Payments must be made on time or else, warns the air cargo business.
UNCHALLENGEABLE on-time payments for fully executed air cargo deliveries is the latest holy grail for complex supply chain transactions, writes Nigel Tomkins.
Even as digitalisation starts to get a slow grip on the airfreight industry’s inherent clumsy, paper-strewn, manual processes – and with blockchain technology perhaps emerging as one eventual solution – what is needed now is the universal recognition and acceptance of the widespread problem of a morass of sluggish, inaccurate and unwieldy payments processes.
It is a problem that is costing the airfreight supply chain some US$10billion in unnecessary costs and related wastage, says airline association IATA.
It is common for payments to not reach airline and forwarder/broker suppliers for months or more – long after the goods have been due to be delivered to the end-customer. Most of the disputes are over extended claims for damaged consignments and delayed deliveries. A high number of submitted invoices are held up by such disputes between various parties in the supply chain.
According to IATA, expeditious payments have become a major cost component for all airlines bedevilled with payment acceptance fees, fraud- and risk-related costs, cash flow expenses and the cost of payment processing. Throw currency conversion rates into the mix and it is clear that there needs to be a unified method which is accepted by all, experts insist.
In recent times, with changing regulations, there has been a rise in the availability of a number of electronic payment methods. But there is a danger that this is becoming a complex minefield too.
On the one hand are new payments systems and, on the other, are standalone gateway payments services. All of them have to consider the likelihood of other fees and costs involved, especially as freight shipments may change hands many times during the total delivery process.
On the passenger side, airlines already have the IATA Billing and Settlement Plan (BSP), a system designed to facilitate and simplify the selling, reporting and remitting procedures of travel agents. It was designed to facilitate and simplify the sales, reporting and remittance procedures of IATA accredited passenger sales agents, as well as improving the financial control and cash flow between BSP airlines and travel agents.
In air cargo there is the existing but old Cargo Account Settlement System (CASS), which facilitates the settlement of charges between forwarders and airlines.
Speaking at a recent online conference, Olivier Houri, the European vice-president and chief revenue officer of SmartKargo, spoke about various stakeholders involved in the cargo payments chain, pointing out that the focus is now on the simplification of payment processing. “The industry has seen effort being made to facilitate quicker payments for shipments or letting cargo providers to move cargo faster and cut down on payment costs,” he observed.
One key issue is the industry’s need to keep pace with changing market forces such as increasing numbers of customers demanding next-day deliveries. A big obstacle is the presence of as many as 12 ‘pain points’ across a chain that involves a host of different players. Currently, digital data exchange is severely limited and cash-flow problems exist for many players.
Shipments moved by air currently require an array of accompanied legal documents, such as the shipper’s letter of instruction, not to mention regulatory checks such as accurate descriptions of the type of item being shipped and dangerous goods declarations and packaging.
