels
frequently. Others ship single orders that were
bought on the Internet or were sent as test sam-
ples. “It is clear that any damage, partial loss, or
pilferage will immediately affect their revenue,”
says Mr. Lagendijk.
PAPER THIN
End-user packaging is the trend occupying the
attention of most electronics makers today. “This
means the boxes are thinner and not as robust
as they once were,” says Johan Schreuders, AF-
KL team member. “Many boxes are made of
fiberboard. On top of that, shipments are moving
very fast. This means consolidators must load
pallets quickly. Cargo handlers may not always
give full attention to how they stack products on
top of one another. Heavy industrial shipments
and personal goods are often loaded on pallets
along with electronics in order to optimize aircraft
© Holt Studios/Alamy
loads and volume.”
Stacking shipments on pallets is an art in itself,
with the smallest and lightest packages generally
going on top. However, the quality of the boxes
is not always calculated to withstand the forces
6 cargovision | JUNE 06
at play in this environment. “We need a better
exchange of information at the onset of package
design,” Mr. Lagendijk says. “If the packaging is
fit for flying, it will reduce costs.” AF-KL Cargo
deem this point so critical that it has implement-
ed a Fit-for-Flying initiative that applies to many
commodities that move by air. “Packaging is very
important and must be secured in such a way to
protect merchandise from both damage and
theft,” Mr. Lagendijk adds. “It doesn’t pay to be
penny wise and pound foolish.”
THE WHOLE TRUTH
Philips Applied Technologies and AF-KL Cargo
recently organized a workshop for high-tech
customers in Europe, so that shippers and trans-
portation providers could discuss aspects of
packaging that relate to airfreight and to their
own costs. Participants discussed and explored
the limitations of the air cargo industry and ways
to create packaging for the entire supply chain.
The packaging of pharmaceuticals is subject to
the same issues as electronics. The difference
being that lives depend on pharmaceuticals.
Product integrity is the primary consideration.
Packaging these products is clearly not a one-
size-fits-all business.
To being with, pharmaceuticals range broadly
from vaccines to medicines. International rules
govern the temperatures for shipping each of
them. When a company designs packages for
these goods, it must integrate the regulations in
© Hollandse Hoogte
order to maintain the integrity of the contents in
transit. “A growing number of companies are
working on packaging to achieve this,” says
Serge Alezier, AF-KL Cargo’s international sales
manager of pharmaceutical logistics for
Southern Europe. However, pharmaceutical
packaging again serves a dual purposes: to pro-
tect and sell the product, and to ensure that it
meets government regulations and industry
standards while in transit.
The decisive factor in striking a balance between
these purposes is the type of pharmaceutical
product, says Stephane Lemaire, director for
pharma industry at AF-KL Cargo. “The packag-
ing is always linked to what’s inside.” Even
though companies in this industry have numer-
ous packaging options available, many of them
use expanded polyurethane Styrofoam, both
standard and customized, in conjunction with gel
packs. The more expensive alternative is vacu-
um-inflated insulated panels.
“There is a lot of research being done on new
packaging materials,” says Ira Smith, senior vice
president for Pharmaceutical & Healthcare at
Kuehne+Nagel. For many companies, the goal is
to ship products cheaper, better, and faster by
closing the gap in the distribution channel and
saving on packaging costs. “Many firms want to
turn a 72-hour package into a 48-hour package.
While a lot of packaging has been developed,
there has been no magic bullet so far.”
One challenge with pharmaceuticals is to ensure
integrity throughout transit. However, as with
electronics, the cost of transportation frequently
overshadows the importance of good packag-
ing. “The first thing pharmaceutical companies
do is use a cheaper box or drum that is less
voluminous and often too flimsy,” says Arthur van
Olst, senior product manager of Pharmaceutical
Logistics for AF-KL Cargo. “In that case, they are
bound to have problems.” Both pharmaceutical
and healthcare companies also ship packages in
commercial boxes designed to be opened easily
by patients, Mr. Van Olst adds. “If these boxes
are accepted for transport and something is then
stacked on top of them, they will collapse.”
ALL WRAPPED UP
High-value products, such as pharmaceuticals
and electronics, often face another problem: high
pilferage rates. “Much of the pilferage is simply
due to the poor quality of packaging,” Mr. van
Olst says. As these issues become more widely
known, companies have begun to collaborate
more with carriers and freight forwarders in order
to develop packaging that suits their transporta-
tion needs and meets the requirements of the
authorities and of their trade associations.
“The challenge for the logistic partners is to
ensure that the shipper, the pharmaceutical
company, asks for procedures developed within
their partnership,” says Mr. Smith of
Kuehne+Nagel.
As a solution for many packaging issues, AF-KL
Cargo developed the AirModule, a container that
increases protection of the contents and facili-
tates its journey through the supply chain.
AirModule is designed to use less packing mate-
rial yet offer greater protection against damage
and theft. It can be moved easily from door to
door, with lower handling costs and shorter tran-
sit times. It does not require the use of wooden
pallets or skids. Still, while the AirModule offers a
partial solution, it does not change the need for
manufacturers to plan their packaging in coordi-
nation with their transportation vendors, so that
their products withstand the rigors of the jour-
neys to their individual markets.
© Enigma/Alamy
cargovision | JUNE 06 7
 cargovision news around the world cargovision news around the world

Our quarterly review of

ATHENS
industry news keeps you Athens International Airport and the Piraeus Port
abreast of developments Authority agreed in March to establish a sea-air
cargo link. The authorities will accelerate offload
in key sectors around procedures at the seaport and move freight to
the airport using a direct truck-shuttle service.
the world. They are promoting favorable cost and handling
terms. Connections were to begin in April, with
rail links to be added in the future.

AIRPORTS General BERLIN AIRPORT TRAFFIC 2005

In mid-March, good business reconciled with
good life after a federal administrative court in
LONDON Leipzig approved a EUR2.5 billion project to WORLD
Depending on your satisfaction with handling services at any of the remake Berlin’s Schoenenfeld Airport into Berlin- Shanghai and Dubai topped the growth charts
seven British airports owned by BAA, you would be pleased or anx- Brandenburg International. About 4,000 local resi- last year for cities handling over 1 million tonnes Kuala Lumpur, the new B747-400 freighter
ious about the ongoing takeover efforts of Ferrovial. The UK is the dents kept this development on hold with protests of freight. Tokyo and New York sank to the bot-
Ferrovial’s second-largest market. About half of its EUR7 billion and lawsuits over its potentially adverse impact on tom. Still, Shanghai’s tonnage was less than a
turnover comes from it’s construction business. However, infrastruc- their environment. In consideration, the court’s rul- half and Dubai’s less than a third of that handled KUALA LUMPUR
ture development is its most profitable segment and accounts for ing restricts landings after 10 pm and noise pollu- by the largest airport, Hong Kong. MASKargo got a new B747-400 freighter in March
over half of its EUR17 billion in assets. BAA owns and operates seven tion. It will also require developers to compensate and plans to use its range and capacity to serve
British airports, including Heathrow, Gatwick and Stansted (serving affected residents. However, the landing restric- triangular routes, such as Kuala Lumpur-Dubai-
London), Southampton, and three Scottish airports at Glasgow, tions won’t help airlines attract business travelers Amsterdam. According to Datuk J J Ong,
Edinburgh, and Aberdeen. and cargo that often leave Asia at convenient Malaysia Airlines senior general manager of cargo,
times in the afternoon and arrive in Europe in late CARRIERS Asia the 747-400 freighters could eventually replace
evening. Berlin’s Tegel Airport will close once MASKargo’s fleet of six leased B747-200
Brandenburg International opens in late 2011. freighters. MAS management expects Mr. Ong to
Tempelhof is expected to close in 2007. TOKYO use the new plane to more than triple
2005 International Feight & Growth Amid poor financial results and concerns that maintenance incidents MASKcargo’s operating profit in 2006 to RM107
have compromised safety, JAL SVP Haruka Nishimatsu replaces million (EUR24 million), up from RM31 million
4.000 t 20% CEO Toshiyuki Shinmachi in June. Mr. Shinmachi served 10 years in (EUR7 million) in 2005. Results like that should see
the carrier’s airfreight division, most recently as a VP, before he was many new freighters arriving in Malaysia.
3.500 t promoted in 1997 to JAL’s board of directors as an SVP and in 2004
3.408t 15% as President. Mr. Nishimatsu is JAL’s SVP of finance and purchasing HONG KONG
3.000 t and has worked in finance since 1991. Cathay Pacific Airlines wants more of China than
Top-level management changes don’t often affect a carrier’s airfreight Beijing and Xiamen. It wants Dragonair, or at least
10%
2.500 t 10% business, but in JAL’s case they could. Since April 2004, Japan Dragonair’s access to the mainland China markets
Airlines International Co. and Japan Airlines Domestic Co. have been Cathay relinquished, after it bought control of the
2.233t
2.000 t 2.120t under the wings of the holding company, JAL. Mr. Nishimatsu over- upstart carrier in 1991. For the moment, Air China
2.016t
1.836t 1.834t
saw the assimilation of the two airlines and is regarded by both com- holds 29% of Dragonair and controls a further
8%
5%
1.500 t 8%
3% 1.629t
1.601t panies as a neutral participant. His task is to return JAL to profitability 43% of its shares through a Hong Kong sub-
1.443t 1.443t by overcoming cultural differences that remain within the two carriers; sidiary. It would like fifth-freedom rights beyond
1% 18% 1.301t 1.281t
1.000 t 0% 1.172t
1.071t
reducing JAL’s interest-bearing liabilities, which are nearly the same Hong Kong. To sort out routes and shares,
2% -0.6% 0% as its gross sales of ¥2 trillion (EUR14 billion) and withdrawing from Cathay, Air China, and Dragonair began talks in
12% -2.0%
500 t -3.4%
unprofitable international routes. On the last point, Mr. Nishimatsu April. At press time, the prognosticators thought
7%
-1.5% says that JAL remains firmly determined to make money from its that Cathay would increase its 18% share in
0t -5% international flights. Dragonair to improve its access to mainland
© Stefan Loupatty

