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2001: An Airspace Odyssey The Airport Noise Symposium University of California Institute of Transpor

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Tracking and Tracing. Pro-active Delay Notification: GIVS (Global ... FedEx has partnered with companies in Supply Chain Management and Electronic Commerce ... – PowerPoint PPT presentation

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Title: 2001: An Airspace Odyssey The Airport Noise Symposium University of California Institute of Transpor


1
2001 An Airspace OdysseyThe Airport Noise
SymposiumUniversity of CaliforniaInstitute of
Transportation StudiesAir Cargo and Electronic
Commerce
  • William Langham, PhD
  • Managing Director
  • Strategic Market Analysis
  • FedEx Services, Memphis, TN
  • February 28, 2001
  • San Diego, CA

2
Air Cargo and Electronic Commerce
  • Air Cargo Customer requirements
  • Air Cargo Growth Trends
  • Air Cargo GDP
  • Electronic Commerce Trends
  • Overarching Trends in Business Manufacturing
  • Business, Manufacturing, Electronic Commerce
    Impact on Aircraft Choice, Airports, Flight
    Operations
  • Summary

3
You are the CEOYour mission is to satisfy your
customers
  • Suppose you are a home business owner making
    specialty dolls that customers order over the
    internet,
  • or
  • you are the CEO of a major distributor such as
  • Wal-Mart
  • Intel
  • Dell
  • General Motors

4
Customer Requirements for Air Express
  • High-Value Products and Critical Documents
  • Just in Time / Time-Definite
  • Time-sensitive
  • Information Intensity
  • World Wide Geographic Coverage

5
Customer Requirements for Air Express
  • JIT / Time-definite
  • Specific Time Commitments
  • Express Service (NFO, Next-day at 1030 or 300)
  • Economy Service (2D, 3D, 4D, 5D)
  • Late Pickup, Early Delivery
  • Highly Reliable
  • Total Custodial Control

6
Customer Requirements for Air Express
  • Information Intensity
  • Tracking and Tracing
  • Pro-active Delay Notification GIVS (Global
    Inventory Visibility System)
  • Worldwide Geographic Coverage
  • Ability to Pick Up and Deliver Anywhere
  • Customers Prefer to Use a Small Number of Carriers

7
Transportation / Logistics Providers Must also
Consider the Overarching Trends in Business
  • Globalization / Decentralization of Manufacturing
  • Long Beach Late pickups require aircraft from
    LGB and Ontario airports to serve local areas.
    LAX unable to serve due to distance or increasing
    traffic gridlock.
  • Sioux City, South Dakota Gateway can choose
    their optimal location without transportation
    constraints, since Express service that FedEx
    created is ubiquitous in the US.

8
Transportation / Logistics providers must
alsoconsider the overarching trends in business
  • Miniaturization high-value, low-weight
    components
  • Mass customization
  • Supply Chain Management
  • Logistics
  • Future re-engineering with IT / internet support
  • JIT / time-definite delivery
  • Tracking, tracing, pre-alerts
  • Intermodalism
  • Air / Truck Networks
  • Truck / Rail
  • Ocean / Rail / Truck

9
Transportation / Logistics Providers Must also
Consider the Overarching Trends in Business
  • It is the customer demand for next-day express
    shipments that drives the need for night-time
    operations at airports and hubs.
  • The air express customer may be a consumer making
    an individual purchase, or the customer may be a
    business managing its supply chains.

10
Air Express and Air Cargo GrowthUS Domestic
(1970-1999)
CAGR
19.7
1.9
Includes Scheduled freight, Charter freight and
Mail.
Source Boeing
11
US Domestic Air Cargo Moves At Least 10 of US
GDP
  • US Domestic Air Cargo Moves 8 of US GDP as
    product, and another 2 as services (accounting,
    payroll, professional services, etc)
  • Air express and air cargo are important to
    customers, as they position 10 of US GDP to the
    locations where the products become useful.
  • From this we conclude that air cargo moves a
    great amount of the GDP.

12
International Trade is a Growing Component of
the US Economy
Total Domestic
Total International
Source Boeing
Includes Express, Scheduled freight, Charter
freight and Mail for US airlines.
13
Projected Air Express and Air Cargo Market
(International - 2019)
Express 63
31
Intl Express
Express 4
Freight/Mai
Intl Freight and mail
9.2
Source Boeing
14
Importance of Electronic Commerce to Local
Economies
Source Forrester Research, February 2000
15
Importance of Electronic Commerce to Local
Economies (FedEx examples)
  • FedEx has partnered with companies in Supply
    Chain Management and Electronic Commerce
  • As one example, fresh flower consumption
    quadrupled between 1980 and 1990
  • Imports from South America now represent 70 of
    fresh-cut flowers sold in the US
  • Consumer prices of cut flowers fell by 15 in
    real terms since 1980
  • No longer a luxury just for holidays and special
    occasions

16
Importance of Electronic Commerce to Local
Economies (FedEx examples)
  • HPs online store
  • Decreases return cycle time by 80
  • Decreases return unit product cost by 70
  • Dell outsources most of its logistics and SCM
    functions to FedEx.
  • Delivers from Austin to rest of US
  • Delivers from Malaysia to rest of Asia
  • Dell turns inventory in less than 8 days vs.
    60-90 days with traditional suppliers

17
Importance of Electronic Commerce to Local
Economies (FedEx examples)
  • Nova Biomedical
  • HPs online retail store
  • Dell
  • Gateway Computer
  • Submitorder.com
  • barnesandnoble.com
  • Toysrus.com
  • williams-sonoma.com
  • Adornis.com
  • Bikeworld.com
  • Calyx and Corolla
  • AeroXchange

