Connecting the community – Arnaud Lambert, CEO, CHAMP Cargosystems

“Increasing meaningful connectivity across the cargo community will drive game-changing progress,” says CHAMP Cargosystems’ CEO Arnaud Lambert. He is keen to stress the opportunities, but also recognizes the extent of cultural change still required if all links in the air cargo chain are to benefit. 

Why the focus on connectivity?

Arnaud LambertAt CHAMP, we have a very wide portfolio that covers airlines, ground handlers, GSA, freight forwarders etc. – so we provide solutions that deliver value for each of those segments. But we are convinced that – ultimately - the benefit needs to go to the end customers, the shippers. They need to see the value of air cargo versus other modes of transport.

So if all the actors in the chain want to up their game, they need to work together and show value to the shipper.

Not only do our solutions deliver the explicit functionality required by specific industry segments: we also offer the market solutions that deliver value across the industry segments that make up the complete air logistics chain. It means the supply chain can work efficiently as one entity.

Digitization of information and then sharing it – which are two different challenges – are definitely the way forward. In the past, retaining information for yourself gave you power. Those days are over. Now, having the information and, critically, sharing it is the game changer.

The successful companies will be those that share – because by sharing information they will remove inefficiencies and unnecessary complexities, improve quality, timeliness and transparency. Improved performance will then be reflected through more satisfied shippers.

The point is that if airlines can find topline growth, they still have an issue with bottom line growth because of cost inefficiencies. Opportunities for efficiency gain can only come from a digitized information flow that applies across the whole chain.

Each actor, from carrier to forwarder, only represents one segment of the end-to-end logistics chain. And they will only be able to drive further improvements and cost savings if they collaborate, and that starts with the digitization of information.

I keep coming back to the user, the customer, because the whole consumer market is going in the same direction as well. It makes it so much easier to accept that cultural shift. Today the procurement or purchasing habits of customers are also influenced by personal preferences. They will go to Amazon or an integrator or whoever – but they have a one-stop shop with visibility across the entire delivery chain.

So that requires a mind shift?

Yes. In fact, the biggest challenge is definitely a mind shift. I was at a congress discussing transparency and sharing of information with a shipper. When he heard the benefits, he said
“I want that full transparency”. Then I discussed the same thing with an airline. They also said they wanted complete transparency with their partners.

Everyone says the same: “Yes, I want to do it”. But put them all in the same room, and they’ll change what they say, because they want to protect their part of the chain, thinking they can add more value than the chain as a whole.

Look at IATA’s target for electronic air waybills. The target was 45% by the end of the year, but we’re still below far from it and there’s no idea yet of when we’ll make 100%. The technology is there. 

Digitization of information flow has a cost, of course.  But it also has a return. The cost is in terms of intelligence that will add another layer of information that needs to be managed. But it is the quality, timeliness, accuracy and accessibility of that Big Data that delivers real value.

Unrivalled value

Our solutions deliver the right functionality for
the specific industry segments that make up the
entire air logistics chain. They also provide value
across those industry segments. 

Arnaud Lambert, CEO, CHAMP Cargosystems

And that needs connectivity end-to-end?

If you look at the whole end-to-end chain, there are individual participants from multiple forwarders to handling agents to airlines, and then the process is reversed. You also have others involved such as customs or security.

They all have different ways of working and different technologies – and even if they don’t have all the information, they need to share what they do have, - in a simple manner.

Since they’re not all on the same technology – despite the internet, despite all the connectivity in the world – if you want accurate and timely data you must use the same format, agree on the same meaning for items of information. Integration and meaningful connectivity between all those involved in the chain remains a considerable challenge.

Even if people use the same systems, they won’t be on the same version at the same time, simply because everyone is at a different stage in their investment in infrastructure, both internally and externally – and they don’t have access to the same availability of investment funding.

If we’re going to have an end-to-end logistic flow, we have to accept that there will always be some links in that chain that are less advanced than others with regard to technology or connectivity.

There’s a greater understanding of this now. For example, in the past you rarely saw shippers at major conferences such as the IATA World Cargo Symposium. Now not only are they there, but they’re on the speaking panel! The shipper is putting pressure on the chain for transparency – and particularly on the forwarder.

After all, it’s forwarders who make the most money from the shipment – it’s definitely not the airline, nor the ground handler. And forwarders are keen to protect their information, because that’s how they can protect their margins.

As a result we’re going to see a major shift as shippers start saying to their cargo chains, “All of you must work together, or we’re going to dictate the rules of the game. And if necessary, we’ll bypass some of the links in the chain”.

There’s another factor driving change. In recent years, we’ve seen a 60:40 ratio for cargo carried between full freighters and passenger aircraft belly. But some of the latest aircraft can take up to 40 tons of cargo. So we’re now seeing a shift to a 55:45 ratio and that’s going to go further to at least 50:50. That means a change in airline business models.

Today, air freight represents about 18% of airline revenues – in some cases going up to 25%. Air freight was very much the hidden side of airline operations. But with more belly capacity, cargo is going to become an integral part of the growth strategy for airlines. They’re serious about this. They recognize it is a different business model to the passenger side, and so it requires specific systems to optimize the logistics flow rather than piggy-backing on passenger systems.

