Assignment on Transportation Problem

Running head: TRANSPORTATION PROBLEM
Transportation Problem
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
Introduction......................................................................................................................................2
Literature Review............................................................................................................................3
Air Cargo: Conceptual Analysis......................................................................................................3
Air Cargo Industry in Past...............................................................................................................4
Current trends in Air Cargo Industry...............................................................................................5
Shrinkage observed in air cargo Industry........................................................................................6
Methodology....................................................................................................................................9
Data Collection..............................................................................................................................10
Analysis.........................................................................................................................................12
Conclusion.....................................................................................................................................13
References......................................................................................................................................14

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Introduction
Aviation industry has been playing the essential role in the economic development of the
European countries. Ahmed, Calders and Pedersen (2015) stated that the air transport is one of
the significant infrastructure of globalization. Establishment of the aviation infrastructure is
crucial for the air freight industry. Air cargo has been contributing much significantly to the
global economy. It is reported that only 1% of the entire exports by volume a failure craft since
they tend to be the most expensive goods (Boonekamp and Burghouwt 2017). It has been
observed that these export services account for almost 35% of the entire Global trade in the value
proposition (Huang, Tseng and Hsu 2016). Establishment of the aviation infrastructure is one of
the most critical components for the air freight industry. Air cargo has been contributing March
significantly to the global economy. It is reported that only 1% of the entire exports by volume a
failure craft since they tend to be the most expensive goods (Boonekamp and Burghouwt 2017).
It has been observed that these export services account for almost 35% of the entire Global trade
in the value proposition (Huang, Tseng and Hsu 2016).
Literature Review
The development of the air transport infrastructure in the aviation industry holds the
much significant place in the post globalization era. According to Rincon-Garcia, Waterson and
Cherrett (2018), air cargo transports are connecting cities and regions to the distant markets to
develop the speedy global supply chain. The major focus of this air cargo is to establish the
reliable supply chain process. It is noticeable that in spite of establishing the positive
relationships between the globalization and air transport, some of the negative phenomenon is
also observable in the air cargo industry. The literature study will thus focus on exploring the

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conceptual analysis of the air cargo industry. The study also attempts to identify the reasons of
shrinkage observed in the air cargo industry in past few years. The transformation of the industry
will be discussed in this literature section.
Air Cargo: Conceptual Analysis
Air Cargo is conceptualized the carriage of goods and commodities in an aircraft. Scott
and Trimarchi (2017) explained that air cargo are generally defined into two segments, such as
airmail and air freight. The air freight segment holds the most of the market share, especially
during the forecast period. The rapid development in establishing the cargo hubs as well as the
rapid growth of the e-commerce business model is supposedly driving the growth prospects in
the air freight process. It is predicted that the global air cargo market is estimated to reach up to
US$130.12bn by the end of the year 2025. Boonekamp and Burghouwt (2017) recognised that
the air cargo industry is now complied with new policies and strategies that ensure growth in this
market. For example, an international policy called ‘Open Skies’ that demands for the
liberalization of the associated rules and regulations in the aviation industry (Beifert 2015). It has
been observed that this specific policy has created greater impact on the air cargo industry.
The aircrafts are divided into diverse sections, such as passengers, cargo, and combi-
aircraft. Among these sections, it has been observed that the cargo aircrafts are generally used for
carrying parcels and carrying the freights for side loading. It is noticeable that the aircraft
passengers are quite different to the cargo aircraft. Combi aircraft, on the other hand, carry the
commodities by side loading on the main deck. In the year of 2013, Cargo airlines in the
European Union took the cyclical upturn and considered the significant improvements in the
profitability level. However, the negative effects of the entire global recession in 2007/2008