China, while Air China would buy into Cathay and

E

M
NG

RE
G

DA
UR

RK
I
RA

HA

K
KO

KO
ER

YO
KF

AP
O

O
O

UI

I
NG

I
CH

NG
PE

AN

ST

ND

BA
AN
KY

M
NG

W
O

IA
HO

AM
I

DU
AN

SH

NE
TO

SE

FR

LO

BA
TA
SI

8 cargovision | JUNE 06 cargovision | JUNE 06 9

 cargovision news around the world cargovision news around the world

WILMINGTON
After nine years of testing RFID, DHL began a
series of pilot projects in March to see how the
tags could improve its efficiency and tracking.
One test, in partnership with IBM, will monitor
possibly achieve greater international access. If this is too easy to fol- the movement of consumer electronics repairs
low, let us add that Citic Pacific Ltd, a Chinese conglomerate with through DHL’s Express network. All other tests
29% of Dragonair and 25% of Cathay and a pivotal player in this bar- will take place in the US and, if successful, could
gain, says it wants to sell its non-core holdings (everything except lead to wider implementation next year.
property, steel, and power) yet retain a significant share of Cathay.
ALONG THE A-1
WELLINGTON Autos are prime candidates for RFID installations,
A grey drizzle welcomed the Rolling Stones to Wellington Airport for everything from immobilizers to tire pressure moni-
their April 18 concert at Westpac Stadium. The city fathers had tors. Using RFID to aid the processes of manufac-

© ANP Foto
granted permission for the stadium to host a certain number of con- turing and distributing autos is Asia, according to
certs each year that could exceed standard noise limits. However, an ABI Research report out in March. Europe fol-
they did not look as favorably upon a proposed Air New Zealand- lows, with cash-poor automakers in North

Qantas codesharing arrangement for air services across the Tasman
Sea. The Wellington Chamber of Commerce fears that such a pact
will slash flights to Sydney and Melbourne.
Nearly 20% of New Zealand’s live lobster exports fly from Wellington,
as well as other seafood, flowers, and high-value goods. Wellington
is located on the southern tip of New Zealand’s North Island and is
that nation’s second largest economic region. So, Mick, enjoy your
lobster in Wellington. ‘Cause you won’t get no satisfaction when you
hit Sydney.
INDUSTRY Europe
BRUSSELS
In February, the European Commission proposed that supply chain
operators who adhere to minimum European security standards
could be designated as secure operators, a status that would give
them fast-track treatment at security checks at both internal and
external EU borders and distinguish them from less secure competi-
tors. About half a million companies now operate transport and ancil-
lary services in the European supply-chain sector. The scheme could
benefit operators who want to invest in security, but hesitate for fear
of wasting valuable assets.
PARIS
Aéroports de Paris SA filed for an initial public offering in April and is
raising fees to fund EUR1 billion in infrastructure improvements.
Airlines are not happy with CDG’s 5% annual increases of the past
five years, or of the next five years. They want the European Union to
regulate airport charges. EU transport commissioner Jacques Barrot
suggested in early April that airports might increase landing fees for
airlines at peak hours and lower them at less congested times. He
had not addressed the issue of Paris as of press time.
Technolgy RFID
AMSTERDAM
Funny stuff that radio frequency interference. First,
researchers at the Amsterdam’s Free University
created a radio frequency identity (RFID) chip
infected with a virus to prove that RFID systems
are vulnerable despite their low memory capacity.
Their announcement came at a conference in
Pisa, in the form of a technical paper entitled, “Is
your Cat Infected with a Computer Virus?”
Concern spread quickly that such a virus could
migrate to the industrial databases connected to
RFID scanners and from there to other tags, cor-
rupting entire systems. Fortunately, no technology
in recent memory has had the monetary support
of so many government agencies and technolo-
gists as RFID. The very next day, Dan Mullen,
president of the AIM Global trade group leapt to
the rescue. “Those researchers built a system with
weaknesses and then showed how they could be
exploited,” Mr. Mullen said. “Poor system design,
whether capturing RFID tag, bar code or keyboard
data will create vulnerabilities.” Well, now you can
rest easy knowing that your cat is safe.
SEATTLE
Meanwhile, Boeing says it will revolutionize the
workings of the logistics sector for the aerospace
parts business. The plane maker hired Intelleflex
Corp. to supply RFID tags for parts of the forth-
coming B787 in order to reduce its maintenance
and inventory costs.
America picking up the rear.
ONLINE General
BEIJING
Air China gave Unisys a five-year contract to host
a system to manage its air cargo. It is expected to
go online in March 2007. The Chinese carrier now
flies about 700,000 tonnes annually to about 20
countries. Things could work out well for Unisys,
because Air China Cargo and China Cargo Airlines
formulated a merger plan in April, according to
Singapore’s Singtao Daily. The two carriers will
hold equal shares of a new company along with
CITIC Pacific (please see Carriers: HONG KONG),
which vowed to divest itself of the air cargo busi-
ness.
HONG KONG
If you know someone who is still filing paper mani-
fests for their ocean and river entries into Hong
Kong, please remind them that they must file elec-
tronically over the Internet as of June 16.
ALGIERS
Air Algerie hired CHAMP Cargosystems to auto-
mate its cargo operations on a five-year contract.
The carrier mostly operates B737s, but also
flies five A330s internationally, and two Lockheed
C-130s wherever they are needed. It plans to
expand cargo operations.
© John T. Fowler/Alamy
Cargojet of Toronto
TRIVANDRUM
Airlines from the Far North buy software from the Far South. Cargojet
of Toronto and Northern Air Cargo of Anchorage both signed up for
IBS Software’s reservations and ground handling software called
SmartCargo. Cargojet operates B727 Advance freighters and trucks
between 13 Canadian cities. Northern Air Cargo flies DC-6s, B727
freighters and ATR-42s to just about anywhere in Alaska, and to
Seattle and Siberia.
HOUSTON
In March, EGL Eagle Global Logistics began using Inforwarding’s Air
Freight Rates Application in Europe, the Middle East, and Africa. The
program displays cargo rates online and enables agents to search
and compare them.
HOOFDDORP
TNT Freight Management joined Cargo 2000 in January.
REDWOOD SHORES
Oracle added G-Log to its list of acquisitions in transport manage-
ment software that already includes Siebel, J.D. Edwards, and
PeopleSoft. Oracle has enterprise resource planning software and
plans to transportation management software to third-party logistics
providers. Using G-Log’s Global Command Center product, Oracle
will try to provide another choice for providers who want to reduce
cycle times and lower total costs.

