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The global air cargo industry is already reaping the benefits of digitalization. Yet the Philippines continues to face hurdles to its leap into the paperless world.
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Local companies, especially those in the air cargo forwarding industry, have not lacked in efforts to digitize, but these efforts continue to be stymied by government regulations that still require the filing of paper documents.
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News on this front is not all grim though, with Transportation Undersecretary for Aviation and Airports Roberto Lim welcoming a suggestion for collaboration between industry players and stakeholders for the exchange of ideas and information in order to tackle this undisputed need to catapult the Philippine air cargo industry into the digital world.
The benefits of adopting digitalization in the air cargo industry are undisputed, highlighted even more so by the COVID-19 pandemic, yet somehow digitalization has yet to be fully embraced in the Philippines.
This is one of the points raised by industry experts in a panel discussion on “Newfound Opportunities for Digitalization Adoption in the Philippines” at the recent Philippines Air Cargo Day jointly organized by the International Air Transport Association (IATA), Philippine Multimodal Transport and Logistics Association Inc. and PortCalls.
The Philippines is depriving itself of the many opportunities that come with digitalization as it continues to use legacy systems that can’t cope with the rapid changes that come with, and demanded by new digital technologies, according to some panelists. This failure to embrace such technologies translates into lost opportunities that would otherwise be contributing immensely to company coffers and, ultimately, to the country’s gross domestic product.
While the private sector has not lacked in efforts to keep pace with the digital transformation that has long benefitted quick-to-adapt Asian countries such as India and Singapore, such efforts have been stymied partly by government regulations that continue to require the filing of paper documents, rather than accepting solely digital submissions, according to panel moderator Francis Lopez, CEO and president of InterCommerce Network Services, Inc.
This government insistence on paper transactions has been a real impediment for air cargo forwarders, especially during the height of the COVID-19 pandemic, when people’s movement was restricted by community lockdowns or simply by fears of exposure to the virus, he said.
Lopez noted that the urgency for digitization of airway bills and other Customs documents became all the clearer with the explosive growth of e-commerce triggered by the pandemic. He cited statistics presented at the Air Cargo Day by David Wee, International Air Transport Association regional director for Asia Pacific, that showed that in 2021 alone, the logistics industry in the Philippines handled 2 billion e-commerce packages and that the volume would double by 2025.
He lamented the continued use of obsolete, legacy systems and paper transactions in government offices, and cited discussions currently underway in Europe about switching to electronic transferrable records, particularly bills of lading and airway bills. “If we don’t start using electronic airway bill, we will be left out and not be able to catch up,” he said, noting that e-airway bills will be commercial documents that can be presented when filing bank claims or letters of credit.
For now, the Bureau of Customs (BOC) continues to require the submission of multiple copies of paper airway bills and bills of lading when applying for cargo clearance, and other documents for manual stamping instead of digital documents for digital stamping.
This policy is ironic, Lopez pointed out, as the BOC is the lead agency in creating the National Single Window, a digital platform that connects to the ASEAN Single Window for paperless cargo document exchanges among members of the Association of Southeast Asian Nations.
Many other Customs jurisdictions now require e-airway bills, he added.
The futility of the outmoded BOC requirement was highlighted by the explosion of e-commerce during the pandemic. More hands were needed to painstakingly process the parcelized, multiple low-value shipments that were accompanied individually by pages of shipping papers for clearance processing before going to the warehouse. “What would take a person to process maybe one cargo or one ship would now be done multiple times by maybe several people. And because of the volume of consumption, definitely it requires digitization,” Lopez said.
Have a digital plan
One of the panelists, Jasraj Chug, co-founder and director of Cargoflash Infotech, offered advice to everyone: have a digital plan, noting that late adopters would find it difficult to survive while early advocates can potentially see much revenues.
He noted the red hot e-commerce industry generated 2 billion packages in 2021, and the volume is expected to double by 2025. “Where is the infrastructure? Do we have a choice not to digitize? I don’t think so!”
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The infrastructure to start a digital enterprise, he said, is already right at everyone’s fingertips with the widespread use of mobile phones.
Chug’s company has been harnessing the power of digitization for some time now. In 2008, it helped an airline go from manual to digital using web technology. The result? Operations became more efficient, growing the airline’s cargo volume by 400% in 11 months, he said.
“That’s the power of digitization,” Chug underscored.
He extols the benefits of the use of data and its collaborative capability. “If one had predictive capability, like forecasting, and started generating real-time data or lead data, then he would know what demand and supply imbalance is, which country is moving what, and how air forwarders and airlines have to work together to provide the necessary capacity to keep balance, whether it’s in the form of charters, wide-body capacity or whatever, as what is the norm term these days.”
With data, airlines and other service providers become smarter and would have the ability to predict requirements, he said, explaining: “We know labor is a problem today. Warehouses finding their staff is a problem. So now they know that on such day of every week, they get a spike, and when they get a spike, they need to have more people. So they’re rechanging their HR rosters to be able to serve the customer better. That’s the value (of digitization).”
He noted Cargoflash has been able to “make multiple products, whether it’s (for) revenue, accounting, booking.” In the Philippines, his company provides integrated air cargo management solutions for Philippine Airlines, “which means there is no paper anywhere in between for the entire online process, from booking, revenue accounting, warehouse management for viewer e-buildup. It’s one process and you are able to track from the airline data capacity.”
