e freight case study cathay pacific

8/17/2019 e Freight Case Study Cathay Pacific

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www.iata.org 1/25 © INTERNATIONAL AIR TRANSPORT ASSOCIATION 2012

CASE STUDYThe benefits of

100% e-AWB and e-freightimplementation for airlinesThe Case of Cathay Pacific

e-freight


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TABLE OF CONTENTS

1. Acknowledgments ....................................................................................................................................... 3 2. Executive Summary ..................................................................................................................................... 4 3. Introduction .................................................................................................................................................. 6

3.1. Objectives ............................................................................................................................................ 6 3.2. The electronic Air Waybill (e-AWB) and e-freight ................................................................................ 6

3.2.1. e-freight ......................................................................................................................................... 6 3.2.2. Electronic Air waybill (e-AWB) ...................................................................................................... 7

4. Cathay Pacific – first IATA member to be 100% e-AWB .......................................................................... 7 5. Main constraints and issues in a paper environment .............................................................................. 8

5.1. Introduction .......................................................................................................................................... 8 5.2. Export process prior to e-freight adoption ........................................................................................... 8

5.2.1. Delivery of the freight at the airport cargo terminal ...................................................................... 8 5.2.2. Perform incoming checks on received documents ....................................................................... 9 5.2.3. Sort the received documents ........................................................................................................ 9 5.2.4. Perform outgoing checks and deliver to the aircraft ................................................................... 10

5.3. Import process prior to e-freight adoption .......................................................................................... 10 5.3.1. Unload the cargo & documentation and dispatch ....................................................................... 10 5.3.2. Retrieve goods and documents for consignee delivery.............................................................. 10

5.4. Summary - main constraints & issues and impacts ........................................................................... 11 5.4.1. Export Process ........................................................................................................................... 11 5.4.2. Import Process ............................................................................................................................ 12 5.4.3. Accounting Process .................................................................................................................... 12 5.4.4. Data archiving ............................................................................................................................. 13

6. The benefits of e-AWB and e-freight........................................................................................................ 14 6.1. The new operational export processes in place for e-AWB and e-freight ......................................... 14

6.1.1. Delivery of the freight at the airport cargo terminal .................................................................... 14 6.1.2. Perform incoming checks on received electronic documents .................................................... 14 6.1.3. Sort the received documents ...................................................................................................... 16 6.1.4. Perform outgoing checks and deliver to the aircraft ................................................................... 16

6.2. The new operational import processes in place for e-AWB and e-freight ......................................... 16 6.2.1. Repatriate and dispatch documents ........................................................................................... 16 6.2.2. Retrieve documents for consignee ............................................................................................. 16

6.3. The challenges of the transition towards 100% e-freight ................................................................... 16 6.3.1. Introduction ................................................................................................................................. 16

6.3.2.

The impacts of the non e-freight countries and stakeholders on the e-freight leaders .............. 17

6.3.3. e-freight shipments after Cathay Pacific cutover 100% e-AWB in Hong Kong .......................... 18 6.4. Main savings identified along the processes ..................................................................................... 19

6.4.1. The approach used to calculate the benefits and costs ............................................................. 19 6.4.2. Caption ....................................................................................................................................... 19 6.4.3. Export process ............................................................................................................................ 20 6.4.4. Import process ............................................................................................................................ 21 6.4.5. Accounting process .................................................................................................................... 21 6.4.6. Data archiving ............................................................................................................................. 22 6.4.7. Productivity gains........................................................................................................................ 22

6.5. Main benefits ...................................................................................................................................... 23 6.6. Main costs to consider ....................................................................................................................... 24

7. The Cathay Pacific next steps .................................................................................................................. 25


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1. Acknowledgments

IATA would like to thank Cathay Pacific and especially Jackson Chan (Cargo Services Manager e-freight), for his fully dedicated support to the realization of this case study and for sharing with IATA hisdeep knowledge and his precious experience on how he managed successfully the e-freight project forCathay Pacific as well as for providing key data, which was crucial to calculate the savings and build thisdetailed report.

IATA would also like to thank Nick Rhodes, Director Cargo - Cathay Pacific, for having supported thecooperation.


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2. Executive SummaryThe objective of this document is to analyze and share the benefits of e-freight for airlines based on acase study realized with Cathay Pacific, which has implemented e-freight and was the first airline to achieve100% electronic Air Waybill (e-AWB) in its Hong Kong home base.

The graphic below highlights for three implementation scenarios the productivity gains , i.e. the level ofmanpower that can be saved or re-allocated to other tasks.

Scenario 1 forms the base scenario with the implementation of 100% e-AWB and e-House Manifest.Scenarios 2 and 3 include the benefits from scenario 1, and in addition the removal of the accompanyingpouches of documents transported with the freight. These two scenarios correspond to implementation ofthe full scope of e-freight, not just e-AWB.

This analysis shows that e-freight can generate significant productivity gains: Nearly 20% of total productivity gains are reached with 100% e-AWB + 100% e-House Manifest.

This has already been achieved by Cathay Pacific in Hong Kong. 30% of total productivity gains are obtained with 100% e-AWB + 100% e-House Manifest and

50% of shipments without pouch. Up to nearly 50% of total productivity gains can be obtained with 100% e-AWB + 100% e-House

Manifest and 100% of shipments without pouch.

The last two scenarios correspond to full e-freight implementation (i.e. removal of air waybill and ofaccompanying documents normally traveling in document pouch)..

SCENARIO 1100% e-AWB

+ 100% e-HouseManifest





+ 50% without pouch



+ 50% without pouch



+ 100% without pouch




Import processImport process

Accounting processAccounting process

Archiving processArchiving process

Export processExport process 27% 38% 52%

-2%* 19% 53%

12% 12% 12%

50% 50% 50%

TOTALProductivity gainsTOTALProductivity gains

19% 30% 48%

*Due to additional effort spent for some destinations where two copies of AWB are still required (printed) by the

consignee and consignee/freight forwarder to be signed for confirmation of pick up the cargo.