10 cargovision | JUNE 06 cargovision | JUNE 06 11

 cargovision news around the world cargovision datelines

JUNE 14-17
Third Annual Sino-International Freight
Forwarders Conference, Dong Fang Hotel,
Guangzhou, China.
Contact: conference@sinoforeignforwarder-
sconference.com

JUNE 17-23
45th Farnborough International Airshow,
Farnborough Aerodrome, Farnborough,
Hampshire, UK. Tel: +44 (0) 20 7976 3330
www.farnborough.com

JUNE 26-28
INTERMEDIARIES Consolidation INTERMEDIARIES Result

© Skyscan Photolibrary/Alamy
Fourth eyefortransport 3PL Summit, 26-28
June, Intercontinental Buckhead, Atlanta.
Contact: Izabela Janecka (Event Director),
WORLD WORLD Tel: US +1 800 814 3459 ext. 252.
The market share of the top 10 freight forwarders has increased from 2005 was a very good year for most forwarders. Tel: UK +44 (0) 207 375 7564.
25% in 1985 to 40% in 2005. Much of it resulted from ongoing con- The operating margins for Kuehne+Nagel and ijanecka@eyefortransport.com
solidation. In the last few months, we’ve seen DFDS Transport Group Panalpina led the field and were three to five times
A/S acquire 99% of Frans Maas Group NV. Fiege, a German logistics greater than for most airlines. A number of large Control Tower Johannesburg AUGUST 2-3
company bought TTS Group and its sister company, Rewico Logistik firms saw exceptional year-over-year growth. The Evolution of Logistics & Supply Chain
International, adding to its consumer products and presence in Management in China, Pudong Shangri-La
Eastern Europe. Another German Logistics firm, Dachser, has Hotel, Shanghai. Tel: +1 630 574-0985 x
expanded into Korea and China through joint ventures. OUTLOOK South Africa 320. CSCMPseminars@cscmp.org.
Kuehne+Nagel bought E.M. Trans AS in Estonia. John Menzies www.cscmp.org
bought Aeroground, a ground handler operating in the western US.
Bibby Distribution in the UK, Azkar in Spain, Bartolini in Italy, MGF JOHANNESBURG SEPTEMBER 10-13
Logistique in France, and Rhenus Group in Germany all joined 2005 was a particularly nasty year for airline safety in Africa, said Jeff Airport Cities World Conference and
together to form the Logistics World Alliance operating from the Radebe, South Africa’s Transport Minister. Addressing an aviation Exhibition, Sky City, Hong Kong.
Rhenus headquarters in Holzwickede. UTi Worldwide Inc. acquired safety conference in January, Mr. Radebe said that, with one third of Melissa@airportconference.com.
Portland-based Market Industries, Ltd., a third-party logistics firm. all fatal aviation accidents and less than a 20th of the traffic, Africa www.airportconference.com
Now, when is UPS going to break down and buy TNT? had 10 times more accidents than the rest of the world. Still, the air-
line business on the continent is thriving. The number of airline com- SEPTEMBER 12-14
panies last year reached 372, up from 300 in 2004. Passenger 23rd International Air Cargo Forum and
Income Change (”04-”05) and Margin (”05) growth was up 11%, and cargo nearly 8%. Exposition, Calgary, Canada. Contact: TIA-
CA Secretariat. Tel: +1 786 265-7011.
80% 80% CAPETOWN secgen@tiaca.org. www.tiaca.org
South Africans who import machinery, mechanical appliances, or
electrical equipment from Germany will see their airfreight rates begin SEPTEMBER 17-21
72%
60% 20% 60% to drop. ABX Turner negotiated special rates with airlines that should FIATA World Congress 2006, Shanghai
help stimulate local industry. Germany supplied R45 billion (EUR6 bil- New International Expo Centre, Shanghai,
17% lion) worth of imports to South Africa last year, compared to R25 bil- China. www.fiata.org
40% 40% lion (EUR3 billion) each from China and the US, and R 21 billion
39% 14% (EUR3 billion) each from Japan and the UK. SEPTEMBER 19-22
Air Cargo China 2006, Shanghai New
Operating
20% 27% 25% 23% 11% 20% Operating JOHANNESBURG International Expo Centre, Shanghai,
income income
19% 17% In March, the ocean shipping company Grinrod went on a spending China. Email: cf@a-zgroup.com.
15%
8% 8% 8% 11% 4% spree in South Africa, buying the shares it didn’t already own in two www.aircargochina.com
6%
0% s 0% distribution specialists: Auto Carriers Transport and Grinrod
t ge
l
zie ns T -7%
de
x
I 5% rs Ne S Na L en otra 3% pina TN s
Perishable Cargo Agents. Auto Carriers performs vehicle distribution OCTOBER 15-18
Fe UT ito ld UP + EG M n
na
l
es
or ne hn Si pr -23% and logistics for South African car manufacturers, where it has about Council of Supply Chain Management and
pe d W eh Jo 3% Pa Ex
-20% Ex st u 3% 2% le -20% 35% of the market. Perishable Cargo Agents has been South Africa’s Professionals (CSCMP) Annual
Po K on ng
© Stefan Loupatty

he ipp sa 13% largest freight forwarder for 25 years. Conference, Henry B. Gonzales
N
ut
sc tre
en . Convention Center, San Antonio, Texas.
-40% De t d -40%
er Tel: +1 630 574-0985.
rb
No
membership@cscmp.org.
www.cscmp.org
12 cargovision | APRIL 06 cargovision | JUNE 06 13
Kovit Thanyarattakul is a
man with a positive view of
Thailand’s airfreight
prospects. He is chairman
and managing director of
Multi Air Services (MAS) in
Bangkok, an air and sea
freight forwarder and logis-
© J. Marshall-Tribaleye Images/Alamy

tics provider that has topped

the IATA league table for
Thailand several times and
© ANP Foto
has been in the top five for
the past 10 years. COMPANY PROFILE

© Andrew Woodley/Alamy
Multi Air Services was founded
in 1978, focusing in airfreight
business. It kept growing suc-

PREPARING FOR CHANGE

BY MICHAEL WESTLAKE
Suvarnabhumi is the name of the new Bangkok
airport 30 kilometers east of the city. The “Golden
Peninsula” or “Golden Land” is due to replace Don
Muang airport, 30 kilomeers later this year, after
many delays and cost overruns. The new airport
will handle 1.5 million tonnes of freight per year,
■ Suvarnabhumi is the name of the new
cessfully. Multi Freight System
Co., Ltd. was established in
1989 to concentrate in ocean
freight, and Multi Logistics Co.,
Bangkok airport 30 kilometers east of the city. Ltd. was founded in 1999 to
The “Golden Peninsula” or “Golden Land” is provide the logistics services in
Will operators use radio-frequency ID tags or due to replace Don Muang airport later this the globalization era.
other new technology at Bangkok’s new year, after many delays and cost overruns.
airport for locating and tracking cargoes? The new airport will handle 1.5 million tonnes Multi Air Services has been one
If airlines and terminal operators want to introduce of freight per year, roughly double the capaci- of the IATA top 5 agents in the
new technologies that would increase confidence in ty of Don Muang. export annual sales volume for
Bangkok’s capabilities, I would fully support them. the past 10 years in Thailand. In