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impacted negatively in terms of freight tonne-kilometers (Trzepacz 2014). There are the
considerable changes noticed in this cargo industry. The further section of the study will focus on
the past trends in the air cargo industry to determine the observable shrinkage.
Air Cargo Industry in Past
In the year of 1910, the first Cargo was moved by aircraft to transport silk by airway. It
has been observed that air cargo industry used to maintain the traditional values in different
segments in past. Taneja (2016) implied that due to the high value and high cost, the
commodities tend to move in a smaller size that became much suitable for the air transport. This
small shipment size was one of the most significant trends observed in the past era. The high
value commodities required more securities from damage, loss, or theft than the lower values.
During the past genre, the aircraft ensued that the commodities will not only be delivered faster,
rather in a most secured way for moving cargo from point to point. Doll et al. (2017) also
observed that the cost of the high value commodities often charged higher due to which a larger
amount of capital were invested. The commodity value influenced the shippers’ modal selection
process in a significant manner. In the previous time, it was noticed that the air cargo operations
had the ability to offer a shipper the benefits related to the speedy delivery and constant resupply.
Later, the air cargo industry restructured their strategy and cut down the costs of the inventory
levels to free up more capitals. In fact, the air cargo industry previously comprised a smaller
group of the airline industry. The changes brought to the globalised world transformed many
activities in this industry. The further section will thus identify the current trend in air cargo
industry and the identifiable shrinkage.

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Current trends in Air Cargo Industry
The air freight industry has been experiencing the considerable changes throughout the
years. The development of the headwinds is now in store for the international air freight
transporters to enable the air capacity, especially when there is much requirement. The small and
medium sized shippers are expected to find it much problematic to secure the air pace if the
larger shippers acquire a larger slice of the available capacity. During the peak season increases
the pressures on the available capacity. It was even noticed that the freight flowing put the more
pressure on the supply chain than the capacity. The report received from the The International
Air Transport Association confirmed the full year data of 2017. It was reported that the demand
has grown by 9.0% that was the double amount of the annual growth signified during 2016
(Beifert 2015). This growth outperformed the entire growth of the industry in both passenger
demand and cargo capacity. In fact, the increasing demands in 2017 were observed in the
regional countries as well. For example, European airlines posted for almost 5.0% year-on-year
increase in the demands of the air freight in December whereas the capacity increased of 3.2%
(Babić, Kuljanin and Kalić 2015). The establishment of the flexible warehousing is one of
those suggestive changes altered the logistics activities into dynamic avenues. The
implementation of block chain started automates and secures the mechanics of the supply chain
management. Such record transactions generate exclusive access to data in real time (Rincon-
Garcia, Waterson and Cherrett 2018).
Shrinkage observed in air cargo Industry
The air cargo industry has been experiencing the greater shrinkage in last few years.
Considering the current atmosphere, a study conducted among 260 airlines comprising 83% of
the global air traffic. The result obtained from this study indicated that the growth in the global

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air freight industry has been slowing down since 2015. In the year of 2014, the growth in FTK
(Freight Ton Kilometer) was almost 2.1% as per the data published by International Air
Transport Association (IATA) (Livingstonintl.com 2018). This percentage was the slowest rate
in the year. However, a month in this year highlighted the higher capacity by expanding up to
4.3%. The monthly report published by IATA confirmed such slower growth in this industry. In
fact, the global trade volumes fell down throughout the year of 2015.
The analysis of the report indicates that one of the major reasons behind such slower
growth rate was the emerging issues identified in the Asia Pacific Region (Taneja 2016). The
freight volumes in this region have seen the slowdowns in both exporting and importing
activities. On the other hand, the airlines in North America, Europe, and Latin America reported
that the declines in the demand level have been decreasing the growth rate much significantly.
The shrinkage is observed in Europe as well. The anticipated reason for such decreasing rate of
the growth was the exit of Greek from Euro-zone. The scenario in North America is highlighting
the issues with harsh weather and the West Coast Port Condition as the major concerns due to
which the demands are pulled down much recognizably.
Tony Tyler, the CEO of IATA, commented in a press release, “Cargo growth has
undoubtedly come off the boil” (Livingstonintl.com 2018). It was also mentioned that the load
factors are falling. In fact, the continuous practices are still contributing to develop the economic
fundamentals in the second half of the year. The exit of Greek from Europe created the strong
impact on economic structure as well. On the contrary, it was reported that two regions, such as
Middle East and Africa experienced the growth in the air freight industry in the year of 2015.
Africa experienced almost 3% rise in the cargo demands whereas Middle East faced 1.3%
capacity increase (Scott and Trimarchi 2017). The Air Cargo Freights have been facing the