Productivity gains (in %) obtained in e-freight environment







+ 50% without pouch



+ 50% without pouch











-2%* 19% 53%

12% 12% 12%

50% 50% 50%


19% 30% 48%

*Due to additional effort spent for some destinations where two copies of AWB are still required (printed) by the

consignee and consignee/freight forwarder to be signed for confirmation of pick up the cargo.



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Beyond the productivity gains, the case study shows that e-freight brings additional benefits such as: reduced costs from less paper and printer use, improved customer service, increased quality of information, increased level of security, faster respond to regulator bodies, etc. (see chapter „‟6.5 Main benefits ‟‟ for all details).

To achieve these benefits, the right conditions must be met, and in the case of Cathay Pacific they included: an investment in business process re-engineering and information system from Cathay Pacific

and their partners a favorable environment with the local market and the support of government (customs).

The 100% e-AWB triggers acceleration in overall e-freight penetration and validates the strategy of e-AWBas the first step towards full e-freight . The figure shows that after e-AWB cutover in HKG, the number ofe-Freight shipments grew in a much faster manner.

Year 2010, from 200 to 300 e-freight shipments (Cathay Pacific) Year 2011, from 300 to 3600 e-freight shipments (Cathay Pacific) Year 2011, from 600 to 6400 e-freight shipments (HKG)

This document does not translate these productivity gains into dollar value, as this depends on each airlinecost structure. However, a separate template has been created, that allows each airline to calculate their

own productivity gains from such implementation. This template can also be used by ground handlers as aprocess model approach has been defined.

Cathay Pacific cutover 100% e-AWBin HKG on January 2011

Cathay Pacific and Hong Kong e-freight shipment trend 2010-2011




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3. Introduction3.1. ObjectivesThis document is part of a series of case studies on the benefits of implementing e-freight businessprocesses in the air cargo supply chain.

The objectives of this document are to: Share the benefits of e-freight for the airlines based on a case study of one IATA airline member,

Cathay Pacific, which has implemented a 100% electronic Air Waybill solution in its Hong Konghome base and has implemented e-freight procedures throughout its network

Present the processes that have been put in place: for e-freight

for managing the e-freight rollout, which includes the dual existing transition period of paperand paperless environments towards 100% e-freight

Identify the costs to consider for implementing an e-freight solution and for running the operationalactivities.

3.2. The electronic Air Waybill (e-AWB) and e-freight3.2.1. e-freighte-freight is the process of transporting air cargo shipments with digital (electronic) exchange of data anddocumentation, in lieu of paper documentation (for Air Waybills, manifests, invoices, packing lists, etc.).

Today, the air cargo industry still largely relies on paper-based processes to support the movement offreight. The average shipment generates more than 30 documents that are used and/or handled by thevarious parties involved: shippers, freight forwarders, ground handling agents, airlines, customs brokers,customs and other government authorities.

These paper-based processes are not cost-effective, nor do they serve the key requirements of air cargo:security and speed.

In December 2004, the Board of Governors mandated IATA to lead an industry-wide project whose aim is totake paper out of the air supply chain, and create the conditions to replace the existing processes with newones where the industry and governments rely on the electronic exchange of information between theparties to facilitate the movement of freight. The long-term vision for the industry is to eliminate the need toproduce and transport all paper for all stakeholders – paperless e-freight.

Although the vision is paperless, the current mandate is paper free. Achieving the vision will requiresweeping changes in regulatory and legal environments. The Board decided that paper free is a morerealistic approach and will deliver the majority of business benefits for industry stakeholders. e-freight ispaper free, i.e., a paper free process whereby the airfreight supply chain does not transport the paper, butthere may be a requirement by exception to produce a copy of this paper from an electronic structuredformat message or a scanned document.The documents that may be required to be produced by exception are the documents in the project scopethat support the cargo or goods release/clearance by customs authorities.


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3.2.2. Electronic Air waybill (e-AWB) Air waybill is a document made out by or on behalf of the shipper which specifies the contract between theshipper and carrier(s) for carriage of goods and which is identified by the airline prefix issuing the document.

The paper Air Waybill is a critical air cargo document that constitutes the contract of carriage between the„‟shipper‟‟ (direct shipper or freight forwarder acting on behalf of the shipper) and the „‟carrier ‟‟ (airline).

The “e - AWB” is the term IATA uses to describe the interchange of electronic data (EDI) messages,in lieu of a paper Air Waybill, to conclude the contract of carriage.

The new Electronic Air Waybill recommended practice (e-AWB RP1670) removes the requirementfor a paper Air Waybill, significantly simplifying the air freight supply chain process.

With the e-AWB, there is no longer a need to print, handle or archive the paper AWB

4. Cathay Pacific – first IATA member to be 100% e-AWBCathay Pacific Airways (CX) and Dragonair (KA) have implemented 100% electronic Air waybill (e-AWB)between forwarder and airline for all export shipments in Hong Kong (HKG) since January 1 st , 2011. Thecutover not only made CX/KA the first in adopting full implementation of e-AWB and also proved to theindustry it is doable. It marks an important milestone in the air freight industry.

e-AWB has been proved to be the first effective step to increase e-freight penetration where HKG hasincreased 10 times the e-freight shipments in 2011 compared with January 2011 against December 2011.

Airlines can implement 100% e-AWB and forwarders can drive 100% e-freight in parallel, moving towardsthe IATA vision of being paper free by end of 2015.

„‟Cathay Pacific Airways success is by working closel y with two excellent IATA working groups since2007: the IATA e-freight Central Action Group (e-CAG) and the IATA e-AWB Advisory Group. Thegroups combine with IATA leaders, major airlines and global forwarders expertise. We define projectscope, standards, procedures and workable approach to move forward. The e-freight and e-AWBprojects require the whole air freight industry members working together to make it happen by end of2015 .‟‟


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5. Main constraints and issues in a paper environment5.1. IntroductionThe handling of freight in a paper based environment involves the below processes. The case study focuseson the processes involved in document handling.