roughly double the capacity of Don Muang.
Will the cargo facilities at Bangkok’s new
airport accommodate Thailand’s growth?
I’m very, very positive because the new airport will
Khun Kovit, 55, started with certainly allow for more tonnage. The government
Air Siam after obtaining a wants the airport to open soon. We expect that to
university degree in market- happen by the end of the year and we believe the
ing. He founded MAS in cutover will go smoothly.
1978. He is a former secre-
tary of the Thai Airfreight Will the airport have a cargo village and
Forwarders Association and a customs-free zone?
was later its adviser. He Yes, but the demand will go far beyond the space
served twice as president of allocated by the authorities, so a private operator
Express Transport might find an opportunity there. Thai Airports
Organization, a trucking Ground Services Co, Ltd. will operate the customs-
company owned by the Thai free zone and the cargo terminal will have two
Ministry of Transport. operators, Thai Airways and Bangkok Airways.
Khun Kovit spoke with
Cargovision about the What about the lack of airside express
prospects for Thai airfreight facilities?
and Bangkok’s new airport. No problem. The Big Four express operators
(FedEx, UPS, DHL and TNT) have negotiated with
Bangkok Airways to use part of the terminal facing
airside and this will facilitate express operations.
14 cargovision | JUNE 06
© Richard Stamper/Alamy
2004, it has gained the top IATA
Are you surprised that Thai Air Cargo, ranking at the sales volume of
the cargo airline planned by Qantas and a matter of trust. We have more flights than most US$64.12 million. Multi can
CTI Holding, has been shelved? airports, but less but less cargo throughput. We provide all kinds of airfreight
Not at all. Our market has lots of exports and few can do repackaging, reassembly, and transship- services. The company has
imports. We know the difficulties they were having. ment. These services just need more investment in gained special recognition as
Without a proper network, it’s impossible to run promotions to build confidence among providers. one of the very best handlers of
freighter aircraft profitably. perishable and fresh cargo.
What types of cargo flow to and
Didn’t Thai Airways and a freight forwarder from Thailand? China and our neighboring countries. Vietnam, Mr. Kovit Thanyarattakul, the
also plan a joint venture? The growth trend in electronic goods is obvious Cambodia and China all have the advantage of Chairman and MD of Multi
That is also on hold. If Thai operated both now and we are seeing more high-fashion gar- lower wages. Thailand must produce more of the group, is now the Chairman of
freighters and passenger aircraft, it would improve ments. Many factories buy fabric from Italy and high-fashion, high-value garments, as Hong Kong Thai Airfreight Forwarders
Bangkok’s cargo throughput. Nevertheless, the make high-value garments here for export to did years ago. Association (TAFA), which is the
problem is poor backhaul loads. In spite of their Europe and America. Our government is promot- only airfreight association rec-
good route network, Thai Airways is conservative. ing the car industry and foreign manufacturers Do you find benefits in collaborating ognized by the Thai
have built plants here. We also have very steady with specific cargo airlines? Government and the airfreight
Do airlines and forwarders suffer because of growth in perishables: orchids and fruit. If these As an independent, we like to deal with all cargo industry. He has strong inten-
Thailand’s imbalanced flow of air cargo? can become tax-free under Free-Trade Agree- airlines. However, in this era of logistics services, tion to build the airfreight indus-
Yes, weak inbound and strong outbound flows are ments, we can be more competitive. General car- we must generate the confidence that we can pro- try in Thailand and fully sup-
a real problem. The Thai government needs to pro- go is growing at about 10% per year. vide one high standard of service anywhere. ports the vision of the Thai
mote our airport as a regional hub. Singapore has Therefore, we must have close cooperation with Government to promote
been doing it successfully for a long time. We just Has Thailand lost cargo business to some airlines that, in turn, choose strategic part- Bangkok’s new Suvarnabhumi
need action from our government. The authorities other places such as China? ners from among the logistics providers, so they Airport as a key airfreight transit
must help to create confidence among logistics We did lose some of the garment business to can offer door-to-door services like the Big Four. hub in South East Asia.
providers that Bangkok is a good cargo center. It is
cargovision | JUNE 06 15
U-TURN
Searching the world for leaner logistics and lower landed costs,
auto builders found China. That worked for a while. Now, they like
■ Just when Chinese laborers had convinced
us that resistance was futile, up pops Michael
Bomann, general manager of worldwide distribu-
tion for BMW, AG. “The promise of China as an
inexpensive source of components is not being
delivered to the auto industry,” Mr. Bomann told
automotive professionals gathered at a logistics
conference in Montreux in March. The quality of
Chinese-made auto parts is unsatisfactory, Mr.
Eastern Europe. We explore this change and its effect on the air Bomann continued. Not only did they take six to
eight weeks to arrive by sea freight, but any sub-
cargo business, where 8% of traffic is automotive related. standard parts then had to be replaced using air-
freight at additional cost.
BY MARK W. LYON China will not become the primary maker of auto
parts for European and American auto produc-
tion during the next five years, Mr. Bomann pre-
dicted. Why auto builders are unimpressed by a
manufacturing prowess that makes other
Western industries quake in their boots, is not
only surprising, but could prove troubling for the
airfreight industry if they decide to relocate pro-
duction to other regions. The early signs suggest
they will.
“The Chinese government saw electronics com-
panies as strategic assets, but not auto compa-
nies,” explains Thomas Cullen, author of
Automotive Logistics Europe 2006, published by
Transport Intelligence Ltd. This oversight retard-
ed the evolution of China’s car industry and the
participation of its component builders in the
US$19-billion market for global auto parts. It also
produced a supply chain infrastructure for elec-
tronics components that is highly efficient and
another one for auto parts that is still primitive
and plagued with chronic problems.”
When China opened its arms to electronics
firms, many of them, even some who had moved
into Eastern Europe only a few years before,
packed their bags and headed to Asia, leaving
behind a slew of underutilized factories and a
© Getty Images skilled (and now hungry) workforce. A number of
these facilities have now reinvented themselves
as neighborhood repair stations for electronics
AUTOLOGISTICS Participants 2006
• 5,000 Suppliers
• US$ 800 billion
Car manufacturing plant, mechanic working on engine
16 cargovision | JUNE 06
consumers in Western Europe. Still, vehicle man-
ufacturers soon discovered they could open
component factories and assembly plants at
bargain-basement prices in Eastern Europe.
Thus, Poland, the Czech Republic, Slovakia,
Hungary, and Romania all became important
sites for auto production, Mr. Cullen explains.
More than 10 plants have opened or been
acquired there by Western vehicle manufacturing
groups during the last decade, while no large-
volume car plants have opened in Western
Europe.
STABILITY AUGMENTATION
Although China overtook South Korea and
France to become the world’s fourth-largest auto
manufacturer last year, with nearly 5 million vehi-
cles produced, recent developments in western
marketing are hindering its success with compo-
nents:
Mechatronics. Mechanical-electronic hybrid sys-
tems, such as chassis stabilization and ABS
brakes are found in growing numbers of models
every year. Mechatronic parts require sophisti-
cated production skills, more so than DVD play-
ers, and different supply routes. Workers in
Eastern Europe have thus far outclassed their
Chinese rivals in building mechatronics.
Shorter lifecycles. Some new auto models last
four to six years in the market, says Volkmar
Herrscher, SVP for automotive at
Kuehne+Nagel’s corporate headquarters. Car
builders used to change models every six to
eight years. “With such a short lifecycle, you can-
not waste time and money in lengthy supply
chains. We saw this previously in electronics.
Now, something similar is happening in autos,
and the more expensive parts are moving by air.”
Build to Order. These programs, offered by
Renault and BMW for example, let customers
change the specifications of their car as late as
Participants 1986
• 30,000 Suppliers
• US$ 250 billion
SUPPLY-CHAIN
STRUCTURE
■ Regionally-based. Automak-
ers, wanting to avoid possible
losses when buying parts in a
foreign currency, historically
preferred suppliers from their
own region, making auto sup-
ply chains less global than
those in electronics, Mr. Cullen
says.
■ Regional differences
between Central and Eastern
Europe. Auto plants in Central
Europe are proper manufactur-
ing sites with wide-ranging
logistics requirements, while
those in Eastern Europe are
usually CKD plants where
workers assemble finished
vehicles from complete
knocked-down (CKD) kits that
arrive as containers of the
parts for a single car.
■ Undefined in the East.
Poland is well covered by
transportation vendors in the
West and in Eastern Europe.
The Baltic States have inferior
services and competition in the
Ukraine is intense.
DYNAMICS
■ Auto related equipment is
8% of total airfreight and 3% of
the auto industry’s total ship-
ping weight.
■ Supply base is dispersed
and individual lanes lack suffi-
cient volumes.
■ High transport costs drive
standardization of packaging
to optimize resource utilization.
■ Suppliers are on a steep
learning curve.
■ Complex supply chains
require end-to-end manage-
ment.
cargovision | JUNE 06 17
cargovision U-turn
Worker at car assembly line
six days before delivery. This can save US$1,500
per vehicle compared to keeping it in inventory.
The trend is on the rise because customers are
more satisfied, less capital is committed, and
management needs fewer inventory controls and
pays lower incentives. Jeff Gaudiano, of BMW
Group’s structural planning, production control,
and distribution division says, “After changing
our IT systems, the most difficult part of introduc-
ing build-to-order was managing the change. We
spent hours educating our suppliers to convince
them they don’t need inventory.”
LANE CHANGE
Within China, rising incomes for auto industry
workers along the Eastern Seaboard have man-
ufacturers searching inland for lower-cost sites,
although most component builders still prefer
Shanghai, with its transportation infrastructure
and skilled labor. Yet, they must weigh these
advantages against an environment that is
underpowered and over-polluted.
“According to some OEMs in the Shanghai area,
they were asked by authorities to reduce pro-
duction in the summer months in order to save
energy during that period,” Mr. Herrscher says.
“They are now trying to force companies into
neighboring provinces, but the workers and
transportation there are lacking.”
Western manufacturers also know that exporting
new automotive technologies to China exposes
them to theft and a quick loss of market advan-
tage to new competitors.
These trends all complicate life for the purchas-
ing manager who is trying to lower transportation
18 cargovision | JUNE 06
© Getty Images
costs. Although container rates from China com-
pare favorably to those from Europe and
America, airfreight rates from China are often
three times higher. To avoid paying these
charges, he may postpone switching delayed
shipments from sea to air until he has no other
choice. At this point, the failure can wipe out any
profit his company gained by moving production
to China.
Under the same pressure, supply chain man-
agers are constantly factoring the minimum tran-
sit times required for stable materiel flows. “Take
the minimum everywhere, and when something
goes wrong, you will fly more than expected,” Mr.
Herrscher says. “We are seeing more of these
emergencies today and are flying more freight
than ever.”
Using airfreight for high-value components can
lower packaging costs, residual damage, insur-
ance premium and lifecycle costs, Mr. Herrscher
says. When it comes to high-tech and electron-
ics in cars, airfreight becomes increasingly
important. It is often the most economical
answer, but only when companies plan and
budget for it. Auto companies have been reluc-
tant to do so, but seem more willing today under
the powerful pressure to reduce cost and
increase productivity.
Meanwhile, for the short term, logistics providers
may see the large flows of auto-related traffic
now moving into China replaced by truck move-
ments to Eastern Europe. In the longer term, car-
riers can expect to fly fewer finished cars from
Asia to Europe. Local parts production in China
will begin to grow more in line with local car sales
as Central and Eastern Europe component mak-
ers take a larger share of the European market.
cargovision interview
Philippe Gallon understands the subtle nature of Africa’s business
climate. As the local manager for AF-KL Cargo in Abidjan, he has
helped more than a few forwarders get effective results for their
customers in West Africa’s Gulf of Guinea region.
EASTWARD BOUND BY PHILLIP HASTINGS
■
BMW said it will expand to
Eastern Europe.
■
PEOPLE MAKE It irritates Philippe Gallon when people explain a
service failure with the comment, “Well, this is
Africa.” As AF-KL Cargo's market manager for
GM negotiating to build its first
CKD factory in St. Petersburg A DIFFERENCE West Africa’s Gulf of Guinea region, he insists
that being in Africa is no excuse for not meeting
and in Kaliningrad, located international standards for air cargo perform-
between Poland and ance.
Lithuanian. “Basic infrastructure can be a problem,” Mr.
■ Gallon says. “A sudden power cut or a broken
Hyundai and Daewoo have telephone link to your handling company. Or a
CKD operations in Ukraine. station suddenly has no aviation fuel and you
■ have a flight due for takeoff. But these are prob-
Hyundia-Kia will increase lems you must resolve. Customers don’t want to
production by 50% in Slovakia know about your internal difficulties. They just
in 2007. want their cargo delivered.”
■ In the Gulf of Guinea, those customers include
Hyundai will open a consignees receiving cargo from all over the
EUR1 billion plant in the world, as well as African shippers of time-sensi-
Moravia-Silesia region of tive perishables, such as French beans and man-
Czech Republic in 2008. goes. Meeting their expectations in Africa often
■ means going the extra mile and sometimes more
Johnson Controls - producer than one.
of automotive components “To achieve European or North American service
and provider of automation standards here,” Mr. Gallon says, “You need
systems, has announced plans three times as much time and energy. I believe
to build a car component my job is my life. If someone phones at odd
factory in Siemianowice, in the times with a problem, you must respond posi-
Katowice Special Economic tively. But it’s a very exciting life. Something new
Zone. is happening all the time, and there are so many
■ opportunities.”
PSA Peugeot-Citroen is
building two manufacturing Born in Lomé, the capital of Togo, Mr. Gallon
plants at a cost of EUR1,057 in joined Air France in 1979 and worked in mainte-
Trnava in the Zazpadne nance before moving to cargo in the early 1990s.
Slovensko region of Slovakia. His work has taken him to Europe, Asia, and
■ many parts of Africa. He arrived in Abidjan last
Renault is reviving Dacia October from South Korea and now manages
production in Pitesti, Romania. Ghana, Togo, Benin, Nigeria, Niger, Burkina
■ Faso, and the Ivory Coast. “I’m always on a
Toyota, Peugeot, Citroën will plane,” he says.
stay in Bohemia, Czech A local presence is vital to the company’s suc-
Republic. cess, Mr. Gallon believes. “Everyone in the Gulf
■ of Guinea market knows that the AF-KL Cargo
VW took over Skoda in Czech manager is based in Abidjan. He visits you and
Republic and will begin then he returns to Abidjan, not Europe. That
production in Russia in 2008. earns you trust and respect as a man. After that,
people respect you in business.”
Philippe Gallon, phgallon@airfrance.fr
cargovision | JUNE 06 19

