A profound change in global ordering, shipping and distribution patterns is driving a secular slowdown in international airfreight growth, according to The Colography Group.
In a soon-to-be released white paper based on its annual World Cargo Traffic Flow Model and North American Transborder Flow Model, The Colography Group said new economic and security concerns are once again transforming inventory strategies around the world.
Businesses concerned about recurring supply chain disruptions are integrating warehouses and buffer stock into their distribution networks, the Georgia-based research group said. In turn, they will increasingly depend on lower-cost surface transport, rather than air, to bring their goods to market.
The result will be a long-term slowing in the rate of airfreight expansion. This is a far cry from the days of the booming 1990s when airfreight grew faster than the overall market as businesses flocked to the "just-in-time" inventory management model, which avoided warehouses and buffer stock in favor of long-range supply chains that held little inventory and relied on airfreight to deliver goods.
For example, from 1994 to 2000, U.S. air export tonnage grew by 35.9%, while the overall U.S. export market increased by only 17.6%. U.S. air imports increased by 61.4%, while total import tonnage grew by just 44.8%.
From 2000 to 2002, U.S. airfreight activity fell dramatically due to the global recession and terrorist fears. U.S. air export tonnage is projected to remain well below the 2000 peak of 6.6 billion pounds, even though the total export market is projected to trend higher. U.S. air import tonnage is projected to grow in line with total import tonnage in future years.
"The changing global dynamic will drive a growing number of businesses to adopt what we are calling `A Continental Strategy,’" said Ted Scherck, President, The Colography Group. "This is triggering the development of a new type of efficient and productive warehouse where inventory will be staged for rapid regional distribution either by rail or truck. Simply put, businesses want to minimize the vulnerability of their supply chains to all types of service disruptions, while meeting their delivery commitments, without an over-reliance on expensive airfreight in a still-challenging world economy."
Among the findings in The Colography Group’s annual World Cargo Traffic Flow Model and North American Transborder Flow Model:
U.S. import tonnage in 2003 is projected to total 2.28 trillion pounds. By contrast, U.S. export tonnage in 2003 will total 992 billion pounds. The value of all U.S. imports in 2003 will total USD1.16 trillion, versus USD640.6 billion for U.S. exports. This reflects the impact of the enormous and swelling U.S. trade deficit. The Colography Group projects similar imbalances in 2004 and 2005.
The global recession at the start of the decade has dramatically curtailed U.S. export growth with all its trading partners. Two bright spots in the U.S. export picture were NAFTA and Central America. U.S. export value to Canada and Mexico grew by 4.6% annually from 1996 to 2002, and growth was evident during that time among all four modes of transport. "The strength of U.S. exports to the NAFTA countries should cool some of the political rhetoric about the `dire’ consequences of free trade agreements," Scherck said.
E-business will continue to be a disruptive force for global supply chains. "Before the web, a business could centralize its order flow, control its shipping patterns and focus its distribution accordingly," said Scherck. "By contrast, shippers today often have no idea where online orders originate. The unpredictability of online ordering means businesses will migrate to warehouses and inventory to ensure availability of their product. And carriers will be required to ship goods with more frequency and over shorter distances."
Published annually since 1990, the World Cargo Traffic Flow Model provides estimates of total annual cargo value and weight, and the distribution of cargo value and weight that was moved between each of the 227 countries for which data was available. The World Air Cargo Traffic Flow Model also analyzes traffic moving between a specific country and one of nine Colography ‘world areas’, between a country and the rest of the world, between world areas, and between a world area and the rest of the world.
Published annually since 1999, the North American Transborder Flow Model provides estimates of surface value and weight moving among the United States, Canada and Mexico.