Sequencing of some activities along the supply chain might differ from one country to another, from one

airline to another. In this section we will describe the main processes and activities performed in Hong Kong.

While the cargo paper environment process described in the next section is still in place for many airlines inHong Kong, Cathay Pacific has moved to 100% electronic Air Waybill.

5.2. Export process prior to e-freight adoption5.2.1. Delivery of the freight at the airport cargo terminalIn Hong Kong, the cargo is delivered first, prior to the freight documentation. The Ground Handler acts as aneutral party and weighs the goods on behalf of both the freight forwarders and the airlines. This specificapproach eliminates subjects of disagreements between the involved parties.

When the cargo has been delivered to the airport warehouse by the freight forwarder and unloaded, awarehouse agent counts the number of pieces, checks the total weight and measures the freightdimensions. The agent keys in data in the warehouse application. After acceptance, the agent produces andprints the Reception Check List (RCL) document in four copies, keeps a copy and delivers the three othersto the truck driver who returns to the freight forwarder warehouse. At this stage, data is available in bothground handler Web solution and airline cargo systems, and both freight forwarder and Cathay Pacific canaccess to the information.

On the freight forwarder side, as soon as the RCL document has been produced data is used to finalize andproduce the Air Waybill, the House Air Waybill and the House Manifest. The pouch is built and deliveredtogether with the Air Waybill and House Manifest to the airline Export office counter.Because the weighing of the freight is done by the ground handler as a neutral party, it however obliges the

freight forwarder must come twice: a first time to deliver cargo at the warehouse and a second time to givethe updated documents to the airline at the Export airline front desk.

Receivefreight at theairport

Performincoming

checks

Sortdocuments

Performoutgoingchecks

Deliver to the

aircraft

Repatriatedocuments &dispatch them

Retrievedocuments

for consignee

Exportprocess

Import

process

Collate all airwaybills forbilling

Performanalysis &

checks

Accountingprocess

Archivedocuments

Destroydocuments

Archiveprocess

Invoice& manage

discrepancies

Receivefreight at theairport

Performincoming

checks

Sortdocuments


Deliver to the

aircraft

Repatriatedocuments &dispatch them

Retrievedocuments

for consignee

Exportprocess

Import

process

Collate all airwaybills forbilling

Performanalysis &

checks

Accountingprocess

Archivedocuments

Destroydocuments

Archiveprocess

Invoice& manage

discrepancies


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5.2.2. Perform incoming checks on received documentsThe documents are brought to the airline by car. As the freightforwarder car driver arrives at the airline Export desk, he may beserved immediately or may queue up to an hour , depending on thenumber of other drivers who arrived earlier. Due to the manualhandling of documents the service offered to the freightforwarders is therefore not always optimal .

When it is his turn, the driver gives the documents to the airlineExport front desk agent who carries out checks. This activity can takesome time, depending on the number of documents to check.

If the documents are accepted the Export front desk agent gives theOriginal 3 of the Air W aybill “for Shipper‟‟ to the driver. At that stage, due to potential human error there is a risk of overlooking hidden dangerous goods orspecial handling requirements for the shipment. Indeed, the Export employee may miss a document outof the pile of papers to check, which may translates to aircraft safety issue and hazards for handling agents.

5.2.3. Sort the received documentsThe Export front desk agent gives a copy of the Air Waybill and theHouse Manifest to the Data Processing Unit (DPU) where a teamkeys in data into the Cathay Pacific cargo application and into thewarehouse system the relevant data from the received

documentation.The manual data capture is time consuming with a risk ofmistakes , such as incorrect shipper or consignee address ormismatch data between paper and data, which can cause customsissue: data is used for Customs clearance and customs can delaythe cargo delivery or upload.

In parallel, the front desk agent brings the rest of the documentsdelivered by the driver to the Export Flight Handling Unit area(EFHU) and stores them in the dedicated pigeon hole, sorted bydestination.

At the Export Flight Handling Unit (EFHU) agents prepare the FlightManifest based on booking lists and Air Waybill documents retrievedfrom the pigeon holes.

Agents group all documents by flight and bring them to another agentfor last checks (see picture in the next section).


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5.2.4. Perform outgoing checks and deliver to the aircraft Agents check documents against Flight Manifest. When validated,the agent puts all documents in the flight bag (flight pouch).

Agents will deliver the pouch, Air Waybills, House Manifests andany other required documents directly to the aircraft. The physicalcargo and the documentation are at this point reunited. This task istime consuming and the flight bag can sometimes be heavy.

5.3. Import process prior to e-freight adoption5.3.1. Unload the cargo & documentation and dispatch

Cargo is unloaded from the inbound aircraft, and paper documentsare repatriated to the airline import warehouse and left on a largededicated table (see picture) where all flight bags are open.

Documents for HKG terminating shipments are split from the transitshipments and delivered to the Import front desk where freightforwarder drivers will come and retrieve them.

The documents are temporarily stored in pigeon holes (on left sideof the next picture below). This activity is time consuming.

5.3.2. Retrieve goods and documents for consignee delivery

Freight forwarder drivers must pick up the documentation,sometimes queuing as shown on the picture.

The queue can be by far longer, especially before the week-ends.The airline agent completes the Shipment Release Form, the driversigns it and retrieves his documents. The driver goes to thewarehouse, takes his goods, signs the Proof of Delivery (POD)

ready to return to freight forwarder warehouse, and the airportwarehouse agent keeps a copy.

The detailed existing process is: The freight forwarder driver comes and signs for the AWB as “Delivery Receipt” The Cathay Pacific agent returns the Original 2 of AW B “For Consignee” to the driver The Cathay Pacific agent will print out the Warehouse Shipment Release Form and driver will use

them for picking the physical cargo from the warehouse The freight forwarder driver will sign on the Warehouse Shipment Release Form and will get one

copy while the warehouse will keep remaining copies.

If any discrepancy or damage for the cargo is found, the driver can go back to Cathay Pacific counter toreport damages and to amend the Delivery Receipt if necessary.