Mr. Krems says:
“We call this the ‘Gold
Standard’. We also
drew up a plan to
achieve it and we call
that the ‘Gold Rush’.”
20 cargovision | JUNE 06
UNDER ONE
ROOF
Apart from gathering people under one roof, what
exactly does integrating local customer service teams
involve? Jan Krems explains.
BY PHILLIP HASTINGS
■ Ask 20 people what they mean by the term
“customer service” and you will get 20 different
answers, says Jan Krems, AF-KL Cargo vice
president of customer service. “Look how 20
companies structure their customer service
organizations and you’ll find 20 different solu-
tions.” Mr. Krems is overseeing the process of
integrating customer service offices throughout
AF-KL Cargo’s network. It is a fundamental part
of coordinating the AF-KL Cargo strategy for
bringing one face to the customer. With AF-KL
Cargo offices located around the world, cultural
differences could have posed a problem. But
that did not happen. Since the project began last
October, the organization has made consider-
able progress towards unifying customer service
teams in the cities where they had previously
operated as Air France Cargo and KLM Cargo.
GOLD RUSH
“We started this project by agreeing on a vision
for customer service that would apply through-
out our organization at the end of the integration
process,” Mr. Krems says. “We call this the ‘Gold
Standard.’ We also drew up a plan to achieve it.
We call that the ‘Gold Rush.’”
Although AF-KL Cargo has customer service
offices at 160 stations, the partners offer dupli-
cate services at only 64 of them. “Since last
October, we have brought the Air France Cargo
and KLM Cargo customer service people togeth-
er under one roof at 35 of these 64 stations,” Mr.
Krems explains. “They work separately, with their
own telephone numbers, but they can see and
learn from each other. By this November, we plan
to establish co-locations at 29 other stations.”
Customers may not notice the difference imme-
diately, because their local Air France Cargo or
KLM Cargo service representatives continue to
use separate telephone numbers and systems,
Mr. Krems says.
“However, slowly but surely those operations will
merge into one. Then, one office will handle all
booking requirements with one team of people
and one system. Over time, customers will see
they are working with a single voice for all of the
AF-KL Cargo business.”
ROOM MATES
Forwarders will gradually be able to source
capacity and book cargo on any AF-KL Cargo
flight with a single phone call. They will speak
with one contact in a common office, using a
common system. The objective of AF-KL Cargo
is to combine the best assets of both carriers’
commercial organizations into a single service.
How this works will become apparent later this
year when AF-KL Cargo rolls out its unique voice
portal (UVP). This utility will display information
about AF-KL Cargo customers, allocations,
rates, spot rates, allotments, and air waybill
details. It is a shell program that creates a single
view of the information in the existing ordering
and booking systems of Air France Cargo and
KLM Cargo for customer service staff at each
co-location.
Mr. Krems explains: “Suppose an Air France rep-
resentative in Singapore receives a call request-
ing 1,000 kg for New York. The rep checks the
UVP system and finds there is no space available
on any Air France flight. The same system will
then show whether there is capacity on a KLM
flight. If so, and the customer likes that option,
they can book the space.”
AF-KL Cargo intends to establish UVP shells for all
of its local operations by the end of October.
“Then we will slowly migrate into a single order-
taking system for both carriers,” Mr. Krems says.
“We combined customer service offices according
to their suitability,” Mr. Krems says. “We always try
to be close to the market, but we take the local
circumstances into account. Some of our offices
are at the airport and some are in the city. Often it
was a question of whether the Air France Cargo or
KLM Cargo offices had enough space.
Sometimes we had to move to new offices.”
© Capital Photos
FOUR CATEGORIES
Apart from putting people together in the same
office what, in practice, does integrating local
customer service offices actually involve? “We
are managing the AF-KL Cargo integration under
four categories,” explains Mr. Krems.
“Management organization, people develop-
ment, services & processes and infrastructure.
“We are already achieving some of our objec-
tives,” Mr. Krems continues. “For example, within
our infrastructure we have established 35 co-
locations. And now we are moving ahead. By
creating our initial vision of customer service, the
Gold Standard, we could share our ideas and
plans and were able to align ourselves within the
AF-KL Cargo organization.”
In principle, AF-KL Cargo wants to complete the
total integration of its local customer service
operations by the end of 2007, Mr. Krems says.
“We stress the ‘in principle.’ We don’t want to
put a firm deadline that could leave people feel-
ing frustrated if there is a delay. The crucial thing
is to get this right, so everyone is happy. The
human touch, rather than tools and systems, will
ultimately decide the measure of success.”
jan.krems@klmcargo.com
cargovision | JUNE 06 21
cargovision week in the life of
CARSTEN PELLICAAN
Carsten Pellicaan is part of a team that helps DHL’s top 100 customers make the most of the company’s four
business units: forwarding, trucking, contract logistics, and express. Mr. Pellicaan has been a member of the
Global Customer Solutions Team since 2004 and worked in Central and Eastern Europe for Danzas and AEI.
Of the mergers, he jokes, “I changed companies three times, without ever leaving the company I worked for.”
WITH PETER CONWAY
MONDAY
HOOFDDORP AND PARIS
Although I am based in Brussels, my office is actually in
Hoofddorp near Schiphol Airport. I usually do two trips a week
and spend one day in the office. Today, I have a 08:00 flight to
Paris. I am not a morning person and find it tough to get up at
06:00. In Paris, I go to the DHL office and straight into an
internal meeting, where we analyze the best way to move a
customer’s airfreight into the US and Canada. Should we use
a hub and spoke with one or two entry points, or direct flights
to all locations? Customs clearance is part of the calculation
and so are rates. In the afternoon, we meet with our customer
to discuss the solutions. In the evening, I fly back to Schiphol.
TUESDAY
HOOFDDORP
In the office, going through my email. I get about 80 a day,
and ditch 30 of them straight away. I have to read the rest and
a few involve serious work. Since my colleagues are always
traveling, it is always interesting to see who is in the office and
to share the pleasures and frustrations of our jobs. Next, I
have conference calls with a customer, followed by a weekly
conference call with my counterparts in Asia and America.
The early afternoon timing for me coincides with the Asian
evening and the American morning. Later that evening, I ride
my mountain bike. Because I’m always traveling, I can’t par-
ticipate in organized sports.
WEDNESDAY
BUDAPEST AND BEYOND
After a morning in the office, I fly to Budapest. I worked here for
five years and love Hungarian people and culture. It’s always
good to come back, but it has changed so much in just a few
years. Today, I take a new highway from the airport to the city
for the first time. Fortunately, the mentality of the people has
not changed so much, and that is comforting to me. We drive
for three hours that afternoon, to the east of Hungary, where
we will meet our customer the following morning.
THURSDAY
© Corb!no
HUNGARY AND THE UKRAINE
I spend the morning inspecting a rail terminal where our cus-
tomer will be loading ocean containers. Then we drive to the
Ukrainian border and leave our car. Since Kiev held the
Eurovision Song Contest last year, EU citizens no longer need
visas, but the border crossing is still difficult and even more
complicated if you drive. Our customer picks us up on the
other side. The Ukraine is still very poor. You see houses with-
out windows and horses in the street. With Eastern European
countries now in the EU, Ukraine is a new frontier for high-
tech manufacturing. Because customs clearance is major
hurdle, we use Budapest as a hub for our customer. It is actu-
ally closer than Kiev. In the evening, I return to Budapest to
meet friends, but our late arrival leaves time for only one beer.
FRIDAY
HOOFDDORP
I fly to Amsterdam in the morning. In the afternoon, between
the emails and conference calls, I take time to think about my
job. My role lets me draw on the varied resources of the DHL
organization. After two years, I am pretty familiar with the dif-
ferent parts of the company. But I still bring a local manager
with me to meetings, because they are the specialists. I also
enjoy sitting with a customer, mapping out their supply chain,
and then suggesting a solution that might entail forwarding for
one leg and express for another. Since customers don’t
always know their own supply chains, it is usually an eye-
opening exercise for them, too. Whether they accept creative
solutions is another matter.
SATURDAY
HOOFDDORP
I do my best to keep weekends free. I don’t mind working
late during the week, but on Saturday and Sunday, I turn off
my computer. My girlfriend and I will marry in September and
we spend the day planning the wedding, and shopping. We
work on our new house and go out in the evening for dinner
with friends.
SUNDAY
HOOFDDORP
We always keep this day completely free. We have a nice late
breakfast, go for a long walk, or a bike ride, or we visit friends.
Tomorrow, I am off on another trip, this time to Barcelona.
cargovision | JUNE 06 23
 TEMPERATURE MATTERS
Rules and regulations often influence the design and construction of packaging
for air transportation. The pharmaceutical industry is a good example. Its tem-
perature sensitive products need methods that can protect against damage and
theft and still temperature-sensitive maintain proper temperature.
BY KAREN E. THUERMER