DHL’s three-phased digitalization journey
Another panelist Yvonne Lee, who started as a management trainee at DHL and is now the DHL Global Forwarding (Philippines) managing director, recalled coming from an era when “black screen and green works”.
The digitalization journey of DHL, a leading global forwarder, started in 2019, shared Lee, and came in three phases: foundation, optimization and use of advanced technology and analytics.
“In the foundation phase, we really do the very basics. The harmonization of just terminology. Different people move in and all different terms mean differently depending on how long you’ve been with the company. Now, I’ve been with my company for 19 years. So what I say may not be the same as the guy who just joined yesterday. So we started with that.”
Harmonization, Lee admitted, took some time for DHL since it has presence in more than 100 countries. “Do we look at profitability the same way? Is profitability to the station manager, to the country manager, the same as the one who delivers the cargo? How do we all contribute to that?”
The second phase, optimization, uses RPA (robotic process automation).
And for the last phase, DHL uses advanced technology and analytics to help manage its own business and help customers manage their business better as well.
Lee said that in terms of data, DHL is “looking at data-informed decisions.” The company harnesses the three ways to apply data analytics: as descriptive analytics, predictive analytics, and prescriptive analytics.
The first way has mostly to do with historical data, which can get easily outdated, Lee explained. The second way deals with forecasting or what’s coming, and the third it’s “not just about what is coming, it’s what do you need to do now to manage what is coming. And that’s very difficult.”
She added: “In DHL, we are journeying there as well, using the three ways.”
Lee said DHL also has to deal with many moving parts to keep operations humming. “We say it takes a whole village to raise a kid; (it) takes a whole maybe more than one country, more than one authority, more than one company… (There are also) different providers, infrastructure owners… associations. How can we come together to make things more effortless?”
And then there’s the issue of confidentiality. “Am I prepared to share my data with my competitors? Is our customer prepared to share their data with us because we also move their competitors cargo? These are very fundamental rules that we have to deal with.”
Laggard in digitalization
Transportation Undersecretary for Aviation and Airports Roberto Lim acknowledged the Philippines has a long way to go before digitalization fully takes root. He said, “If you feel that you’re left behind with all of these fast-moving changes, you can just imagine how we in government (feel), (we) also feel the same way, if not in a bigger way. Because, you know, the marketplace is, at least in this area… lead(ing) the way.”
He said government has to be attuned to what’s going on to create policies to remove the roadblocks. “One example of how we can help remove the roadblocks would be in the case of e-freight,” an old initiative, which he said government continues to push for.
But where government can help the most is in strengthening linkages with other agencies involved in processing cargo, Lim said: “The e-airway bill is just one piece of the total number of documents involved for export or import transactions. That’s where we need to improve the coordination. And beyond the coordination and meeting is really alignment of policies.”
And alignment–but within the organization–is also a challenge Lee sees at DHL Philippines: “You cannot have collaboration without alignment.” The working culture is important as well, and so is “real trust”. She said that as a newcomer in the Philippine office, she still has a lot to learn about the Filipino culture.
“I know, at the ground level, people are willing to work, but they’re not sure. A lot of it has to do with, you know, okay, I don’t want to overstep you because I think you’re more senior. I don’t want to overstep you because you’re from the government, you know, I don’t want to understand the wrong thing. So, and these are very real, but how can we help people to feel safe? Okay, I really have the idea, but I may be the youngest or the least experienced in this area, but all of you. You know, the big bosses in you, like you have the expertise, you have the resources to bring this to parts, but how can I then raise my hand? I think culture is a very big deal here,” Lee said.
Collaboration is key
Meanwhile, Lim welcomed a suggestion by Lopez to build an air cargo community where airports, airlines, forwarders, shippers and other service providers exchange information, saying government can definitely initiate and link up stakeholders.
“Even players, the NGOs (non-government organization) like IATA (International Air Transport Association), the multimodal association… these are already organized units that can and have their own membership groups and individuals whose goals really are for the industry. So that’s one way of organizing this collaborative umbrella to build a community,” Lim said.
“And definitely we would want to and support that because we just have to move forward and seize on the opportunities that technology is offering.”
Chug and his company are looking as well at opportunities to collaborate with the larger ecosystem – airports, cargo handlers, customs authorities. This effort to collaborate will take the form of a soon-to-be introduced cloud-based platform that will allow small and mid-sized air cargo forwarders that do not have the financial means to build their own systems to simply hop onto the platform and generate business. In particular, Chug said the platform will allow subscribers to the service to book shipments for their own clients as well.
Taking the first step
Summing up, Lopez said: “The thing is that we have to take the first step, look into how you would be able to digitize your operations. It’s not just changing from typewriters to computers, but really looking at the process itself, how to reuse data and technology.”
Chug piped in: “Paper has ruled us for 2000 years. It’s time to change that and get into digitization and move from hand stamps and hand signatures to digital stamps and digital agreement, smart contracts. All that brings in a lot of efficiency and spares your organization time to do more, think or create for revenue so the value chain is changing. You’ve got to be part of the change of the value chain.”