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5.4. Summary - main constraints & issues and impactsThe constraints and issues described in the previous section are summarized in the tables below.

5.4.1. Export Process

Receive the

freight at theairport

Performincoming

checks

Sortdocuments


Deliver to theaircraft

Freight forwarder driver deliverscargo to the warehouseWarehouse agent checks receivedcargo (weight, number of pieces,etc.) and gives a receipt to the driver Driver goes back to the freightforwarder house and delivers thereceiptFreight forwarder driver prepares thedocumentation

A driver comes back to the airportwarehouse to deliver the documents



Driver has to come twicefor one freight deliveryDriver has sometimes toqueue at peak timeperiods for 30 minutes toone hour When documentspresented after flight cut-off time it prevents theload of the freightThis process isperformed manually


The acceptance agent collects thedocuments, performs a quality checkand gives the shipper copy of theMaster Air waybill to the driver


May overlook somehidden dangerous goodsMay overlook specialhandling requirementsfor the shipment


A copy of the Master Air waybill andthe House Manifest are delivered toa team in charge of loading data insystemsThe dedicated team keys in data insystems from the Master Air waybilland House ManifestThe rest of the documents are putinto a pigeon hole by destination atthe Export Flight Handling UnitPrepare flight manifest based onbooking list and air waybilldocuments

An agent groups all documents forthe flight, brings them to anotheragent for checks



Manual tasks that remaintime consumingRisk of wrong datacaptureRisk of incorrect addressdata capture due toshorten consignee andshipper addresses into35 characters


Check documents against flightmanifestConfirm when okPut all documents in the flight bag(flight pouch)


Manual tasks that remaintime consumingManual tasks that remaintime consuming

Take the flight bag and deliver it tothe aircraftTake the flight bag and deliver it tothe aircraft

Manual task that remainstime consumingTask outsourced to rampoperator involvingadditional cost


FreightForwarderreducedefficiency

Airline reducedefficiencyDegradation ofserviceReduced shippersatisfaction



Potential aircraftsafety issuePotential healthyissue forhandling agents


ReducedefficiencyPotentialincorrect billingto the forwarderincreasingappeal cases forbillingamendmentCustoms holdcargo and delaydelivery toconsignee


ReducedefficiencyReducedefficiency

Reducedefficiency

Additional costs

Reducedefficiency

Additional costs

Processes Main activitiesMain activities Constraints & issuesConstraints & issues ImpactsImpacts

Receive the

freight at theairport

Performincoming

checks

Sortdocuments





















Manual tasks that remaintime consumingManual tasks that remaintime consuming

Take the flight bag and deliver it tothe aircraftTake the flight bag and deliver it tothe aircraft












Reducedefficiency

Additional costs

Reducedefficiency

Additional costs



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5.4.2. Import Process

5.4.3. Accounting Process

Repatriatedocuments

and dispatchthem

Retrievedocuments

forconsignee

Freight paper documents arerepatriated to the airline importwarehouseLocal arrival flight bags are split fromthe transit ones and delivered to theImport front deskThe documents are temporarilystored in pigeon holes


There is a dual processof cargo and documentrepatriation performed bytwo different resourcesThere is a manualresearch of localdocuments with finaldelivery to the front office


Freight Forwarder driver comes topick up their documentationThe airline agent completes theShipment Release Form, the driversigns it and retrieve his documents.The driver signs the air waybillDelivery Receipt and ShipmentRelease FormThe driver goes to the warehouse totake his goods


Freight forwarder driverneeds to come first to theimport front office beforeretrieving their goods atwarehouseDrivers may queue atfront office at busy times



An inefficienttwo-step levelprocess retrieval

A need for theairline to provideresources



Processes Main activitiesMain activities ConstraintsConstraints ImpactsImpacts

Repatriatedocuments

and dispatchthem

Retrievedocuments

forconsignee















Collect all airwaybills for

billing

Performanalysis &

checks

For each flight retrieve all physicalair waybillsIdentify missing documentsDeliver air waybills to the accountingdepartment


In physical paperhandling environmentsome documents maybe lost


Process all air waybills per customer Key in data in cargo applicationPerform checks on data and charges


No specific constraintNo specific constraint

WorkloadincreaseWorkloadincrease

NoneNone


Invoice& manage

discrepancies

Manage discrepancies due to lossof documentsInvoice to customers


Missing documentsMissing documentsWorkloadincreaseCustomerrelationship

WorkloadincreaseCustomerrelationship


billing

Performanalysis &

checks







No specific constraintNo specific constraint

WorkloadincreaseWorkloadincrease

NoneNone


Invoice& manage

discrepancies



Missing documentsMissing documentsWorkloadincreaseCustomerrelationship

WorkloadincreaseCustomerrelationship


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5.4.4. Data archivingRegarding local regulations, the cargo documents must be archived for 7 years in Hong Kong. Each AirWaybill and House Manifest are thus collected and stored until their destruction.

Archive thedocuments

Destroy thedocuments

Collate the air waybills and housemanifestsBring them to storage areaStore on the shelf


The documentationneeds to be archived for7 years


Plan the retrieval of dossiersRetrieve the dossiersDestroy the dossiersRecycle the paper


The process brings noadded valueThe process brings noadded value

WorkloadincreaseCost for storage


Workloadincrease

Workloadincrease



Destroy thedocuments







The process brings noadded valueThe process brings noadded value



Workloadincrease

Workloadincrease



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6. The benefits of e-AWB and e-freightThe changes in the export and import processes in e-freight and e-AWB environment are described below.

6.1. The new operational export processes in place for e-AWB and e-freight6.1.1. Delivery of the freight at the airport cargo terminalThis sub-process remains the same. The freight forwarder driver delivers the freight at the airline warehousewhere the number of delivered pieces, the overall weight and dimensions are taken and information iscaptured in the ground handler application solution. The Freight Forwarder can access the data either fromtheir own system or the airline system. The truck driver returns to his warehouse with the Reception CheckList document. As soon as the data is in the system the Export operator can finalize the Air Waybill, theHouse Air Waybills and the House Manifest.