■ “U.S. Food and Drug Administration (FDA)
dictates the temperature regulations and guide-
lines for shipping pharmaceuticals,” says Arthur
van Olst, senior project manager for Pharmaceu-
tical Logistics at AF-KL Cargo. Other countries
have adopted the US standards and some, such
as Canada and Ireland, have expanded the
requirements to include additional temperature
monitors.
“These regulations have little flexibility, “ Mr. van
Olst adds. “Wherever we go, we must consider a
multitude of variables. For example, if you ship
vials of vaccine from the United States to the
Netherlands, the temperature must be between
2°C and 8°C throughout the entire journey.”
Vaccines are more sensitive to temperature
changes than medicines, Mr. Olst adds.
FDA guidelines say that temperature controlled
packaging should be validated. This means that
packaging experts must consider various proto-
cols in their designs.
level is paramount in ensuring integrity through-
out the supply chain,” says Mr. van Olst.
HEAT SYNCH
Logistics providers have four service options
when they use AF-KL Cargo, depending on
whether their customers’ products need to fly
frozen, refrigerated, or at room temperature:
Pharma 1.
Product must remain frozen at a temperature
between -20°C and +20°C.
“This is a closed cool-chain concept,” Mr. van
Olst says. Most shipments moving this way use
Envirotainers with active temperature control
systems. These allow the shipper to stipulate
exact temperatures and to keep the product
temperature stable despite fluctuations in the
ambient temperature. An added benefit,
Envirotainers are so secure that they also protect © Corb!no

For example: against theft and pilferage.

Is the pharmaceutical shipment going to a cold
or hot climate?
Is it traveling during summer or winter?
What outside temperatures will it encounter while
in transit?
How long will the product be in traveling?
Will the shipment take 24, 48 or 72 hours to
© Corb!no
“While this is the most secure way to ship tem-
perature-sensitive products, it is also the most
expensive,” Mr. van Olst adds.
Pharma 2.
Product must remain between 2°C and 8°C.
“This is not a closed cool-chain concept, Mr. Van
Olst notes. “ It is used more frequently than
perature-controlled warehouse.
“The only time the shipment is not in a controlled
environment is when being delivered to the air-
craft,” Mr. van Olst says.
Pharma 3.
Product must travel at room temperature
between 10°C and 25°C. Products include pills,
based on the Good Distribution Practices of the
FDA.” Where airports do not provide tempera- “Maintaining a proper
ture-controlled warehousing, AF-KL Cargo and constant tempera-
arranges for local ground handling agents to pro- ture level is paramount
vide temperature-controlled service and ware- in ensuring integrity
housing capabilities, Mr. Olst adds. “Not every throughout the supply
station in the AF-KL Cargo networks can handle chain” says Mr. van Olst

reach its destination?
If it arrives on a holiday, Kuwait on Friday or
Dallas on Saturday, will the packaging maintain
the required conditions throughout the week-
end?
“Maintaining a proper and constant temperature
Pharma 1, because it is cheaper.” These ship-
ments may be palletized or stacked in the
AirModule system developed by AF-KL Cargo.
They are transported in the temperature con-
trolled cargo compartment of an aircraft, or a
temperature controlled truck, or stored in a tem-
creams, and other over-the-counter drugs.
Pharma 4.
Products shipped with dry ice coolant.
“AF-KL Cargo offers these solutions to pharma-
ceutical shippers based on their temperature
requirements,” Mr. van Olst says. “They are also
pharmaceutical shipments. Based on a cus-
tomer’s product requirements, we look at our
worldwide system to see which ones can fulfill
them. This network is audited every year to
ensure they maintain the quality needed to han-
dle pharmaceutical shipments.”

