GIS General Mills Inc

By Paul Page 

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FedEx Corp.'s investments in improved ground services paid off for shippers during the peak season -- but not necessarily for the parcel carrier itself. Some retailers gambled on deliveries by choosing slower and cheaper options later than ever heading into the holiday crunch, the WSJ's Paul Ziobro reports, avoiding the express services that bring FedEx higher yields while still getting their goods on time. In fact, FedEx Ground delivered 54 million packages a day earlier than expected during the last quarter. The results highlight the difficult holiday balancing act parcel carriers face during the seasonal shipping surge, when demand drives up costs and the crush of packages can bury profit-making efficiency strategies. In this case, the holiday rush pushed operating profit at FedEx's ground unit up 23%, but operating profit at FedEx Express tumbled 24%, pulling down overall earnings. Parcel carriers may be adjusting to changing delivery patterns, but shippers may be shifting their own strategies just as fast.

Some of the biggest food suppliers are struggling to manage soaring logistics costs in a fast-changing consumer market. General Mills Inc. is the latest big company to succumb to tight capacity and rising prices in shipping markets, saying its freight costs neared 20-year highs in February while spending for its ingredients was also on the upswing. The WSJ's Annie Gasparro reports the maker of Cheerios cereal and Yoplait yogurt plans to raise prices on its packaged foods, but the company is pulling back its earnings outlook on the thinner profit margins brought on by its supply-chain woes. General Mills and other suppliers to grocery chains are struggling to preserve profits in a tumultuous transport market. Cass Information Systems says its index for truckload demand rose 6.5% year-over-year in February, the fourth straight month of better-than 6% growth. Trucking companies have been raising prices on their shipping customers, and General Mills' comments show shippers are anxious to pass those costs along.

Some companies across Europe are starting to reset their supply chains as the U.K. exit from the European Union approaches. A survey of supply-chain managers shows around one in seven EU companies have already switched suppliers, the WSJ's Nina Trentmann reports, and more than 60% expect to do so ahead of Brexit. The survey by the Chartered Institute of Procurement & Supply suggests the dread and debate over Brexit is giving way to concrete action, with a growing lineup of companies building new distribution channels. British companies also are acting, with many raising prices and preparing to reduce headcount to fit expectations for leaner demand. Big supply-chain operators still are trying to plan amid uncertainty over major issues like customs rules. A European car makers' group warned this week that new barriers at borders would undermine their "just-in-time" and "just-in-sequence factory strategies and "could even lead to assembly line stoppages."

ECONOMY & TRADE

Battle lines are being redrawn in the last hours before what some believe will be a trade war over tough new protectionism in Washington. The Trump administration is in close talks with several allies and trading partners on exempting them from U.S. tariffs on steel and aluminum, the WSJ's William Mauldin reports. The news Wednesday in a congressional hearing adds new complications to an extensive overhaul of U.S. trade relations that's reaching a critical point, with metals tariffs set to take effect on Friday. Talks over exemptions are underway or starting soon with Argentina, Australia, and the European Union, and waivers also may go to South Korea, Canada and Mexico, depending on broader negotiations. Those separate talks with Mexico and Canada are picking up steam, with signals emerging that the countries may have cleared a road block on critical auto-industry issues. For now, the administration may postpone the steel and aluminum tariffs for some countries, but it's not putting the trade weapons away completely.

QUOTABLE

IN OTHER NEWS

The Federal Reserve will raise interest rates a quarter-percentage point and says a strengthening economy may merit more aggressive increases. (WSJ)

Borrowing rates for U.S. consumers have been rising across a range of products. (WSJ)

Oil prices reached the highest level in a month, reaching close to $70 a barrel. (WSJ)

Sales of previously owned U.S. homes rose 3% from January to February. (WSJ)

Canada's currency has declined almost 4% against the U.S. dollar this year as the Mexican peso has gained 5%. (WSJ)

Private-equity firm Sycamore Partners has racked up big profits through its investments in the struggling brick-and-mortar retail sector. (WSJ)

The founder of commodities shipping and trading giant Noble Group Ltd. is retiring, leaving behind a business in financial turmoil. (WSJ)

Amazon.com Inc. is considering acquiring some locations from bankrupt Toys "R" Us Inc. (Bloomberg)

More trucking companies are adding electric logging devices as the April 1 deadline for enforcement of the ELD mandate nears. (Supply Chain Dive)

U.S. regulators say positive train control systems are operating on about 56% of the track used by freight railroads. (Progressive Railroading)

Insurers are expecting hundreds of millions of dollars of claims stemming from the massive fire on the Maersk Honam. (The Loadstar)

Loaded container imports at South Carolina's Port of Charleston fell 4.7% in February. (Charleston Post and Courier)

Retail chain owner TJX Cos. plans a 1.2 million-square-foot distribution center outside Youngstown, Ohio. (Youngstown Vindicator)

Houston-based industrial distributor DXP Enterprises expanded sales 19.5% in the fourth quarter. (Industrial Distribution)

New management wants to revive the long-gone Kozmo.com delivery service, with a focus on groceries. (TechCrunch)

An Italian manufacturer says it will produce and sell a 3D-printed car in China next year. (Automotive Logistics)

ABOUT US

Paul Page is deputy editor of WSJ Logistics Report. Follow him at @PaulPage, and follow the WSJ Logistics Report team: @jensmithWSJ and @EEPhillips_WSJ. Follow the WSJ Logistics Report on Twitter at @WSJLogistics.

Write to Paul Page at paul.page@wsj.com

(END) Dow Jones Newswires

March 22, 2018 06:42 ET (10:42 GMT)

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