Note: as noted above, the delivery (and acceptance) of the freight still involves a paper process with theRCL. This could be eliminated as a further step but is not yet considered paperless in this case study.

6.1.2. Perform incoming checks on received electronic documentsA flexible approach in placeFreight Forwarders have to key in their air waybill and house manifest data in their system and send theirdata using direct host-to-host connection to Cathay Pacific. If forwarders do not have yet this capability theycan use the application called Ezycargo™ system. So far in Hong Kong, about 1/3 of the freight forwardersuses Ezycargo to send the FWB / FHL messages.

An efficient application solution in placeOne of the Airline Export employees checks the quality of themessages received electronically. The application with interface hasbeen developed to display data on the screen, and specificfunctionalities to perform automated checks have also beendesigned and implemented to facilitate the human checks, savetime and gain in efficiency and control. This includes among othersthe crosscheck of number of pieces, weight from physical goodsagainst FWB and FHL data, as well as the check of station, countryand postal codes. If anything is detected as incorrect by the system,it will be highlighted by a red cross in the application, on the screen.

If the verification is not positive, the agent rejects the acceptance and specifies the reasons to simplify theinvestigations for the freight forwarder in charge of completing the file correctly.Compared to the paper environment, the application is capable of assessing the risk of dangerous goodsbeing present. The export employee will then clarify with the freight forwarder to make sure it is notdangerous goods or not requirements for special handling.

When ready, the freight forwarder submits again the electronic documents. On the left side of the picture thescreen shows the e-freight application, and on the second screen it shows the airline cargo system and thelocal warehouse system from left to right.


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The quality control takes more time than before for verifying data as well as for specifying thereason of rejection to the freight forwarder due to the following reasons: In AWB paper Export staff can see all information faster compared to e-AWB So far, experience tells paper AWB has less errors than electronic data when first started in each

location, which may be due to IT mapping and inappropriate data input to satisfy systemrequirement such as only put „.‟ In the address field and CargoImp FWB limitation such as 35characters in key address has an impact on time processing too. A Cargo-IMP change request isunder adoption by the Cargo Services Conference to allow for two address lines increasing the sizeto 70 characters.

System auto checking and highlight of potential errors require staff to clarify with forwarders andreduce errors such as hidden Dangerous Goods.

Remark: Export staff may take a learning curve to do faster. With learning curve, in HKG the e-AWBrejection rate was 70% in January 2011 and has been significantly reduced to 30% by the end of December2011. This will continue to reduce.

If the e-Documents are correct the agent proceeds to the acceptance and with one click button verifiesautomatically whether the Air Waybill and the House Manifest have still to be printed in case the destinationcountry is not yet e-freight capable.

The Cathay Pacific Export office reduced to the minimum! After Cathay Pacific cut over 100% e-AWB, there is no need toreceive paper Air Waybill and House Manifest from all freightforwarders.

When the destination country is e-freight, there is no need tocollect the pouch from e-freight freight forwarders, which meansthere is no need for the freight forwarder to physically come onceagain to the airport and bring the pouch (except if specialdocuments need to be transported, such as certificate of origin,etc.).

The need for resources is also adapted to the new situation and limited to the minimum, as shown on thepicture: the full large left part is now closed and only one counter remains open to handle the forwarderpouches for non e-freight shipments as well as special documents to carry, and the walk-in customers (nopre-booking, no interactions done until the customers turn up at the acceptance desk).

If the Freight Forwarders have a single process for thisactivity, unfortunately Cathay Pacific has to manage twoprocesses in parallel to respond to routes such as Warsawroutes , which means that:

The electronic Air Waybills and House Manifestsdocuments need to be printed for Warsaw routes, whichis now done directly by an airline agent and not by thefreight forwarders anymore. When paper AWB is printedthis is not considered as e-AWB as the contract ofcarriage is on paper.

The freight forwarder has still to come to deliver thepouch with the House Air Waybills, the Invoice andPacking List and any other document.

Closed desks Lastdesk

Closed desks Lastdesk


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6.1.3. Sort the received documentsThe process is drastically simplified as most of the tasks have been automated in the e-freightenvironment. The Flight Manifest preparation remains the core activity of this process and most of the othertasks are eliminated, as presented in chapter 6.4.3.

6.1.4. Perform outgoing checks and deliver to the aircraftThere is no need to go and retrieve documents at the aircraft anymore , for e-freight upstream stationsand flights without special documents to carry, translated in productivity gains.

However, when the upstream station is non e-freight or when some special documents have to be carriedon, there is still a need to collect the flight bag (Air Waybills, House Manifests and pouches), and the oldprocess remains unchanged. This will still remain the case for several years to come.

6.2. The new operational import processes in place for e-AWB and e-freight6.2.1. Repatriate and dispatch documentsWith digitized information:

There is no pouch and no document to retrieve. The task is eliminated , except when specialdocuments have been carried, and then the flight bag needs to be brought back to the airline importoffice.

There is also no need to open the flight bag, separate the documents for local goods from thedocuments for goods in transit (except when special documents have been carried). The process issimplified .

There will be an interim period. When not 100% e-freight, there are still documents to be sorted and to bedispatched to the consignee like Certificate of Origin, License, Permit, or CITES Certificate etc. Localcustoms or government authorities are still requesting original copy.

6.2.2. Retrieve documents for consigneeFor the non e-freight destination the airline import office is required to handle the Air Waybill and the HouseManifest as well as the pouch and dispatch them to the consignee (via the freight forwarder).

For the e-freight destination, like Hong Kong, the airline import office may still require to handle the pouch(when exists) and dispatch it to the consignee via the freight forwarder. Currently Cathay Pacific prints outthe Air Waybill and the warehouse shipment release form for the consignee signature for proof of delivery:

Cathay Pacific still print two AWB laser A4 copies, one for consignee copy and the other one for forwarder tosign it as Delivery Receipt. In the near future, only the warehouse shipment release form should be printedfor the proof of delivery.

