AIR FREIGHT
Benefits of Air Cargo
Why is there a relationship between a product’s value and its propensity to be shipped by air transportation?
There is no single answer, but it is safe to say that relatively high-value commodities tend to go by air,
despite the much higher cost, for one or several of the following reasons:
Small shipment size
Due to their cost, these commodities tend to move in relatively small lot sizes, which make them suitable
for air transport. To use an extreme example, no one buys gold in quantities sufficient to fill a twenty-foot
sea container. While less costly than gold, electronics, precision instruments, sophisticated industrial
machinery and other high-value commodities also tend to be smaller in size and weight.
Time sensitivity
Certain products are extremely time sensitive. These could include a wide range of perishables, medical
products, and seasonal products that must meet very specific delivery deadlines and whose production
offers limited options other than by air.
Security
High value commodities, by definition, require more security from loss, damage or theft than lower-value
goods. Aircraft generally offer not only the fastest but also the most secure way to move cargo from point
to point.
Cost of Capital
High-value commodities consume large amounts of capital and impose high interest costs on their owners.
Thus, the time-savings achieved through air cargo are worth more when high-value commodities are
involved. Collectively, these value-driven factors are at work, although their impact on transport decisions
depends on changing shipper perceptions of their relative importance. Moreover, other factors unrelated to
commodity value increasingly influence shippers’ modal selection process. To better understand each
factor, and how it interacts with the others, it is necessary to first explore how transportation modes are
selected and recognize, in general, that shippers do not care about transportation mode. They care about
the consignment reaching its intended destination, on time and in good condition, and the cost of the
transportation.
Inventory cost
Because air cargo operations can offer a shipper the benefit of speedy, constant resupply, inventory levels
can be reduced. This element of speed allows a producer to ship select products to their customers just in
time instead of having to operate large warehousing facilities. By reducing inventory levels, a firm can free
up more capital, reduce inventory holding costs, and reduce obsolescence cost.
In summary, air cargo provides the benefits of speed, reliability, security, and reduction of inventory cost.