Are these challenges common across all tiers?

Everyone is operating in the same market, but the dynamics will differ depending on an airline’s size and location. But no matter what the size of carrier, they all need to embrace
e-commerce and they all need to treat their passengers and their part in the logistics chain differently.

If you’re Tier 1 you can dictate some of the rules, but if you're mid-tier or low-tier you have to accept them. The complexity of the challenges will differ according to the carrier’s size. Everyone needs to be able to manage their own future, but at the same time recognize that they’re all part of the same entwined logistics flow.

The greatest benefit from the digitization of air waybills – even though ambitious but sound targets have not yet been met – is that everyone has realized the only way forward is to work together.

Clearly the big players are still going to try to include their rules, and the smaller ones will need to work within those rules. But Tier 1 have another significant challenge: they will need to effect change for legacy systems developed in-house and major transformation programs are very costly.

Even the largest Tier 1 carriers have opted for a service model in preference to a desktop license. It shows they’ve understood the need to focus on their core business model, not to re-invent the wheel but to use community solutions to access state-of-the-art systems. They can still add modifications, but they also gain access to the broader community. That’s a major, and welcome, shift.

What’s the progress with paperless commerce?

Overall the air cargo industry has benefited from IATA’s efforts to resolve the whole issue of Cargo IMP standards. If that is well managed with the right levels of connectivity and no resistance, the best carriers will handle 90% of their transactions electronically.

The rest will be done manually, but even then most transactions can be handled electronically because of the extent of digitization through the chain, even if it is not yet complete.

The introduction of the electronic air waybill has really been about trying to replace a paper document with an electronic document. But for me, the benefit is not about getting rid of paper, reducing dead weight etc. – that's a side benefit. The real benefit of e-freight is about sharing information across the logistic chain at all times.

And it’s not about technology. That’s all there. Once again, it's the mental shift required to accept sharing a single format document. It’s the degree of willingness or reluctance to share. We have to accept that it can take time to accept this kind of mental shift.

There’s an impatience to get everyone using Cargo XML, but not everybody will be on the same page at the same time. Look at the adoption of the barcode – it took years to get 90% of shipments barcoded. People tend to underestimate the time it will take. I’ve no doubt that it will be faster than the barcode, but there will be a period where we need to co-exist between the paper version and electronic version, and the Cargo IMP and the Cargo XML version. And that complexity should not be underestimated, not from a technology point of view but from a business process point of view because the richness of the information between the two standards is different.

Of course, the world would be simpler if everyone used CHAMP! But there will always be choice and with choice comes the need for standardization, for a common approach. There are something like five billion different ways of routing cargo. So a shipment needs to use a standardized process if it is going to be able to use any one of those five billion different routes.

But not everybody is going to be able to do that at the same time. And that’s where companies like CHAMP can help, by enabling all parts of the chain to work seamlessly together because not everybody will have the means or the will to do that themselves.

You launched CHAMP Forwarding Systems last year. How’s that progressing?

It's working very well. For us, this has been a strategic shift. In the past we dealt with airlines and ground handlers. Now we’re covering the community end-to-end by moving into the forwarding space. We were already connecting close to 4,000 forwarders to the rest of the world. But this is about providing solutions for that community.

The logic is that there are major forwarders with their own systems – we’ll see how we can help them. But there’s also a large community of mid-size and small forwarders who are an important part of the global sector, but have not had the means or the scale to access

The logic behind CHAMP Forwarding Systems is to provide simple, easy solutions and processes for the community. It’s progressing very well, but is also providing some surprises. First, we had underestimated to what extent the smaller forwarders were unaware of changes across the sector, including the benefits, the whys and hows of the electronic air waybill.

While we began by dealing directly with individual forwarders, we’re now talking to forwarders associations, such as Connecta and others. They’ve welcomed the opportunity for their members to gain access, through CHAMP, to an easy and cost-effective way to embrace e-commerce.

The second surprise is that airlines have shown great interest. They’re used to dealing with the major freight forwarders, of course, but they also deal with hundreds of small forwarders who come to them in a completely non-standardized manner.

So the airlines see this as a way of standardizing the inbound stream of that segment. They know that if they want to be fully digitized they need the inbound zone to be fully digitized, structured with the right quality. And while they make time to discuss issues with the big players, they can't give the same amount of time to the smaller players. That's where we come in. And by taking value up the chain, we add value down the chain to airlines and the ground handlers.

Major shift on the horizon

We’re going to see a major shift as shippers start
saying to their cargo chains, ‘All of you must work
together, or we’re going to dictate the rules of the
game. And if necessary, we’ll bypass some of the
links in the chain. 

Arnaud Lambert, CEO, CHAMP Cargosystems 

What’s the progress with TRAXON and the customs authorities?

The acquisition of Traxon, the company, was based on a strategy to get connectivity between all the actors. Today Traxon is the brand under which we have all value added services complementing our core cargo offering.