6.3. The challenges of the transition towards 100% e-freight6.3.1. IntroductionFor e-freight to be feasible between an origin and destination, both parties should be to the same treaty(MP4 or MC 99). There may be exceptions to this general rule that would apply to those locations that havenot signed Warsaw 29 but have national legislation that supports e-document trading.The MP4 and MC 99 countries support electronic data information exchange and paperless. The Warsawcountries require a specific procedure to prepare the paper Air Waybill and must be on board the cargo flightat origin.


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6.3.2. The impacts of the non e-freight countries and stakeholders on the e-freight leadersWhile Cathay Pacific became the first airline to be 100% e-AWB, many airlines, freight forwarders andcountries are not yet e-freight. Cathay Pacific would get the full benefits of paper free on e-freight tradelanes.

Offering 100% e-AWB is already improving the customer service and airline performance significantly asdescribed previously. If we also look at the savings obtained by an airline that is e-AWB and e-freight it leadsto an advantage by being even more efficient and less costly for the airline. Even with this situation the directsavings are more important than costs making the case more than robust enough to move to e-freight. Ofcourse, with more e-freight trade lanes the payback will be faster.

6.3.2.1. Dual processes to set up and manage: printing Air Waybill!

While the overall business case remains very positive on both the bottom line and the operationalconditions, there is consequently a necessity to manage several dual processes to cover both e-freight andnon e-freight destinations. There is no real added complexity but the situation leads to additional workloadwith non added-value and some additional costs.

For instance, a task that should have disappeared in a full e-freight environment and that was performed bythe freight forwarders in now assigned to the airline, a position choice directly taken by the airline:

In the e-freight environment, the freight forwarder does not need to print the Air Waybill and theHouse Manifest anymore, the task is performed electronically

In a non e-freight environment at destination, the airline receives the AWB data and House Manifestelectronically from the freight forwarder and needs to print the two documents as there is a pouchdelivered by the freight forwarder to handle.

Cathay Pacific has decided to perform this task in order to simplify the process for the freight forwarders andmake them ready on both information technology and procedures to proceed for the 100% e-freight rolloutwith their own documents such as House Air Waybill, invoice, packing list.

In order to calculate the additional workload, or let‟s say to reduce the total elimination of that activity eachairline should calculate the destination routes impacted by not being yet e-freight and by the number of timesthere is a need to carry special documents on e-freight routes. Note that on some routes paper AWB isprinted at destination.

6.3.2.2. Dual processes to set up and manage: the arrival of the pouchThis has been described in chapter 6.1.2 and the additional work to perform is now explained. Before the e-

AWB and e-freight, the airline export counter agent received at the same time the pouch with the Air Waybilland House Manifest documents.Today, this is not true anymore as the Air Waybill and House Manifest are sent electronically by the freightforwarders, which leads to an additional activity for the airline, but also for the freight forwarder who needs tobring the pouch. Indeed, the airline agent has to verify whether and when the pouch has been delivered.

Remark: This constraint happens only in Hong Kong location (airline home market) where freight forwarderstendered their cargo first and weigh the cargo. When this is done freight forwarders go back to their office toprepare the Air Waybill with actual piece and weight information. For Cathay Pacific office, there is noperfect timing to staple the AWB and the pouch together due to large volume of shipments out of HKG.

At other locations, airline can receive at the same time both the physical cargo and forwarder pouch andthus can check the electronic Air Waybill and print it out and staple all documents together before export.


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A specific procedure has been put in place: Cathay Pacific has produced on purpose a label delivered to thefreight forwarders in charge of specifying on that label (attached to the pouch) information on the e-AWBnumber, destination, flight number, and consignee name. The airline is then in charge of matching both thepouch with the printed Air Waybills and House Manifests documents.The Export office agent time stamps a specific label that contains key information (e-AWB number,destination, flight number, consignee name) and the freight forwarder leaves the office with a copy of thelabel as a proof of delivery for the pouch.

6.3.2.3. Data quality checkThe building logic of the e-freight application consists of performing basic data quality checks such ascorrect pieces, weight among Air Waybill, House Manifest and physical goods. It also highlights suspectdangerous goods and special cargo based on keyword searching. The export staff cannot simply ignore thiswithout checking with the forwarder for additional information.This task is thus more time consuming than before using paper mode. On the other hand it ensures a betterquality and service to the freight forwarders and customs.

The additional work on the airline side is also shared with the freight forwarders that need to provide moreinformation. The freight forwarders are still in the learning curve and it is expected to have less additionalchecks in the future with freight forwarders completing correctly the documentation.

6.3.3. e-freight shipments after Cathay Pacific cutover 100% e-AWB in Hong KongThe figure shows that after e-AWB cutover in HKG, the number of e-Freight shipments grew in a muchfaster manner.

Year 2010, from 200 to 300 e-Freight shipments (Cathay Pacific) Year 2011, from 300 to 3600 e-Freight shipments (Cathay Pacific) Year 2011, from 600 to 6400 e-Freight shipments (HKG)






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6.4. Main savings identified along the processes6.4.1. The approach used to calculate the benefits and costsTogether with the support of IATA, a process performance approach including visits in the field has beenundertaken in order to analyse and compare all sequential activities in paper and paperless environments aswell as the use of key metrics for measuring the benefits.

Cathay Pacific have a standard measurement for each major Import and Export activity based on previousstatistics or by chronometer measurement. Cathay Pacific created a benefit worksheet in 2009 whenrequesting the e-AWB and e-Freight projects funding. The benefit worksheet has been reviewed in early2012 after one year 100% e-AWB cutover in Hong Kong with additional knowledge and experience.

Three scenarios have been defined and analyzed to identify the benefits respectively.

Scenario 1 : e-AWB scenarioThe e-AWB scenario focuses on being 100% e-AWB and e-House Manifest only as implemented already inHKG by Cathay Pacific. By the end of 2014 IATA targets to reach 100% for the e-AWB as well as for the e-House Manifest.