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considerable challenges due to the technological impacts. It is noticeable that the most
observable issue in the freight industry is the rapid and drastic growth in the e-commerce
business. The announcements of the online sales volume is much higher due to which the
shipping necessity is also increasing drastically. Merkert, Van de Voorde and de Wit (2017)
observed that the shipping companies face the considerable challenge in understanding the
rapidly changing and ever increasing demands of the current environment. For example,
Alibaba-led Cianiao network is subjected to deliver over 30 million packages each day. In spite
of such larger amount of delivery, the demands in China are still exploding. The current
innovativeness brought to the freight industry in Denmark is quite appreciable. Especially,
managing the high-end technologies for bringing more innovations to the baggage handling
system is quite observable in current time (Poulsen, Ponte and Lister 2016). Observing such
shrinkage in the air freight, some of the anticipated challenges are described further:
 The ever increasing fuel prices in the air freight industry are the most considerable issues
for the slower growth in past few years. The skyrocketing fuel prices are quite fuel price
is reducing the demand level and looking for the optional sources of supplying the
products. Another most recognizable issue observed within the industry is the looming security
threats. The security related to the baggage management is not satisfactory, which posed
the identifiable threat to the industry (Iata.org 2018). The growth is slowed down due to
such lack of security in the maintenance of the air freight exports and imports
 The technological development is continuously increasing the level of competition and
creating the higher value of goods (Ahmed et al. 2017). It creates the opportunistic
scenario for the market competitors. On the other hand, the customers themselves are

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using some of the technologies at their homes instead of asking for shipping. For
example, the 3-D printing can be used at home or factory (Feng, Li and Shen 2015). The
customers do not need to order for shipping it. Therefore, the technological advancements
are creating such disruption in the shipping process now-a-days. The inefficient supply chain process is also quite acceptable issue in considering such
slower growth in this industry. Due to the revised policies in air cargo industry, the
supply chain procedures need to undergo several steps, which cause delay in delivery. Decreasing demands of the air freight is also suggested as the specific reason behind such
slower growth in the air freight industry.
 The automation process implementation has created the job retention risks for the
associated workers (Doll et al. 2017). The advanced technologies are replacing the
human efforts, which is a considerable risk in terms of employment. On the other hand, if
these technologies do not function properly, it might create a huge loss of data (Singh,
Singh and Saha 2015). The lack of appropriate technical knowledge can be riskier in such
context. It is thus necessary to obtain adequate knowledge based on this parameter.
The above scenario is highlighting the major issues suggested for the slower growth in the air
freight industry. There is the huge opportunity lies in exploding in India. Kupfer et al. (2017)
pointed out that he emergence of the disrupt technologies is also one of the most considerable
challenging factors for the air freight industry.
Methodology
Using the appropriate research methodology helps the research subject to be analyzed in
a synchronized and systematic way. Understanding the appropriate focus based on the research

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subject helps in identifying the adequate use of the research method that can enhance the quality
of the research. This study is based on the identification of current issues and opportunities in the
freight industry with the reference of Denmark. The study requires identifying the present
concerns associated with the baggage handling and technological advancements in the freight
industry. The information regarding to such context can be gathered by utilizing the qualitative
research method. This research method helps in generating the informative responses from a
number of populations that have been dealing with the real life scenario (Larsen and Lassen
2017). The interview strategy has been selected to gather the responses based on the scenario in
freight industry. It would provide the considerable knowledge regarding the challenges and
benefits experienced by the people associated with the air cargo industry in Denmark. The
positivism philosophy is applied to this research for extracting the hidden truth based on the
current situation in the freight industry. The use of the deductive approach is quite beneficial for
understanding the existing theoretical concept, which can further be linked with the collected
information received from the respondents (Ahmed, Calders and Pedersen 2015). The
explanatory design is used in this study to interpret and explain the responses derived from the
qualitative data collection process.
The non-probability, convenience sampling technique is utilized to develop this
interview session with some of the workers associated with the freight industry. This qualitative
data collection process would engage 4 associates for the interview sessions. Two of them work
in the cargo centre and Trafikkontor department of Aalborg Airport and other two are from
Billund Airport. The responses gathered from their experiences would be analyzed to identify the
comparison between these two airports and the probable challenges emerging in the Air Caro
industry.

