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E-commerce: a risky boom for international supply chains

Blog post   •   Nov 09, 2018 12:25 GMT

What’s easily shopped online needs to be shipped in a safe and compliant way in the physical world. (Photo by rawpixel on Unsplash)

Air freight peak season is in full swing – and about to get even busier.

Big e-commerce dates are all happening in November, starting with Singles’ Day on November 11, followed by Black Friday on November 23, and Cyber Monday on November 26.

While Cyber Monday and Black Friday are traditionally US events, and Singles’ Day is thought of as a Chinese occasion, you can see these growing into global shopping (and shipping) events, with the air freight volumes to prove it.

E-commerce is the fastest-growing sector driving global air freight volumes. Lucas Kuehner, Panalpina’s global head of Air Freight, said in a blog post earlier this year: “We have gone from zero to an estimated 20,000 tons [of e-commerce air freight] in only two years. The actual figure is likely to be higher.”

Big online marketplaces and their suppliers are Panalpina’s most important e-commerce customers. This market is getting bigger as traditional stores are also increasingly turning to e-commerce, and to air freight. In its classic role as a consolidator, Panalpina is also interesting for smaller e-commerce customers.

“When doing e-commerce air freight you have to know exactly what you’re doing and deliver with speed and consistency. That includes staying on top of customs as well as dangerous goods and security regulations, because nothing can go wrong,” said Kuehner.

The boon and bane of freight consolidation for international e-commerce

Unhindered by national borders, legions of consumers will go online this month to purchase products online. After the final, effortless click, their international orders will be consolidated, transported and de-consolidated – often multiple times.

“Only freight consolidation can make international e-commerce shipments affordable in the first place. Otherwise, transport costs, especially for air freight, would be too high and often in no relation to the price of the purchased product,” explains Kuehner.

“But the consolidation comes with challenges. In many cases, the original shipper details and the product information get diluted by a single commodity list provided under the name of the consolidator, who deals directly with a freight forwarder such as Panalpina. That makes e-commerce cargo riskier than other cargo.”

Freight forwarders, airlines, regulators and authorities are faced with three main challenges:

  • Firstly, third-party screening for compliance and security becomes difficult since the original shipper details are not transparent at the time of shipment booking.
  • Secondly, counterfeit and other forbidden illegal items can lead to delays and customs penalties for the shippers.
  • Thirdly, hidden, falsely declared or undeclared dangerous goods can jeopardize flight safety and the environment.

These challenges need to be addressed, because e-commerce is here to stay. It is estimated that there are currently over one billion online buyers in the world, and online shopping transactions continue to evolve rapidly as global e-commerce retail sales are expected to exceed $4.8 trillion by 2021.

Ensuring compliance with customs, dangerous goods and security regulations

So what does Panalpina do to mitigate risk in the international e-commerce supply chain as much as possible?

First of all, Panalpina handles e-commerce freight as a restricted commodity, meaning it requires prior approval from the company’s standards and governance experts, who evaluate the shipper, the commodity, and other shipment parameters and identify potential risks.

Panalpina has put in place global standard operating procedures for e-commerce freight to ensure a safe and seamless process from booking acceptance to handover to the carriers.

Furthermore, Panalpina has segmented e-commerce customers into three risk groups: low-, medium- and high-risk.

The company has also enhanced its shipper’s declaration for regulatory compliance to specifically address e-commerce-related risks. The amended declaration allows Panalpina, with the consent of the shipper, to perform physical checks and cargo security screenings when deemed necessary.

All of these measures mitigate risk in international supply chains that are inherent to the global boom of e-commerce.

For the 10th edition of Singles’ Day this coming Sunday alone, Alibaba expects to receive more than one billion orders.

The majority of these orders will come from within China. However, with Alibaba’s significant and growing presence in international markets across Asia, Europe and Latin America, scores of products will have to be shipped to consumers the world over too.

Panalpina is here to help in the background, playing a discreet but important role in ensuring that international e-commerce shipments comply with customs, dangerous goods and security regulations.