Todayâ€™s Top Supply Chain and Logistics News From WSJ

Paul Page

Paul Page

The Wall Street Journal

CANCEL ^[1]
Biography ^[2]
@PaulPage ^[3]
paul.page@wsj.com ^[4]

March 17, 2016 6:39 a.m. ET

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FedEx ^[7] Corp. FDX 10.71 % ^[8] Chief Executive Fred Smith says e-commerce has to start paying its way. The express delivery giant is investing heavily in its Ground division network as it adjusts to the shifting demands that online sales place on distribution channels. Those pressures are biting into FedEx's profit margins, and Mr. Smith tells the WSJ's Laura Stevens that although e-commerce is "important to FedEx, it is only a part of our business.^[9] Tradition, if not the market, requires that we make a profit on it." The comments highlight the strain that e-commerce retailers, most pointedly Amazon.com ^[10] Inc., AMZN -2.96 % ^[11] are placing on parcel operations that depend on density for efficient and profit-making deliveries. FedEx's financial results also show the stress. The overall profit fell in the quarter ending Feb. 29, largely because FedEx spent $204 million to settle class-action lawsuits over its former independent-contractor driver model at FedEx Ground. And higher costs at the Ground division left operating income there down $2 million, to $557 million, despite a 30% gain in revenue.

A.P. Moller Maersk ^[12] AMKBY 0.00 % ^[13] A/S may be getting a jump on Amazon.com Inc. in the world of drone delivery. The shipping giant is studying deploying drones aboard its giant vessels and at its port operations around the world in an effort to cut the cost of supplying ships at sea ^[14], the WSJ's Costas Paris and Robert Wall report. While studies are preliminary, Maersk says it may save up to $9,000 per ship each year if it is able to shuttle mail, medicine and spare parts by drone rather than dock at ports. Many in the business world believe such industrial operations are more realistic than commercial package deliveries, and the maritime industry—with its infrastructure spread over wid e areas—is embracing drones. European regulators want to use them to enforce pollution standards at ports and authorities in South Korea and Japan are using them to monitor ships out at sea.

Sports Authority Inc. is playing hardball with its suppliers as the retailer restructures under bankruptcy protection. Sports Authority is suing more than 160 suppliers over control of goods it holds as the company closes stores and sells off inventories to raise cash ^[15], the WSJ's Peg Brickley reports. The suits hinge on a critical question in supply chains over which company owns the goods moving through distribution channels. For Sports Au thority, the result will determine who gets the money when consigned goods are sold—vendors or the banks. Consignment arrangements are supposed to give makers of goods a direct claim to the money when goods are sold. If the lawsuits succeed, though, vendors that thought they had secured claims—like shoemaker Asics America Corp., which is owed $23 million—will wind up as unsecured creditors.

TRANSPORTATION

ENLARGE

Photo: Associated Press

Investors are betting on a rebound in the less-than-truckload segment of the trucking industry. A report from investment group Stifel says shares of LTL operators—companies that combine loads from several customers on trucks—have risen 4.8% on average since the start of the year, compared with a roughly 1% decline in the S&P 500 ^[16], WSJ Logistics Report's Robbie Whelan writes. That's a turnaround from last year, when LTL shares swooned as the carriers struggled as overstocked retailers reined back inventories while e-commerce sales put a greater premium on parcel delivery. Stifel analyst David Ross says the improvement this year is based partly on what looks like better pricing discipline the carriers are showing. Some carriers say they're raising charges by 3% or more when they renew contracts with customers this year.

QUOTABLE

'E-commerce has been fueled…by Amazon's expansion without regard to the disciplines of the financial marketplace.'
—FedEx's Frederick Smith.

IN OTHER NEWS

Port trucker Total Transportation Services Inc., or TTSI, filed for chapter 11 bankruptcy protection ^[17], citing mounting costs of litigation over drivers and pricing pressure. (WSJ)

The White House eased more restrictions on Cuba ^[18], including lifting some financial transaction limitations to make tr ade easier. (WSJ)

China's state broadcaster took aim at Alibaba Group Holding ^[19] Ltd. BABA 0.83 % ^[20] in a telecast, ramping up pressure on the e-commerce giant ^[21] to tackle fake sales on its shopping platforms. (WSJ)

Factory production expanded 0.2% last month ^[22], the second straight monthly gain, although broader industrial production slumped 0.5%. (WSJ)

Consumer prices in the U.S. fell 0.2% in February but edged up 0.3%^[23] when more volatile energy and food prices were excluded. (WSJ)

U.S. housing starts jumped 5.2% in February ^[24] to the highest level since September. (WSJ)

U.S. rail regulators are proposing that all trains be required to have two-person crews ^[25]. (Hearst Newspapers)

New Japan Post ^[26] 6178 -0.98 % ^[27] Holdings Co. president Masatsugu Nagato says the business will pursue mergers and acquisitions in logistics ^[28] and other arenas. (Japan Post)

E-commerce shipping specialist Shyp is expanding its service for sellers ^[29] on eBay ^[30] Inc. EBAY -0.44 % ^[31] (Fast Company)

Australian construction giant Brickworks warns it will start importing materials from Spain ^[32] because of high domestic shipping costs. (The Australian)

London Heathrow Airport will create a web portal to help consolidate freight truck movement ^[33] around the airport and cut emissions. (Air Cargo Week)

Retailer American Apparel is working with Postmates on same-day deliveries ^[34] of clothing purchased online. (AdWeek)

The state of Virginia will provide $350 million to expand ^[35] the Virginia Ports Authority's largest container terminal. (Virginian-Pilot)

Dallas-area developers plan an eight-building warehouse and industrial park ^[36] in the burgeoning Arlington, Texas, distribution area. (Dallas Morning News)

Bank of America Merrill Lynch says U.S. port container throughput figures show strong growth ^[37] to start 2016. (CNBC)

Warehouse equipment maker Hy-Tek Material Handling said it has acquired Gems Conveyor Installation ^[38] and Applied Handling Equipment Co. (Modern Materials Handling)

ABOUT US

Paul Page is deputy editor of WSJ Logistics Report. Follow him at @PaulPage ^[39], and follow the entire WSJ Logistics Report team: @brianjbaskin ^[40], @lorettachao ^[41], @RWhelanWSJ ^[42] and < a href="https://twitter.com/EEPhillips_WSJ?lang=en" target="_blank" class="icon none" style="color: inherit; text-decoration: none;" name="readabilityLink-43">@EEPhillips_WSJ^[43], and follow the WSJ Logistics Report on Twitter at @WSJLogistics ^[44].