24 cargovision | JUNE 06 cargovision | JUNE 06 25

 cargovision country file

THE CZECH REPUBLIC BY GERRY BROWN

TRAVEL TIPS

© Alamy
■
Czech companies tend to
start work earlier than
09:00 and finish earlier than
17:00.
■
NEED TO KNOW Meetings can take longer
than expected and can be
■ The Czech Republic very formal.
joined the EU on May 1, ■
2004. Czech business people
■ Population: 10.2 mil- increasingly use English,

© Bildarchiv Monheim/Alamy
lion. Czech men refer to but misunderstandings can
the national drink, beer, and do occur. If in doubt,
as ‘liquid bread’ consum- © Arcaid/Alamy Orangery Prague Castle Exterior use an interpreter.
ing more than 150 liters a ■
© Robert Harding/Alamy

year, the highest in the Business people should be

world. CONSIGNMENT PLANNING 24-7 open and expect directly
■ General: A member of Vaclav Koula, air export manager, Prag Museum fur Moderne Kunst Lichthof expressed opinions.
the OECD, NATO, WTO, cargo-partner CR, s.r.o. ■
IMF, and EBRD, the Punctuality is expected and
country is a parliamen- “It is no longer a problem for us to truck across EU CSA, to connect with Delta flights to JFK from appreciated, and business
tary democracy with an YIELDS IMPROVING to carriers to give good price, reliability, flexibility, borders to airport hubs such as Amsterdam, Berlin and Athens. We are known as the “Detroit of dress should be smart and
open market economy Andrea Hricova, airfreight manager, and communication. AF-KL Cargo tops that with Brussels, Frankfurt, and Paris. While we work with Europe.” Czech-produced automotive parts, clean.
and a strong currency. Schenker spol, s.r.o. commitment, especially for the Equation express most of the airlines serving Prague, the now unified machinery, lighting, electronics, and crystal glass- ■
■ Economy: Real GDP product. This benefits the flourishing local film AF-KL Cargo management in Prague gives ship- ware are our key exports. We prefer to board car- It is best to use a person’s
5.5% in 2006; 4.5% “Expansion in our Czech Republic activities has industry. Typically, we dispatch film rushes to pers round-the-clock service for consignment plan- go at Prague, but tend to truck it to Paris and title, such as Doctor.
expected in 2007. Nearly been on the back of the German or Austrian London or America. Even parts of the re-make of ning. This is a first in this market by any airline. As a Amsterdam via consolidation at Hahn (Air France) ■
60% of exports go to manufacturers setting up local joint venture the James Bond movie Casino Royale were shot in result, depending on the urgency of shipments or and Linz (KLM). A local community of 150,000 Shaking of hands is cus-
EU15 (Germany takes plants. Some 60% of our traffic goes directly by the country in February. Afterwards, a Monarch the client’s choice of service level, we can split Vietnamese and Chinese has created a substantial tomary when meeting and
36%), mainly machinery road to our main hub at Frankfurt where it heads Airlines charter ferried 12 tonnes of film equipment capacity between the two carriers. We can buy two-way market for Equation and time-sensitive leaving people.
and transport equipment, for Hong Kong, New York, Shanghai, or Tokyo. from Prague to Nassau. Looking to the future, space for a better rate and even consolidate in our items. These people were factory workers in the ■
intermediate manufac- Rates are negotiated by manufacturer head Prague is thinking big. It could become an air car- Vienna head office, particularly for the large volume communist era, but today have become traders Bring a plentiful supply of
tured goods, and chemi- offices. I see yields improving on outbound traf- go gateway to Central and Eastern Europe. of automotive parts to the US, Japan and Mexico.” and entrepreneurs, contributing to the thriving business cards, as the use
cals. fic, which has moved traditionally on a collect Compared to Vienna, its nearest rival, there is Czech economy. Prague will likely grow as a trans- of business cards is com-
■ Financial Rating: basis. Key to being successful in this market is to already little difference in service standards.” shipment hub for small and express imports feed- mon.
Moody’s, A1 grade; have a strong network with multiple choices for THRIVING ECONOMY ing CSA’s Eastern European network.” ■
Fitch, A grade, Stable for delivery.” Vladimir Blazek, customer service manager Some of the old communist
long-term foreign curren- EFFICIENT, COMPACT, ECONOMIC for Central and Eastern Europe, attitudes still prevail, but
cy obligations. Renata Zasmetova, export manager, AF-KL Cargo, Prague MARKET ADVANTAGE the new generation of busi-
■ Foreign Investment: FILM RUSHES Delta International Cargo s.r.o. Hans Korbijn, director - AF-KL Cargo ness leaders is developing
Favorable laws attracted Ctibor Liska, export manager, “Since the Czech Republic joined the EU, the chal- Central and Eastern Europe, Budapest all the business skills rec-
1,200 foreign companies, ATS-Air Transport Service “Prague Ruzyne Airport is efficient, compact and lenge for AF-KL Cargo in Prague has been to ognizable in the West.
including Volkswagen, economic. However, it is unlikely to take on the maintain and expand its market share in the face “The integration of AF-KL Cargo in Prague resulted ■
Daewoo, Hyundai, “The Czech air freight market is becoming more role as a regional hub to Central and Eastern of growing truck competition to other EU airports. from the enthusiasm of local teams from both air- The Czechs rightly resent
Siemens, Danone, Coca competitive from offline carriers that solicit air Europe soon as long as it is served by smaller air- Under a unified Prague management, we retain lines. They wanted this to be one of the first stations being treated as if they are
Cola, Pepsi Cola, and cargo to be trucked to Vienna and Frankfurt. As craft with only limited capacity. We will continue to product consistency and selling practices, but to gather local offices under one roof. This took a developing country.
Tesco. a local forwarder routinely handling 100-kg to truck large air shipments to Amsterdam, Frankfurt, shippers now enjoy greater choice in capacity allo- place after the Czech Ministry of Finance allowed Therefore avoid statements
500-kg consignments, from vaccines to spare London and Paris, en route to destinations such cation between the Air France and KLM networks. both airlines to sell each other’s air waybills. It has such as “the way we do it in
parts, I prefer Prague uplift where possible. I look as Los Angeles and Miami.” This includes using local SkyTeam Cargo partner, given us a significant market advantage.” our country is...”

26 cargovision | JUNE 06 cargovision | JUNE 06 27

 cargovision market monitor

Positive signs for the coming year could be tempered by changes in Major Scheduled Airlines - Global Freight Traffic Growth Growth of Semiconductor Market and IATA
economies and industries that influence the use of air cargo. 20% Growth - Quarter vs Quarter previous Year
Semiconductors shipments IATA FTK

Average Growth of Last 3 Years = 6.9% 60% 25%

Growth - Month vs Month Previous Year
20%

BY DICK VAN DEN BERG AND MARK W. LYON 15%

40%
15%

10%
20%

2005
5%
10%
0% 0%

Annual Growth
-5%
5% -20%
-10%

A TROUGH BETWEEN PEAKS? 0%

-40%

-60%
-15%

-20%

-25%
Jan ‘99 Jan ‘00 Jan ‘01 Jan ‘02 Jan ‘05 Jan ‘04 Jan‘05 Jan ‘06
-5%
Jan ë03 Apr‘03 Jul ‘03 Oct ‘03 Jan ‘04 Apr ‘04 Jul ‘04 Oct ‘04 Jan ‘05 Apr ‘05 Jul ‘05 Oct ‘05 Jan ‘06 Semiconductor shipments - LH ...
■ The first quarter of 2006 showed airfreight ■ In airfreight, it was also noticeable that Europe, IATA FTK - RH scale

growth increasing Figure 1, fueled by recovering
economic growth in Europe and Japan. Despite
high oil prices, the world economy is in a remark-
ably good state, leading to optimistic forecasts
for 2006.
Japan, and Korea were low in growth while Figure 1
China was still a powerhouse. The two other Figure 4
growth engines were India and the Gulf region,
where fast growing oil revenues created an
Air Freight Growth (IATA) and World Trade Growth Airports with Largest Increase in Freight ...
import boom. The airports in the Gulf States per-
annual growth rates WTO Trade
form a hub function for the whole region, and the

2005 increase in tonnes

IATA FTK
350,000

■ One of the factors behind the stronger outlook high growth in India is up on top of their own 15%
300,000
for 2006 is the continued influence of world stellar performance.
250,000 China
trade. According to the World Trade Organiza- 10%
tion, we may expect a 7% increase in trade dur- ■ The increase in airfreight during 2005 was 200,000

ing 2006, which is close to the average of the concentrated on a number of airports that were 150,000
5%
past five years Figure 2. Trade growth peaked in mainly situated in Asia, the Middle East, and
2000 and in 2004 just like the growth of air- Europe Figure 5. The top 10 airports in terms of 100,000