The Traxon Customs Gateway (TGC) service involves a gateway with a standard set of messages and, depending where you land, the system will handle customs pre-clearance automatically. We have close to 50 countries connected to this service – including all 28 EU countries, the US, Canada, Israel and many others, including the ASYCUDA countries.

We’re following the same storyline that we use with CHAMP – here is a simple way of doing business through a set of modules, with just one set of messages through the core system. And you don't need to be a CHAMP core system customer to use them.

Customers such as BA, Lufthansa, Air France/KLM are using the system, including the modules, because instead of managing a whole set of documents pre-clearance and then point-to-point, we manage the point-to-point and they just have to connect to one point. This added value is now also being extended into areas of security.

The customs authorities want to make it as simple as possible. It's one area where standardization can actually take place relatively quickly because it's in everybody's interest to have the similarity. The World Customs Organization have also done a terrific job in encouraging use of the system, including for less developed economies. It’s enabling some of those countries to move closer to linking into the global e-commerce system as a whole.

How would you characterize your first six months as CEO of CHAMP Cargosystems – and the state of the market?

It’s probably clear from my earlier comments that I’ve been taking a fresh look at the company, to see how we can reshape CHAMP to focus more intently on innovation.  Our customers – now and in future – remain our biggest asset and we’ll continue our efforts on the customer experience on a company level. 

In terms of the market, Q1 was strong for everyone – linked to port embargos in the US, which shifted competing traffic from maritime to air freight. That, together with fluctuations in exchange rates and the lower cost of fuel, gave ‘wings’ to airlines.

Our customers enjoyed strong performance – so, since our own revenues are dependent on levels of air cargo activity, we also enjoyed a strong first quarter. In Q2, there was still a tail wind from Q1, but it began to fade. In Q3, we have not seen growth as expected, but there will be more variation in Q4. Overall I would expect 2015 to show growth over 2014, but more around the 4% forecast by Airbus and Boeing than the higher rates seen in Q1.

The Middle East is still growing strongly. Asia is still growing but not at the same rate as previously – and there is more growth in the domestic than in the international market. However, Africa is definitely the one to watch – they have been growing at 24% against last year and there is definitely further potential there.

As far as the situation in China is concerned, it depends how deep and prolonged the correction is before we can see whether it’s adversely impacting air cargo. Meanwhile it reflects the fact that what was the case last year may not be the same next year. There is always a changing dynamic.

We have the advantage of being naturally hedged: if one region is weaker than the others, that weakness is diluted by other regions. Also, because a good deal of our revenue is earned on a recurring basis, we can continue to invest in the future.

CHAMP signed major contracts recently. How will you build on this success?

In addition to long-standing Asian customers such as Singapore Airlines, Philippine Airlines and Vietnam airlines, we’ve also gained Japan Airlines – and this is particularly important, because our services cover the airline’s substantial domestic market, as well as its international markets. This is a major change for CHAMP, which has previously focused wholly on international trade.

We’ve also been implementing a complete transformation program at Cathay Pacific, another Asian leader and one of the biggest international cargo operator in the world.

For other high end customers these two wins are helpful markers of our capabilities. They add a great deal of value for us – if an airline can see that our solutions suit a broad range of over 100 airlines, from the largest to smaller carriers, then it provides a great deal of comfort for anyone considering switching to CHAMP. We expect more contracts in Asia.

What comes next? We’re evolving different strategies for Tier 1, middle and lower tiers. Each is important, because they’re all part of the community, but different strategies are needed dependent on geography and size. For example, lower tier customers look for cost-effective, standard solutions simpler to use than similar but tailor-made requirements for Tier 1.

We’re also raising our profile in the US and in Africa, where for two years running we’ve won the international IT Provider of the Year Award. We already have several African customers but like everything in the region you need to be present physically to grow.

That will be the direction for CHAMP in the future. We’ll also be placing more focus on the forwarding market. We’ve made a start this year and as we expand our presence, we’ll add more higher value added services.

Our aim is to provide services that fit right across the community. Typically, we’ve been providing solutions specific to vertical elements in the chain. We are now moving towards solutions that make the connection between airlines, ground handlers, freight forwarders etc.. We can then use these ‘transverse’ services to provide business intelligence solutions and technical solutions that allow trends to be mined and benchmarks set across the entire entwined logistics chain.

How would you summarize your future aims?

Connectivity is a theme that underpins everything. It starts with cultural change, breaking down barriers, getting rid of information silos, developing a strong, transparent, community view. CHAMP’s task is to enable the community view to happen.

We need to be able to demonstrate that transparency means you cede some control but you gain far greater benefit by being prepared to do so.

We strongly believe there’s real value to be gained for the end-to-end cargo chain by concentrating at the community level and by creating this transverse model. Not only value for the sector as a whole, but also for each of the different actors in that industry. That's what we aim for.

Arnaud Lambert
Arnaud Lambert
Chief Executive Officer, CHAMP Cargosystems
Arnaud Lambert has been CEO of CHAMP Cargosystems since February 2015. He was previously a member of the Executive Committee at the company and was Vice President of Global Service Delivery for CHAMP worldwide. He has more than 15 years’ experience in the air cargo sector and previously held positions at Cargolux Airlines and Procter & Gamble.
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