Scenario 2 : e-AWB + 50% without pouch shipments scenarioThis scenario is based on the scenario 1 + implementation of e-freight for 50% of the shipments by the endof 2015. As of April 2012 Cathay pacific has 8% e-freight penetration in HKG.

Scenario 3 : e-AWB + 100% without pouch shipments scenarioThis scenario is equivalent to scenario 1 with a 100% e-freight environment. The principle of being 100% e-freight means a true paperless transportation for all shipments, whether general cargo or special cargo (nodocument pouch), with still walk-in customers to serve.

6.4.2. CaptionIn paper environment we have defined the required workload to perform a task and its frequency . Themore „‟+‟‟ there ar e, the heavier the workload and task repetition. The aim of this approach is to highlight themain savings without communicating on Cathay Pacific figures for confidentiality purpose. It also showswhere the improvements are along the processes for any other carrier.

Task that remains Task to perform in both paper environment and in e-freight environment

Minor change Task slightly improved ( ≤5%)

Partly eliminated Task partly eliminated, usually around 50%

Eliminated Task eliminated

Eliminated* Task eliminated except when special documents to handle

More effort Task requiring more effort (dual or new task, etc.) compared to paper environment


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6.4.3. Export process

Task description Workload Frequency

Retrieve and check the documents +++ +++ Partly Eliminated Partly Eliminated Eliminated

Performs a quality check on electronic FWBand FHL data (no missing data and specialdocuments…)

+ +++ More effort More effort More effort

Detaches the shipper copy of the Master Airwaybill and gives it to the driver. Detachesthe airline copy for filing and one copy forairline finance office for billing.

+ +++ Eliminated Eliminated Eliminated

Detaches another copy of the Master AirWaybill and one copy of House Manifest forcustoms report process

+ +++ Partly Eliminated Partly Eliminated Eliminated

After acceptance, receive correction advisefrom the freight forwarder for dataamendment (Charge Correction AdviceCCA)

+++ + Partly Eliminated Partly Eliminated Partly Eliminated

Deliver the Master Air waybill and the HouseManifest to the team in charge of loadingdata


Key in data in systems from the Master Airwaybill and House Manifest into airline ca rgosystem

+++ +++ Partly Eliminated Partly Eliminated Partly Eliminated

Update the air waybill record in thewarehouse systems (Inform the warehouseto provide the ok to start physical cargo build-up or flight manifest work)


Sort rest of received documents + +++ Partly Eliminated Eliminated*

Retrieve documents for preparing flightmanifest + +++

Eliminated Eliminated Eliminated

Container build up instruction based onbooking list and received air waybills + ++

Group all documents for the flight, to beready for checks

+ ++ Partly Eliminated Eliminated*

Check documents against flight manifest(HKG) + +++

Dual process Dual process Eliminated

Check documents against flight manifest(oversea stations) + +++

Partly Eliminated Partly Eliminated Eliminated

Put all documents in the flight bag (flightpouch) + ++


Take the flight bag and deliver it to theaircraft +++ +

Informcustoms

After take off, update information to report tocustoms in some countries (US, Canada,Europe, etc.)

+ + Partly Eliminated Partly Eliminated Eliminated

Perform incomingchecks foracceptance

Sortdocuments

100% e-AWB +e-HouseManifest

100% e-AWB +e-House

Manifest + 50%pouch lessshipments

100% e-AWB + e-House Manifest+ 100% pouch

less shipments


Paper environment


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6.4.4. Import process

Remark: the new task to perform in e-freight environment is due to additional effort spent at destinationswhere still two copies of AWB are required (i.e. to be printed) by the consignee and consignee/freightforwarder to be signed for confirmation of pick up the cargo.

6.4.5. Accounting process


Retrieve flight bag from aircraft and bring itback to the office

+++ + Partly Eliminated

Split the local arrival flight bags from thetransit ones and deliver them to the Importfront desk

+++ + Partly Eliminated Eliminated

Print AWB laser copies for consignee copyand sign for delivery note for proof ofdelivery.

+ + New task New task New task

Sort and store temporarily the documents inpigeon holes

+ + Partly Eliminated Eliminated*

Deliver to the Freight Forwarders thedocuments they come to pick up

+ ++ Partly Eliminated Eliminated*

Complete the Shipment Release Form, andget freight forwarder signature ++ ++


Copy of the air waybill. + + Eliminated Eliminated Eliminated


less shipments

Performdocument

deliveryprocess

100% e-AWB +e-House



Paper environment

Receive thefreight at the

airport


For each flight retrieve all physical air

waybills+ + Eliminated Eliminated Eliminated

Identify missing air waybill documents + + Minor change Minor change Minor change

Deliver air waybills to the accountingdepartment + + Eliminated Eliminated Eliminated

Process all air waybills per customer + ++

Key in data or data amendment in cargorevenue accounting application

++ ++ Partly Eliminated Partly Eliminated Partly Eliminated

Perform checks on data and charges ++

Invoice &manage

discrepan-cies

Manage discrepancies due to loss ofdocuments

+++ +


less shipments

100% e-AWB +e-House



Paper environment


billing

Performanalysis &

checks


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6.4.6. Data archiving

6.4.7. Productivity gainsThe graphic below highlights for three e-freight implementation scenarios the obtained productivity gains ,i.e. the level of manpower that can be saved or re-allocated to other tasks.

Improvements have been calculated for the three scenarios and are given in percentage of productivitygains per process and as overall.


Archive theair waybillsand housemanifests

Collate the documents, label them and storethem + ++ Eliminated Eliminated Eliminated

Organise the collect of documents + (+) Eliminated Eliminated Eliminated

Retrieve the documents + (+) Minor change Minor change Minor changeDestroy the documents + (+) Eliminated Eliminated Eliminated

Recycle the documents + (+) Eliminated Eliminated Eliminated


Destroy thearchived

documents

Paper environment100% e-AWB +

e-HouseManifest + 50%

pouch lessshipments


less shipments

Workloadweight

perprocess

Workloadweight

perprocess







+ 50% withoutpouch



+ 50% withoutpouch



+ 100% withoutpouch



+ 100% withoutpouch





-2%* 19% 53%

12% 12% 12%

50% 50% 50%


19% 30% 48%

++++++

++++

++

+

*Due to additional effort spent for some destinations where two copies of AWB are still required (printed) by theconsignee and consignee/freight forwarder to be signed for confirmation of pick up the cargo.


