Today's Top Supply Chain and Logistics News From WSJ
February 01 2017 - 6:48AM
Dow Jones News
By Paul Page
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Amazon.com Inc.'s Prime Air is preparing to buckle up for the
long haul. Amazon plans to build its first air cargo hub to handle
its growing freighter fleet, the WSJ's Laura Stevens reports,
putting the e-commerce giant even more firmly in the delivery path
of traditional carriers including United Parcel Service Inc. and
FedEx Corp. The Seattle-based retailer is placing the hub at
Cincinnati/Northern Kentucky Airport, where DHL ran its domestic
express hub years ago and where the company still operates its
international cargo services. The airport will provide a single
base for the 40 cargo planes Amazon says it plans to lease in its
burgeoning network, a linchpin of the company's strategy to take
greater control of its own logistics operations. The airport is
firmly within the Ohio Valley zone that parcel carriers have long
used as a base for national operations. It's also a short truck
drive from the 11 fulfillment centers Amazon has placed in Kentucky
for easy reach to a big swath of the U.S. population.
Wal-Mart Stores Inc. is taking a different delivery route in its
online sales competition with Amazon. The retailer is abandoning
its two-year-old membership-focused ShippingPass service, the WSJ's
Sarah Nassauer reports, and instead lowering the barriers to free
shipping across its online products. The move removes a pillar of
Wal-Mart's efforts to match Amazon and sends a signal across the
retail industry that competing with the e-commerce behemoth on
Amazon's terms won't work. Wal-Mart is betting instead that it can
leverage its scale and a more simplified approach rather than
competing strictly on membership price -- ShippingPass was $49
while Amazon Prime sells for $99 a year. The move also shows that
Wal-Mart's e-commerce strategy remains a work in progress. Wal-Mart
says its membership program helped ramp up and test the logistics
network that it's spending billions of dollars to create, and that
the distribution channels. The bigger test will be whether the lure
of free shipping draws in enough customers to cover its costs.
Delivery companies are struggling with e-commerce almost as much
as retailers are. United Parcel Service Inc. saw its profit margins
wilt in its busiest season, the WSJ's Paul Ziobro reports, as gains
in e-commerce deliveries offset growth in more profitable
business-to-business shipping and helped send the company to a $239
million loss. UPS is pledging to boost spending by a third to $4
billion this year as it tries to keep up the shift toward online
shopping. But the results show the company and rival FedEx Corp.
are flying against strong shipping and trade headwinds. They hardly
lack for business: UPS domestic shipments rose 5% last quarter over
the year before. But the results show how online shopping is
overhauling the economics of retailing and distribution, with
growing residential deliveries raising operating costs. UPS is
focused on raising prices to match those higher costs, a move that
will add new worries for retailers as they struggle with their own
costly response to e-commerce.
SUPPLY CHAIN STRATEGIES
The pharmaceutical supply chain is next in the firing line.
President Donald Trump met with drug-company executives and
appointed two pharmaceutical chiefs to a 28-member advisory council
tasked with expanding manufacturing in the U.S., the WSJ's Peter
Loftus and Preetika Rana report, putting new focus on an industry
that he has criticized over its overseas production. That puts the
administration in the middle of another complicated and
far-reaching supply chain: The Food and Drug Administration says
roughly 60%, of finished medicines sold in the U.S. are made in the
country but some 80% of the main components used to make
pharmaceuticals are produced abroad. Companies including AbbVie
Inc. and Pfizer Inc. are investing outside the U.S., and are adding
factories in Asia. But their research and development comes in the
U.S. And attempts to shift more production to the U.S. could
undermine another goal of the Trump administration -- to lower the
cost of prescription drugs.
The sprawling corporate structure that Roadrunner Transportation
Services Inc. built through acquisitions is starting to crack. The
transport and logistics company says it is restating three years'
of earnings after finding what it called "various accounting
errors," WSJ Logistics Report writes, in a big step backwards for a
business that's been focused on rapid growth. Investors punished
the company, shaving its share price by nearly a third, and
investment firm Stifel suspended its rating on the business and
said the company would likely have to sell various pieces to repay
lenders. Roadrunner's initial reading identifies only $25 million
in costs at two subsidiaries into question, but the company says
accountants are still going over the books. Beyond that, the
restatement revives questions over a growth strategy that has
created more than 20 separate units with a wide and varying range
of operations.
QUOTABLE
IN OTHER NEWS
Elaine Chao was confirmed and sworn in as secretary of
Transportation. (WSJ)
Florida Gov. Rick Scott threatens in his proposed budget to cut
funding for improvements at state ports if they pursue deeper trade
ties with Cuba. (WSJ)
Eurozone economic growth accelerated at the end of 2016 while
the jobless rate fell to its lowest level since 2009. (WSJ)
American consumer confidence fell in January after reaching a
15-year high in December. (WSJ)
Canada's economy rebounded in November on strong manufacturing
growth. (WSJ)
Hennes & Mauritz AB is abandoning its target of opening 10%
to 15% more physical stores each year. (WSJ)
Apparel retailer Under Armour Inc.'s strong growth pace slowed
down sharply in the fourth quarter. (WSJ)
Caterpillar Inc. will move its headquarters from Peoria, Ill.,
to Chicago to gain better transportation access to its global
customers. (WSJ)
Xerox Corp. reported declining profit and revenue in its legacy
copier business as it completed its split from the bulk of its
services businesses. (WSJ)
Toshiba Corp. plans to stop building nuclear power plants.
(WSJ)
Trump administration trade advisor Peter Navarro says the White
House wants companies to redraw global manufacturing to make
"components in a robust domestic supply chain that will spur job
and wage growth." (Financial Times)
China's e-commerce boom depends on many thousands of local
couriers who critics say work long hours under harsh conditions.
(The New York Times)
States in the U.S. are adding tolls to more roads since lower
fuel costs have reduced gas-tax revenue. (Governing)
UPS will pay more than $25 million to settle charges it
submitted false claims to the federal government over delivery of
overnight packages. (USA Today)
Auctions of former Hanjin Shipping Co. container ships have
netted a total of $460 million. (Port Technology)
Ontario, Calif., officials are struggling to rid the town of
hundreds of abandoned Hanjin shipping containers. (Inland Valley
Daily Bulletin)
Seattle-based freight-matching business Convoy hired former Uber
Technologies Inc. executive Tim Prouty as head of engineering.
(Geekwire)
Local residents are fighting efforts by the Portland, Maine,
port to create a refrigerated shipping center for trans-Atlantic
trade. (Maine Public)
ABOUT US
Paul Page is deputy editor of WSJ Logistics Report. Follow him
at @PaulPage, and follow the entire WSJ Logistics Report team:
@brianjbaskin, @jensmithWSJ and @EEPhillips_WSJ and follow the WSJ
Logistics Report on Twitter at @WSJLogistics.
Subscribe to this email newsletter by clicking here:
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Write to Paul Page at paul.page@wsj.com
(END) Dow Jones Newswires
February 01, 2017 06:33 ET (11:33 GMT)
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