By Paul Page
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FedEx Corp. is playing hardball with some retail shippers as it handles the surge in holiday packages. The company is pressing some customers for higher prices and has even dropped some retailers that won't pay up, the WSJ's Paul Ziobro and Ezequiel Minaya report. FedEx showed the impact of the late-year flood of e-commerce shipments in its fiscal quarter ending Nov. 30 as expenses outpaced revenue at both the FedEx Ground and Express units, pushing the company's operating profit down to 7.8% from 9.1% a year ago. The decline is a stark sign of the impact of online sales on parcel carriers, with operators spending heavily to handle the business. FedEx opened four big hubs and 19 automated sorting stations this year, and average daily ground volume grew 5% last quarter. But expenses at that package operation jumped 12%. FedEx says their buildup in facilities and people is investment in future demand, however, and the company also expects its customers to invest in that service.
E-commerce growth is turning the aftermath of the holiday sales period into a kind of second peak shipping season as retailers scramble to handle the surge of returns that come with online sales. United Parcel Service is trying to bolster its ability to handle that business with an investment in six-year-old tech specialist Optoro Inc., WSJ Logistics Report's Jennifer Smith writes. Optoro's software helps analyze and routes unwanted merchandise to marketplaces that offer the best chance of recovering lost revenue. That's an increasingly important concern for retailers, with returns cutting into margins that are already under pressure because of the high costs of managing the logistics of online sales. The returns cost sales revenue, and they're complicated for companies to handle. UPS isn't buying Optoro, but the new stake will have the companies working together more closely -- especially after the holidays.
This week's deadly truck attack in Berlin is focusing new attention on the potential use of commercial vehicles in terror. Authorities in several U.S. cities say they had already taken safeguards at big public events since a truck attack in July killed 86 people in Nice, France, the WSJ's Zolan Kanno-Youngs, Jennifer Smith and Nicole Hong write. That includes the use of dump trucks and other "blocking vehicles" to stop drivers that might use trucksas weapons. One former law enforcement official says the use of checkpoints to watch for suspicious trucks coming into cities "would be a logical next move." In the meantime, companies like Penske Truck Leasing Co. that rent trucks say they are paying special attention to their own safeguards and keeping in close contact with law-enforcement agencies.
SUPPLY CHAIN STRATEGIES
Navistar International Corp. expects to begin working with Volkswagen AG early next year on commercial trucks and engines for the U.S. market. The alliance, aimed at cooperating on new products from sourcing to sales, has won antitrust approval in the U.S., the WSJ's Bob Tita reports, and Navistar expects reviews elsewhere to be done early in 2017. The companies have been working on joint plans since Volkswagen announced in September it was taking a stake in Navistar to help expand its footprint in the U.S. truck business and help the company compete with rival Daimler AG. The plan will give Navistar's trucks a more global flavor as the companies save costs by sharing parts sourcing and engine technology across borders. Those cost savings are especially important at Navistar, which just lost $34 million in its fiscal fourth quarter on a 17% decline in revenue.
The Apple Inc. supply chain that built a sprawling electronic parts eco-system in Asia may be expanding. The company is in talks with India's government about manufacturing products in the country, the WSJ's Rajesh Roy and Newley Purnell report, as Apple seeks to expand its sales and presence in the South Asian nation. Apple has less than a 5% slice of India's booming smartphone market and making goods such as iPhones locally would allow the company to open its own stores there to ramp up sales. The idea is to bring to India what Apple has done in China, where the firm's outsourced manufacturing business has helped give Apple's goods a big profile in China's big consumer market. Apple faces big regulatory hurdles in India, however, including requirements for local materials in manufactured goods. That means any moves to produce in the country will likely draw in more components makers and logistics providers that keep Apple's Asia supply chain moving.
IN OTHER NEWS
South Korea's Hanjin Shipping Co. agreed to sell its stake in the U.S. port operator that runs Long Beach, Calif.'s biggest container terminal to Mediterranean Shipping Co. (WSJ)
The euro hit its weakest level against the dollar in 14 years, sending money rushing out of eurozone financial markets. (WSJ)
Praxair Inc. and Germany's Linde AG agreed to a merger to create a single $66.6 billion giant in the industrial gas business. (WSJ)
A judge approved the $33.1 million sale of bankrupt natural-gas transporter Murphy Energy Corp.'s Port Hudson, La., terminal, which was auctionedalong with other terminals. (WSJ)
Nike Inc. is trying to speed up its supply chain with what it calls an "express lane" as athletic apparel supplier increases direct and online sales. (WSJ)
Ford Motor Co. plans to start exporting small sport-utility vehicles from India to the U.S. starting late next year. (WSJ)
Walgreens Boots Alliance Inc. and Rite-Aid Corp. moved closer to merging after Rite-Aid struck a deal to sell 865 stores to a small regional chain called Fred's Inc. (WSJ)
BlackBerry Ltd. reported stronger earnings as it turns toward software after suspending smartphone manufacturing. (WSJ)
Transportation industry officials fear support for a large infrastructure stimulus plan from a Donald Trump administration is wavering. (Associated Press)
South Korea's Hyundai Merchant Marine Co. will order five container ships and up to five oil tankers after showing a $253 million net profit in the third quarter.(Yonhap)
The Cass Freight Index showed U.S. domestic truck and rail shipments declined 3% from October to November. (Logistics Management)
Amazon.com Inc. is opening two distribution centers in Aurora, Ill., west of Chicago, adding to several new fulfillment sites in the state. ( Chicago Tribune)
A large majority of Americans under age 50 have bought goods using their smartphone. (Internet Retailer)
Hong Kong-based Kerry Logistics Network Ltd. bought Spanish freight forwarder Bofill & Arnan. (Lloyd's Loading List)
British Airways said it will operate its full schedule on Christmas Day and the day after despite a strike by some cabin crews. (The Independent)
Growing snack food consumption in the Middle East is fueling surging demand for potatoes from India. (Fresh Plaza)
Paul Page is deputy editor of WSJ Logistics Report. Follow him at @PaulPage, and follow the entire WSJ Logistics Report team: @brianjbaskin, @lorettachao, @smithjenBK and @EEPhillips_WSJ and follow the WSJ Logistics Report on Twitter at @WSJLogistics.
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(END) Dow Jones Newswires
December 21, 2016 06:42 ET (11:42 GMT)
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