Workloadweight

perprocess

Workloadweight

perprocess







+ 50% withoutpouch



+ 50% withoutpouch



+ 100% withoutpouch



+ 100% withoutpouch





-2%* 19% 53%

12% 12% 12%

50% 50% 50%


19% 30% 48%

++++++

++++

++

+

*Due to additional effort spent for some destinations where two copies of AWB are still required (printed) by theconsignee and consignee/freight forwarder to be signed for confirmation of pick up the cargo.



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6.5. Main benefitsThe benefits are numerous and can be presented as follows:

Increaseproductivity


Eliminate many operational tasksEliminate double keyboarding and reduce number of manual errorsEliminate risk of losing documents

Access information in real time and treat shipments faster



Improvecustomer

service

Improvecustomer

service

Provide an improved & efficient service to the freight forwarders bysimplifying their paper handling work and reducing their downtimesPro-actively alert freight forwarder on document issues to let them adjustquickly and ensure loading of cargo as scheduledBetter visibility for freight forwarder and stakeholders by enhanced cargotrack & trace solutionEliminate the management of discrepancies due to missing documents


Reducecosts

Reduce

costs

Reduce storage costs by eliminating paper documents and free upvaluable office space

Eliminate costs of paper purchase, paper destruction and recycling ine-freight environmentReduce outsourcing cost at out stations by eliminating paper handling

Reduce storage costs by eliminating paper documents and free upvaluable office spaceEliminate costs of paper purchase, paper destruction and recycling ine-freight environmentReduce outsourcing cost at out stations by eliminating paper handling

Increaselevel

of security

Increaselevel

of security

Secure the access of dangerous goods information and special handlingrequirements for the shipmentBecome flexible enough to be compliant with regulations needs byresponding properly and in a fast manner to customs demands


Respond fasterto regulator

bodies


bodies

Reduce cycle timePerform pre-clearance to the customsSubmit data with better quality to customsContribute to the advanced reporting requirements by providing data inadvance and be compliant with Governmental and security regulators


Increasequality of

information

Increasequality of

information

Reuse customer data in an automated wayImprove data accuracy, integrity, validity, consistency, criticality andinformation completeness

Access electronic data instead of paper that can be damaged or lost



Sustaindevelopment

Sustaindevelopment

Be eco-friendlyBoost company status in the community by being part of the GreenRevolution








Improvecustomer

service

Improvecustomer

service



Reducecosts

Reduce

costs

Reduce storage costs by eliminating paper documents and free upvaluable office space

Eliminate costs of paper purchase, paper destruction and recycling ine-freight environmentReduce outsourcing cost at out stations by eliminating paper handling

Reduce storage costs by eliminating paper documents and free upvaluable office spaceEliminate costs of paper purchase, paper destruction and recycling ine-freight environmentReduce outsourcing cost at out stations by eliminating paper handling

Increaselevel

of security

Increaselevel

of security




bodies


bodies



Increasequality of

information

Increasequality of

information





Sustaindevelopment

Sustaindevelopment




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6.6. Main costs to considerThere are some costs to consider in the development of the solution and its maintenance, as presented inthe diagram below.

At high level, the management of therelationships with stakeholders isessential in the success of the projectand coordination is required.Through the Business processtransformation, the processes areadapted, fine tuned and dualprocesses during transition period run

in parallel. Another key aspect of the project is tomanage the change and the rollout,including training and communication.The e-freight solution and themessage distribution model need tobe defined as well as the requiredlevel of security in messageexchanges.

The main activities to consider during the integration of the solution are the updates of the information

system(s) and interface(s) as well as the management of all technical aspects such as: Project management and solution development life cycle (user requirement, architectural

governance, development, tests, integration and validation, etc.) Installation of printer software on PCs at outstations System enhancements based upon outstations requirements System problems investigation and solving Technical support during the pilot run and transition phase

The need of additional printers during the transition period is justified by managing both e-freight and non e-freight destinations: for 100% e-AWB rollout in Hong Kong, Cathay Pacific has used a neutral printer,purchased one neutral AWB printer and three laser printers as well as four new PCs.

During the transition phase, there is also a need for equipment at the outstations. Printers are required tocover some countries requirement on neutral Air Waybill, interline carriers who are not yet adoptedelectronic Air Waybill or laser Air Waybill. Customs and other government parties may request airline toproduce hard copy documents when requested.

e - f r e

i g h t b u s

i n e s s

Management of Change & Network Rollout

Solution Integration

Business ProcessTransformation

IT Strategy & Governance

R i s k M a n a g e m e n

t

& S e c u r i

t y

O r g a n

i s a

t i o n

Stakeholder Management

Operational Management & maintenance

e - f r e

i g h t b u s

i n e s s

Management of Change & Network Rollout

Solution Integration

Business ProcessTransformation

IT Strategy & Governance

R i s k M a n a g e m e n

t

& S e c u r i

t y

O r g a n

i s a

t i o n

Stakeholder Management

Operational Management & maintenance


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7. The Cathay Pacific next stepsCathay Pacific rollout e-AWB to oversea stations where feasible during 2012. The current feasible countriesfor Cathay Pacific are Singapore, Malaysia, UAE, Australia, Korea, Canada, Japan, Taiwan, Thailand, NewZealand and Europe.

Cathay Pacific will continue working closely with capable e-freight forwarders to increase number of e-freightshipments in existing 36 e-freight enabled Cathay Pacific stations.

IATA will pursue effort to get the remaining countries adopting e-freight and Cathay Pacific will adjust therollout plan accordingly.

‟‟We believe e- freight can bring benefits to the members and will be the future for the air freight industry.‟‟

Jackson Chan, Cargo Services Manager – e-freight, Cathay Pacific.