December 22, 2017

Seko to utilize domestic air for deliveries of big goods ordered online

Air to substitute for line-haul LTL for heavy, outsized items.

By Mark B. Solomon

Third-party logistics provider (3PL) Seko Logistics has introduced a nationwide delivery service for heavyweight and outsized goods that incorporates a once-popular, but now frequently overlooked, transport mode: air freight.

Under the program, Itasca, Ill.-based Seko will use the cargo holds of passenger aircraft instead of less-than-truckload (LTL) services for the line-haul portion of certain goods ordered online. Seko will pick up products by truck at either the customer's warehouse or one of its own and deliver them to a designated origin airport. Following the move, Seko collects the goods at the destination airport and trucks them to the end customer. The program will be offered for express deliveries made in 1 to 2 days of ordering, or standard deliveries made in 3 to 4 days. The standard service is the option that is price-competitive with truck. Businesses must be certified as "known shippers" under the Transportation Security Administration's (TSA's) criteria to be eligible, Bourke said.

The new service is aimed at hauling such products as large flat-screen televisions, bicycles, and folding sports equipment such as ping-pong and air hockey tables, goods that are non-conveyable in traditional parcel systems and may require faster delivery times than a line-haul truck operation could provide, Seko said.

The program spent several months in the pilot stage for an unidentified electronics retailer that was moving shipments from the Southeast to markets in Texas and California, according to Brian Bourke, Seko's vice president of marketing.

Shipping goods by air is generally far more expensive than by truck. However, the rate differential between air and LTL, the primary truck mode to move e-commerce, is virtually nil for oversized commodities, Bourke said. Part of the reason are the recent moves by the large parcel carriers to make it more expensive to ship relatively lightweight, but bulky or outsized, items by ground. Parcel delivery services are priced either by the actual weight of a shipment or by its dimensions. A large item like a bicycle would be subject to dimensional pricing, and its outsized dimensions would subject the commodity to higher rates to compensate the carrier for the amount of space the product would occupy in the trailer.

Seko's formula for standard deliveries would probably not have been cost-competitive three to four years ago, before the changes in dimensional pricing, Bourke said. Another benefit of using air, especially for high-value commodities, is that in-transit damages are lower, because airline personnel are generally more careful in their cargo handling, according to Bourke. The pilot shipper reported a significant reduction in its cargo-claims ratio versus truck when it switched to air, Seko said.

Bourke said he was unaware of any 3PL using domestic airfreight for all or part of a last-mile delivery. Seko said it will continue to use its ground network to haul most of its last-mile deliveries. Demand for last-mile deliveries of heavy goods is expected to grow rapidly as producers and merchants throw open more of their stock-keeping units (SKU) to online ordering.

Airfreight became a potent force in U.S. commerce in the 1970s and early 1980s as businesses began to adopt fast-cycle distribution and delivery strategies. However, the mode fell out of favor in the mid-1980s as companies switched to regional distribution centers that could be served by lower cost ground transport, thus achieving rapid deliveries at a fraction of the cost of air. United Airlines and American Airlines ceased freighter services in 1984. Since then, no U.S. passenger airline has operated all-cargo aircraft in domestic commerce.

Instead, airlines built profitable businesses moving goods in their plane's bellyhold compartments, taking advantage of the fact that cargo could be priced competitively because the plane had to fly no matter what. The bulk of a flight's revenue was already being generated by passengers, and to a lesser extent, mail.

Carriers like Memphis-based FedEx Corp., Atlanta-based UPS Inc., and the former Airborne Express, the Seattle-based carrier acquired in 2002 by German giant DHL, filled the void to some extent. However, distribution patterns over the years have continued to tilt toward shorter-haul deliveries. FedEx, which built its company around the need for next-day air deliveries, several years ago restructured its operations to de-emphasize air in favor of its fast-growing ground parcel business. FedEx's traditional air business had stagnated for years.

Seko itself was for many years almost exclusively an air freight forwarder, and was originally known as "Seko Air Freight." It eventually rebranded to reflect an expanded service portfolio beyond air.

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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