0%
freight. This illustrates the high correlation freight increase include four Chinese airports, 50,000
between trade growth and airfreight growth. three airports in other Asia and Middle East, two
-
in Europe, and one in the USA. All four of China’s -5% Hong Kong Shanghai Dubai Paris CDG Frankfurt Guangzhou Beijng Bangkok Louisville Singapore

■ In export value the EU, USA, and China are major freight gateways are in the top 10, as is
the three main exporters of the world Figure 3. Dubai, the main hub in the Gulf. Paris and Frank- Figure 5
-10%
China is now bigger than Japan in exports and it furt are the top 2 in Europe, where a small 1999 2000 2001 2002 2003 2004 2005

is getting close to the USA. Regarding imports,
the USA is by far the No. 1, and the graph shows
just how big the trade deficit is. This situation
may be a risk for further economic growth.
Some countries export technological products,
growth percentage is still a big volume. The only
US airport with a large increase is Louisville, the Figure 2 IATA: Major Freight Flows IATA WATS
2004 data from IATA WATS and Forecast IATA Forecast
UPS hub. This is due to the move of their hard
freight (Menlo) hub from Dayton to Louisville.
Intra - Asia/Pacific

but others rely on commodities like oil. Russia ■ The gains in international traffic at the airlines Top-10 Exporters
2005 export and import in ... Trans - Pacific
and Saudi Arabia are large oil exporting countries Figure 6 can mostly be found in the Middle East
and their export value jumped in 2005, creating and Asia-Pacific regions: Emirates, Cathay Pacif- 2000 export
Europe - Asia Pacific
import
large trade surpluses. ic, Qantas, Singapore Airlines, and integrator
FedEx, which increased its presence in Asia. Not 1500
North Atlantic

■ Of course, only a small percentage of all prod- all carriers recorded growth in 2005, Polar Air
ucts is transported by air, but they have a high saw a dramatic decline in FTKs and Lufthansa, North America - Latin America

value per weight unit. Semiconductors are one Korean Air, JAL, and EVA Air all faced a decline in 1000
Europe - Middle East
example, and it looks like the airfreight market is their FTKs and market shares. The move of the
very much dependent on the cycles of the semi- semiconductor industry to China may explain the 500 Europe - Africa

conductor industry Figure 4. For semiconduc- decrease for JAL, Korean, and EVA. Polar has
© Olé ontwerpers

Billions US $

tors, 2005 was a year of low growth: overall financial difficulties, and Lufthansa decided to Europe - Latin America

sales revenue climbed by 7% vs. 28% in 2004. concentrate on profits and not growth. 0
EU USA China Japan Canada Korea Russia Mexico Taiwan Saudi Arabia 0 1000 2000 3000 4000 5000 6000 7000
China was still growing fast, but semiconductor tonnes (000)
sales growth in Europe and Japan was negative. Figure 3
Figure 6

28 cargovision | JUNE 06 cargovision | JUNE 06 29

 cargovision postscript
SO, YOU
WANT TO
BUY A
PORT, EH?
■ When those lovable US Congressmen decide to
cook a goose, they do make hash, don’t they? Sput-
tering, throwing mashed potatoes in the air, falling
over backwards into deep water...ports. Some of the
hysteria and fallout published during that February
debacle would be humorous, were it not so exasper-
ating.
Nine legislative proposals concerning Dubai Ports
World’s purchase of Peninsular and Oriental Steam
Navigation Company appeared within days of the
announcement:
Investigate port facility acquisitions;
Review the mergers and acquisition process;
Suspend foreign acquisitions;
Ensure the security of US ports;
Reverse the approval of the takeover by the
Committee on Foreign Investment in the United
States;
Prohibit operations owned by foreign governments at
US seaports;
Amend the Defense Production Act of 1950;
Prohibit the takeover of P&O by DPW.
Zero legislative proposals have since appeared con-
cerning:
National Shipping Company of Saudi Arabia docking
Saudi-Flag cargo ships with Saudi Arabian seafarers
30 cargovision | JUNE 06
cargovision information
Cargovision is the management magazine of AF-KL Cargo. Its function is
to disseminate information on transport, distribution, logistics, informa-
Ports of New York and New Jersey 40 years to tion services, and general business developments. The editorial opinions
clean up the corruption that followed in the wake expressed in the magazine are not necessarily those of AF-KLM.
of Mr. Luciano’s oversight. Reproduction in whole or in part without written permission is prohibited.
The sad part of this political myopia will be its
cost. Over half of the economists polled in a fore-
casting survey by the Wall Street Journal said that
protectionism, like that demonstrated in the ports
deal, will slow the US economy and lower foreign
direct investment. The slowdown could be signifi-
cant, 8% of them said.
SUBSCRIBER SERVICES
Cargovision is published
Published by
AF-KL Cargo Communication
P.O. Box 7700
quarterly by AF-KL Cargo
and mailed to subscribers in
almost every country.
1117 ZL Schiphol
The Netherlands
Christelle Dufour Theuws
PAY THE PIPER
More specifically, the buffoonery is likely to dis-
courage investment in the US transportation infra-
Please visit
www.cargovision.org
dufourtheuws@cargovision.org
Kirsten Hemmer
hemmer@cargovision.org
structure, which is in a horrible state, according to and click on the Subscribe icon.
port operators who spoke at a trans-Pacific trade You will be able to: Concept & Realization
conference in Long Beach in March. vdBJ Communicatie Groep,
The expected volume of container traffic arriving • Sign up for a free subscription Bloemendaal
in North America by 2020 will exceed the current The Netherlands
capacity at US ports by 200%. Congestion during • Change your address vdbj@cargovision.org
© Mary Evans Picture Library/Alamy
the fall’s high season has slowed West Coast www.vdbj.nl
imports to a crawl for the past two years, leaving • Cancel your subscription
in the US; billions of dollars of Chinese imports stranded. Editor in Chief
Security of China operating port terminals in the Although, this congestion creates a windfall for • Review Recent editions Mark W. Lyon
US; B747 charter operators who can supply capacity lyon@cargovision.org
Security of Emirates Airlines operating a cargo ter- to retailers that lack other means of getting their You can also change your
minal at JFK. goods to market in time for Christmas, it does address by sending a fax with Project Manager
The legislators also seem to have overlooked nothing to solve the fundamental shortcoming. the subscription number found Urtha Ririhatuela
Inchcape Shipping Service, which provides food Investing in US ports would help. However, no on the Cargovision mailing ririhatuela@vdbj.nl
and fuel to US Navy Ships at ports around the well-heeled US interests have offered and it is label to: +32 27 51 77 59.
world under a US$50-million, five-year contract. It unlikely that an overseas operator would bid after Art Direction
is owned by Istithmar PJSC, an investment house watching the US Congress torpedo DPW. Even Sok Visueel Management
based in the UAE.. so, the largest US-based container terminal oper- Amsterdam, the Netherlands
ator, SSA, may want to sell its US assets, accord-
ing to the Financial Times. Alas, the most suitable Editorial Office
UNA BUONA IDEA? candidates would not qualify by today’s no-for- Vijverweg 18
eign-government-ownership standard. The 2016 GX Bloemendaal
Why not give the US ports back to the mafia? Asks world’s No. 3 operator of container ports, The Netherlands
Deanne Stillman in a blog on The Huffington Post. Singapore’s PSA, is owned by the Singapore gov- Tel.: +31(0) 23 541 17 01
“In World War II, the feds handed security for the ernment investment firm, Temasek. Even riskier Fax: +31(0) 23 541 18 01
Port of New York over to Lucky Luciano. So what if for No. 1: Li Ka-Shing, chairman and the largest
they had to spring him from the joint in exchange shareholder of Hutchison Whampoa Ltd., owner Circulation Manager
for protection? The plan worked - German U-boats of Hutchison Port Holdings in Hong Kong, who Herman Brijssinck
never landed at Battery Park and if they tried - well, supposedly has ties with Chinese authorities. Tel.: +32 2752 90 51
fuhgeddaboutit. Now is not the time to break with The final irony is that the US relies on port opera- Fax: +32 2751 77 59
tradition. Let’s keep homeland security in la tors like DPW, PSA, and HPH to perform security brijssinck@cargovision.org
famiglia. checks overseas. So, now whose goose is
Someone quickly reminded Deanne that it took the cooked? AF-KL Cargo © June 2006
Volume 21 Number 25
cargovision | JUNE 06 31
32 cargovision | JUNE 06