By Paul Page
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E-commerce growth is proving expensive for United Parcel Service
Inc. The delivery giant saw strong gains in domestic package volume
in the first quarter, but the WSJ's Paul Ziobro and Joshua Jamerson
report that costs are also racing upward as the deliveries grow
more expensive to complete and the company builds infrastructure to
match changing consumer buying patterns. UPS says shipments to
homes, a proxy for e-commerce deliveries, rose about 7% in the
first quarter, ahead of the 2.6% volume increase in its U.S. parcel
business. Those home deliveries are tougher to serve than the more
concentrated and economical business-to-business deliveries. UPS is
also building two regional hubs that will rely heavily on
automation, taking some of the labor cost out of its distribution
channels. It's not all about cost: UPS saw operating profit at its
supply chain and freight division jump nearly 22%, partly from the
need driven by e-commerce for companies to store more goods closer
to where shoppers live.
DryShips Inc., like other commodities businesses, has been on a
business roller-coaster. But the ride has worked out very well for
the bulk carrier's chairman and chief executive. George Economou
has come out of a dizzying series of twists and turns in the
company's shares with tighter control of the business, the WSJ's
Spencer Jakab writes in a Heard on the Street column, and backing
for new vessel purchases amid a series of maneuvers that could earn
Mr. Economou tens of millions of dollars in profits. There are no
accusations of any wrongdoing and no evidence the company or its
CEO engineered a one-week stock rally that briefly pushed its
shares up 1,500% last November for no apparent reason. But the
ability of DryShips to reap ongoing gains from the runup, both for
the carrier and Mr. Economou, highlight how the complicated
structures of vessel ownership and management may be more important
to bulk carriers than the movement of supply and demand in
commodity shipping markets.
British regulators are stepping into an increasingly heated
furor over payments in the supply chain. New compliance rules will
require U.K.-registered firms to provide detailed information on
how they pay their suppliers, the WSJ's Nina Trentmann and Mara
Lemos Stein report. It's an attempt to settle the growing battles
between the U.K.'s biggest companies and the smaller suppliers that
depend on the business, and timely payments, for their survival.
The government says nearly half of the country's 5.5 million small-
and medium-sized companies receive payments late, with some $33.9
billion owed to them at the end of 2016. The new rules require that
companies disclose their payment terms and how well they've met the
terms, providing warning signals to regulators as well as
suppliers. There's some urgency to resolve the issue before the
U.K. leaves the European Union since a Brexit-induced slowdown
could leave even more companies looking to delay payments.
SUPPLY CHAIN STRATEGIES
Airbus SE's supply chain is still stuck in a low gear. The
European plane maker is facing another year of scrambling to meet
full-year delivery targets, the WSJ's Robert Wall reports, after
falling behind in the first three months because of problems with a
key engine supplier. The disconnect between Airbus and engine maker
Pratt & Whitney, a unit of United Technologies Corp., has been
troubling Airbus as it tries to ramp up production to meet soaring
demand for new jets. The aerospace industry's intricate supply
chains involving sophisticated components are having a hard time
keeping up with the production promises, however. Airbus plans to
build 200 of its A320neo jets with Pratt engines this year but
delivered only 26 in the first quarter. With many millions of
dollars at stake based on the delivery schedule, the pressure on
production will only grow as the year goes on.
Creditors are pushing a bankruptcy court to resolve the
long-running bankruptcy of National Air Cargo Inc. Led by aircraft
lessor Global BTG LLC, the creditors are asking a court to oust
National chief Christopher Alf, who founded the business and led it
through its tumultuous rise as a big military contract flier and
through a bankruptcy that's lasted nearly three years. The WSJ's
Katy Stech reports creditors said in a sharply-worded filing with a
bankruptcy court that debt-payment negotiations have broken down
and the company is "hemorrhaging cash" with no moves to end the
impasse. National has been hurt by the steady withdrawal of U.S.
military personnel from the Middle East, but Global BTG says there
are deeper problems with the company's management. A judge will
hear the arguments in court next month, potentially bringing
National's saga closer to conclusion.
QUOTABLE
IN OTHER NEWS
Amazon.com Inc. posted a 41% rise in first-quarter profit, as
growth in shipping costs outpaced sales expansion. (WSJ)
National Air Cargo Inc.'s creditors are asking a court to oust
the operator's founder and leader to end National's long-running
bankruptcy case. (WSJ)
France's economic growth slowed to 0.3% in the first quarter.
(WSJ)
Growth in U.S. durable goods orders slowed in March on declining
demand for motor vehicles and parts. (WSJ)
First-time unemployment claims in the U.S. jumped by 14,000 in
the past week. (WSJ)
Mexico's exports rose 14.1% from a year in March while imports
grew 15%. (WSJ)
Australia's government will restrict natural-gas exports in an
attempt to avert a looming domestic gas shortage. (WSJ)
Brazilian mining giant Vale SA reported its biggest net profit
in three years as rising iron ore prices offset higher shipping
costs. (WSJ)
Ford Motor Co.'s first-quarter net income fell 35% on higher
costs and weaker sales in the U.S. (WSJ)
Kia Motors Corp. will build a $1.1 billion factory in India with
capacity to build 300,000 vehicles a year. (WSJ)
Under Armour Inc. posted its first quarterly loss as a public
company, amid cooling demand for its sneakers and athletic apparel.
(WSJ)
American Airlines wants to raise pay for pilots and flight
attendants next month to keep pace with its rivals. (WSJ)
Hong Kong's Li & Fung Ltd. faces a crucial period in its
attempt to restructure its supply chain for a digital era. (Nikkei
Asian Review)
Fashion retailer Kit and Ace is closing all its stores outside
Canada and moving its international sales entirely online.
(Business in Vancouver)
Union Pacific Railroad Corp.'s net profit grew 9% in the first
quarter on strong pricing and 25% more coal shipments. (Associated
Press)
South Korea's Daewoo Shipbuilding & Marine Engineering Co.
booked a $230 million first-quarter profit after two years of heavy
losses. (Yonhap)
Hyundai Merchant Marine Co. faces sharply higher costs since
selling its stake in a Korean container terminal to the Port of
Singapore Authority. (Business Korea)
Old Dominion Freight Line Inc. expanded its first-quarter profit
9.1% to $65.8 million on solid growth in demand and
less-than-truckload pricing. (Winston-Salem Journal)
C.H. Robinson Worldwide Inc.'s first-quarter net profit rose
2.6% to $122.1 million on a 13% boost in shipping volume.
(Minneapolis Star-Tribune)
Freight broker Echo Global Logistics fell to a $2.9 million loss
as rising transport costs offset a 2.6% gain in gross revenue.
(Associated Press)
Truck maker Paccar Inc. swung to a $310.3 million first-quarter
profit on a 40% gain in truck orders. (Commercial Carrier
Journal)
Mediterranean Shipping Co. believes misdeclared hazardous cargo
caused a fire that damaged one of its ships this month. (Splash
24/7)
Ace Hardware will place a 1.1 million-square-foot distribution
center for the northeast U.S. in Bethel Township, Pa. (WFMZ)
The research unit of International Business Machines Inc. won a
patent for the passing of package from one drone to another in
flight. (Mashable)
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:
http://on.wsj.com/Logisticsnewsletter .
Write to Paul Page at paul.page@wsj.com
(END) Dow Jones Newswires
April 28, 2017 06:41 ET (10:41 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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