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Data Collection
The qualitative data has been gathered for understanding the current issues faced by the
air cargo industry or freight industry in Denmark. The responses of the associated interviewees
are structured further.
Q.1) Does the current innovation is helpful for the baggage system in the air cargo
departments of the airport? Justify your answer
The question implies the effectiveness of the current innovative technologies used in the
air cargo freight management system. One of the associates from Trafikkontor department of
Aalborg Airport mentioned that the reduction of the manual system in baggage handling process
has increased the risks with the baggage loss. It is true that the automatic baggage information
through the innovative technologies has the storing capability of the baggage, but the risks
persist due to the lack of proper monitoring. The associate also mentioned that the storage
capacity for the parcels, paller, and packages in the systems from the pickup sites of Jetpack is
quite limited. Therefore, it is quite challenging for them to manage the increasing baggage,
which might lead to the issue, such as baggage loss. On the contrary, another associate from the
Air cargo department of Billund airport described that the baggage capacity in this system is
quite higher. Therefore, it becomes easier for them to manage the heavy baggage. In fact, the
frequent monitoring process in this airport helps in keeping the updated information presented
through the RFID technology. There is thus a minimal risk associated with the baggage storing
factors.
Q.2) What are the major challenges your department has been facing with the
technological innovations?

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In responding back to the question regarding the considerable challenges faced in the Air
Cargo department due to the innovative technologies. One of the associate from Cargo centre
department of Aalborg Airport mentioned that due to such technological innovations, the
shipping demands have increased much significantly. Therefore, the associates have to face
much pressure to deliver orders more than the previous time. The respondent also mentioned that
it became quite difficult for them to monitor each of the baggage system and the information
storing capacity simultaneously. On the contrary, another associate from Billund Airport
highlighted that due to the innovations, the storage capacity has increased. It provided them with
extra benefits in managing a larger number of passengers all at a time. Moreover, the airport
could even increase the annual business amount much significantly. Therefore, it can be implied
that the Billund airport has faced the commendable growth after developing the innovative
technologies.
Analysis
The information obtained from the interview clearly indicates that the Billund airport
could achieve more benefits in compare to Aalborg Airport due to the innovative technologies.
The literature study indicates that in spite of developing the innovative technologies in Aalborg
baggage system, it received several complaints regarding the missing baggage system due to
which the profits were decreased. As per the information gathered from respondent of the
associate working in this airport, the lack of proper monitoring system is the reason behind such
technological disruption. On the contrary, the similar innovativeness implemented in Billund
Airport turned out to be positive changes. The airport increased the capacity of handling more
passengers that is quite beneficial in increasing the annual sales. There is the facility available to
track the baggage information through the mobile devices. The literature study indicates that the

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small and medium sized companies can generate benefits from such services while participating
in the international trade with much efficiency. Shipping through the Airways sometimes
becomes advantages in terms of maintaining security since the cargo control is highly managed.
The information obtained from the qualitative data collection process indicates that the automatic
baggage information through the innovative technologies has the storing capability of the
baggage, but the risks persist due to the lack of proper monitoring. The current changes brought
to the freight industry is thus facing the considerable challenge in understanding the rapidly
changing and ever increasing demands of the current environment.
Conclusion
The study explores the ideas of the identifiable shrinkage of air cargo in last few years
with a special reference of Denmark shipping ports. It has been observed that the Air Cargo
Freights have been facing the considerable challenges due to the technological impacts. It is
noticeable that the most observable issue in the freight industry is the rapid and drastic growth in
the e-commerce business. The obtained ideas from the literature study and the secondary
research process indicates that the Aalborg Airport has implemented the innovative RFID
baggage handling system to reduce the risks with the lost baggage. However, it is still facing the
challenges with the lost baggage issues. On the other hand, Billund Airport has been managing
the air freight activities much significantly due to which the capacity of accommodating more
passengers has been increased. This innovative approach adopted by the airport has increased the
profit revenue in a significant way.

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