18
Electronic Commerce and Fleet Planning
  • EC and underlying trends in international
    commerce will require air cargo express to grow
  • Trend toward more widebodies
  • FedEx has replaced multiple daily flights with
    fewer flights of larger aircraft size
  • Progression toward larger fewer operations

19
Electronic Commerce and Fleet Planning
  • FedEx order of A/C
  • 1973 Falcons 6.5k pound
    payload
  • 1979 B727 48k
  • 1990s MD11/MD10/DC10 140-170k
  • 2000s A380/MD11,MD10 140-170k

20
Electronic Commerce and Fleet Planning
  • Narrowbodies serve smaller markets or secondary
    airports in metro areas plagued by air traffic
    congestion and/or traffic gridlock. For example
  • OHare An emerging role for airports in Gary
    and Milwaukee
  • LAX Ontario and Long Beach too far in time and
    distance to be served via LAX
  • Air express customers require late evening pickup
    and next morning / next day delivery
  • Packages must be in MEM by 100 am for sortation
  • Cannot waste time trucking from suburban
    locations far from central airport due either to
    distance or traffic -- customers would shift to a
    carrier willing to fly direct

21
Essential Aviation Services for a Local Community
  • Match aircraft to inbound and outbound city cargo
    demands
  • Cargo does not require numerous flights/day like
    passengers do, but it does require the minimum
    essential flights, or that city receives no
    service

22
Essential Aviation Services for a Local Community
  • Cargo does require
  • Late pickup / early delivery
  • Aircraft to support hub-hub flights e.g. LAX-MEM,
    LAX-OAK, LAX-EWR
  • Late a/c to support customer requirements for
    late pickup, LAX-MEM

23
Essential Aviation Services for a Local Community
  • Cargo does require
  • Secondary airports to ensure service while
    avoiding local traffic congestion (air or ground)
  • Local ground infrastructure such as close
    proximity to airport, stations, service centers,
    drop boxes
  • Normal aircraft service infrastructure

24
Summary
  • Air cargo moves a significant and growing portion
    of US GDP
  • Trends in Manufacturing and Consumer Demand point
    to increase usage of Overnight and other Time
    Definite Services
  • JIT / Time-definite / Miniaturization
  • Globalization / Decentralization
  • Supply Chain Management / Logistics /
    Intermodalism
  • Information content
  • Re-Engineering / IT / Mass Customization
  • EC / Internet
  • Full integration transportation, communication,
    IT, logistics, and electronic purchasing

25
Summary
  • Forrester Projection that EC will account for 17
    of the US GDP by 2004
  • More widebodies for larger markets
  • Narrowbodies to serve smaller markets or
    secondary airports in metro areas plagued by air
    traffic congestion and/or ground traffic gridlock
  • The Ultimate Decision-Maker The Customer drives
    the transportation system
  • No cargo airplane moves without a business
    purpose and each airplane delivers a major
    economic benefit to each community it serves
    everyday

26
Backup slides
27
Importance of Electronic Commerce to Local
Economies (BTB/BTC)
Source Forrester Research, Inc. February, 2000
28
Importance of Electronic Commerce to Local
Economies (FedEx examples)
  • Nova Biomedical
  • Manufacturer of blood-diagnostic devices
  • Low inventory
  • Central distribution location
  • Express distribution

29
Importance of Electronic Commerce to Local
Economies (FedEx examples)
  • Nova Biomedical
  • 6 million inventory on 80m business
  • Saves its customers 5m/yr vs. 3-month inventory
    level
  • Reduces inventory losses due to product
    obsolescence
  • Rapid overnight delivery
  • Total cost is everything including the
    satisfaction of our customers. John Wallace,
    CEO, Nova

30
Importance of Electronic Commerce to Local
Economies (FedEx examples)
  • Phillips Semiconductor
  • Outsources SCM to FedEx
  • Global customer response time reduced to less
    than 5 days from 2 weeks
  • Frees up millions of unproductive value
    stockpiled in inventory
  • Lower administrative costs vs. multiple carriers,
    freight forwarders, customs brokers
  • Customer receives quicker delivery at less cost

31
The FedEx Formula
  • Inputs
  • Faster / JIT / Time-definite
  • Near perfect reliability
  • Information Intensity
  • SCM / EC
  • Re-engineering

32
The FedEx Formula
  • Outputs
  • Less expensive in total distribution costs
  • Speed to market
  • Savings to customer
  • Lower inflation in FedEx sphere of influence

33
Importance of Electronic Commerce to Local
Economies (BTB)
8 of the Top 10 Industries Projected to Use EC in
2004 Are Major Users of Express Shipping
Online Sales as a Of Total Sales
Online Sales
700,000
45.0
Computing electronics
40.0
Computing and electronics
600,000
35.0
500,000
30.0
Motor Vehicles
Motor vehicles
400,000
25.0
Petrochemicals
20.0
300,000
Motor Vehicles
Office Products
15.0
200,000
Utilities
10.0
Consumer goods
Aerospace defense
100,000
5.0
Pharma/Medical
-
0.0
Source Forrester Research, February 2000
34
Importance of Electronic Commerce to Local
Economies
E-Commerce Hypergrowth Timing by Region
35
How Did EC Perform in 2000?
Online Retailing Revenue Posts 48.3 Billion in
2000
8.0
6.0
Monthly
online
Sales
(
billions)
4.0
2.0
Jan
Feb
Mar
Apr
May
Jun
Aug
Sep
Oct
Nov
Dec
2.8
2.4
3.0
3.3
3.4
4.0
4.0
4.2
4.4
6.4
6.2
billions
Source National Retail Federation and Forrester
Research, February 2001
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