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14 October 2016

Today’s Top Supply Chain and Logistics News From WSJ

The breaking apart of Hanjin Shipping Co. is about to begin. The South Korean bankruptcy court handling the shipping line’s insolvency plans to dispose of the firm’s sales and marketing network for its Asia-U.S. routes, and the WSJ In-Soo Nam reports the sale sign could go up as early as Friday. Hanjin subsidiaries involved in handling trans-Pacific cargo as well as some container ships would be sold to raise funds and help rehabilitate the remnants of the company. It’s unclear whether any other shipping operators, including smaller South Korean carrier Hyundai Merchant Marine Co., have an interest in the assets. The sale plan comes as creditors line up claims in of the industry’s biggest bankruptcies. Hanjin’s assets include the 37 ships it owns, but returns on the vessels will be limited since vessel values have been plummeting as the industry copes with excess capacity.

Amazon.com Inc. is getting an expensive lesson in shipping hazardous goods. A new Federal Aviation Administration proposed $78,000 penalty is the fourth fine the e-commerce giant has faced in the U.S. in the last four months, and comes as the company faces similar scrutiny in the U.K. WSJ Logistics Report’s Erica E. Phillips writes the actions highlight the hurdles Amazon faces in scaling up its own logistics and transport operations. The latest bump involved a small and seemingly simple shipment of hair tonic, but the ethanol-based product is flammable and the FAA says the package lacked the required documentation when it was shipped through the FedEx Corp. system. With its vast array of goods, and its goal of moving more of those in its own controlled network, Amazon faces a logistics challenge in getting its staff trained in the complicated business of labeling, packing and shipping dangerous goods.




CSX Corp. is scrambling to cut its operations down to meet rail shipping demand. The freight railroad’s $455 million profit in the third quarter was 10% behind the same quarter a year ago, but the WSJ’s Ezequiel Minaya reports the earnings slip was far less than the decline in key shipments. Coal carloads were off 21% from a year ago, metals and equipment business fell 13% while revenues overall were down 8%. Like other railroads, CSX is scaling back by parking engines and furloughing workers, and the company cut its expenses 6.8% from the same quarter a year ago. And the cutbacks in capacity helped the company maintain its pricing: the revenue per unit, or yield, on its overall business was flat despite the reduced demand. And yields for coal, agricultural and the intermodal container business even edged up slightly over last year. The figures show CSX is telling its customers that it will keep its prices steady even if demand remains weak.


A food fight is starting in the e-commerce arena. The new Amazon plan to build brick-and-mortar convenience stores to complement the company’s online presence comes as traditional grocers are building up their web business, and the WSJ’s Heather Haddon and Sarah Nassauer report those stores now face tough competition on their turf. Companies including Wal-Mart Stores Inc. and Kroger Co. have been testing new strategies to counter a rough patch that’s battered retail food sales, adding services like curbside delivery, or “click-and-collect,” aimed at bringing in busy shoppers. One hurdle: those efforts can be expensive and eat at profits in a tight-margin grocery business. And e-commerce accounted for just $1 billion in sales in 2014 among traditional food and beverage stores—0.16% of the $670 billion market. Those companies now are trying to figure out how to mix groceries and online sales profitably, and before Amazon shows them how it’s done.

The shipbuilding industry is starting to shrink in line with the downturn in the broader shipping businessMitsubishi Heavy Industries Ltd. , Japan’s fourth-largest shipyard in terms of capacity, will stop building general cargo and large cruise ships, and the WSJ’s Costas Paris writes other companies are likely to follow Mitsubishi’s lead. Mitsubishi Heavy relies largely on orders from Japanese shipping companies that have all but halted their demand for new vessels after years of heavy losses. Japan’s 81 shipyards have only five orders this year after taking nine last year. The company, like South Korea’s troubled shipyards and the big builders in China, has been looking to cut costs and set up partnerships. But Mitsubishi’s new move to get smaller suggests a fundamental change may be underway in a shipbuilding world that has been used to years of expanding orders and bigger vessels.

Source: http://www.wsj.com/articles/todays-top-supply-chain-and-logistics-news-from-wsj-1476354002