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Homegrown Supply Shortfalls; Passing Along Price Increases; Racing to Deliver

By Paul Page

 

A Bell Manufacturing furniture plant in Minneapolis. PHOTO: TIM GRUBER for THE WALL STREET JOURNAL

Building a domestic supply chain isn’t providing the ticket around post-pandemic disarray that many companies had hoped for. Furniture chain Room & Board is coping with steep stockouts and monthslong delays in delivering sofas and dressers. The WSJ’s Austen Hufford reports the firm is one many finding that manufacturing goods in the U.S. and sourcing components close to home won’t insulate business from shortages and bottlenecks. Those shortfalls in labor and materials are reaching across the furniture sector, undercutting the ability of manufacturers to capitalize on strong consumer demand. Big-box retailer IKEA is short of some furniture, and one merchant is even offering discounts on purchases of items that are in stock. The problems are a reminder that simplifying supply chains is no panacea. Room & Board is sticking with its strategy, however, saying closer quality control and nimble market responses will prove valuable over the long term.

 
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Supply Chain Strategies

A Sysco distribution center in Louisville, Ky. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS

Rising costs in food supply chains are starting to reach consumers. Companies ranging from suppliers like General Mills and Campbell Soup to chain restaurants including Shake Shack and Chipotle are raising prices, and the WSJ’s Annie Gasparro reports that executives expect more price increases this summer as shipping, commodities and labor expenses remain elevated. Those cost components have been broadly stable for many years, with occasional spikes in particular sectors. But experts say rising prices for foundation ingredients including corn, soybean oil and wheat are straining suppliers in what Unilever CEO Alan Jope says is “a period of unprecedented commodity inflation.” Transportation is adding to the mix, with trucking prices reaching multiyear highs and hitting perishables markets hard. Average spot rates for refrigerated transport rose 5.8% from April to May, according to DAT Solutions, which says the ratio of loads to trucks rose more than 30% over that period.

 
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Quotable

“We are faced with higher freight costs, worker shortages and uncertainty related to inflation. These issues are rising as Covid abates.”

— Dollar Tree CEO Michael Witynski
 

E-Commerce

Outside the Amazon fulfillment center in Staten Island, N.Y. PHOTO: MARK LENNIHAN/ASSOCIATED PRESS

Amazon’s rush to speed up its logistics network is raising the stakes for small merchants. America’s small and medium-size online sellers are being separated into winners and losers based on their ability to adapt to the changes in logistics being driven largely by Amazon and other big retailers. The WSJ’s Christopher Mims writes that the race raises tough questions for companies like South Carolina-based Charleston Gourmet Burger, which decided just before the pandemic to stop selling its sauces and marinades through stores and to concentrate on online sales. Sales plummeted after that and costs have jumped as the larger e-commerce market has been pushed by Amazon’s promises of free and fast delivery for consumers. That’s a familiar refrain for many small shippers who must cope with rising fees to use Amazon’s logistics network or face what experts say is a weeding out of merchants through the online competition.

 
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Number of the Day

1.269

The Cass Freight Index for May, a record 35.3% increase from the pandemic-hit level a year ago and up 7.7% from the April reading.

 

In Other News

A measure of U.S. consumer sentiment rose in early June, reversing part of a decline in May. (Dow Jones Newswires)

The International Energy Agency says low coronavirus vaccination rates in emerging economies are pushing back a return to pre-pandemic levels of oil demand. (WSJ)

Leaders of the Group of Seven wealthy democracies called on China to respect human rights, particularly in the industrial Xinjiang region. (WSJ)

House lawmakers proposed bipartisan legislation that seeks to make Amazon and other large firms effectively split into two companies or shed their private-label products. (WSJ)

A strong recovery in passenger travel is helping Boeing find new homes for unclaimed 737 MAX jets. (WSJ)

Chinese ride-hailing giant Didi Chuxing could gain a valuation of $70 billion in planned initial public stock offering in the U.S. (WSJ)

NextNav is merging with a SPAC that will take public a firm with GPS technology with applications for transportation and warehousing. (WSJ)

Home Depot will start chartering a container ship dedicated to its own goods to help get around supply-chain bottlenecks. (CNBC)

Ocean Network Express joined container lines dropping services at China’s Yantian port as the backup of vessels stretched to more than 50 ships. (TradeWinds)

A shipping platform says more than 300 container ships are caught in port bottlenecks around the world. (Splash 247)

The U.S. Department of Agriculture will spend $4 billion to shore up food supply chains. (Supply Chain Dive)

Toyota accelerated its target for net-zero carbon emissions at factories to 2035, from the previous deadline of 2050. (Nikkei Asia)

Trucker Knight-Swift Transportation is shifting its intermodal business from BNSF Railway to Union Pacific. (Journal of Commerce)

Freight brokers Worldwide Express and GlobalTranz are merging, with Worldwide chief Tom Madine leading the combined business. (Transport Topics)

The former chief mate of the MSC Gayane was sentenced to seven years in prison for leading a cocaine smuggling operation that was foiled by U.S. authorities. (Philadelphia Inquirer)

Airbus is preparing to take orders for a freighter version of its A350 widebody jet as soon as next month. (Air Cargo World)

Kent County in the U.K. is trying to permanently ban heavy-duty trucks from stopping on county roadways. (Motor Transport)

Freight forwarder DSV Panalpina raised its earnings outlook for the year. (ShippingWatch)

Supply chain traceability technology provider Circulor raised $14 million in a Series A funding round. (Logistics Manager)

British cocktail bars are running short of mixers and beers because of slow deliveries from Europe. (Financial Times)

 

About Us

Paul Page is editor of WSJ Logistics Report. Write to him at paul.page@wsj.com.

Follow the WSJ Logistics Report team: @PaulPage, @jensmithWSJ, @CostasParis. Follow the WSJ Logistics Report on Twitter at @WSJLogistics.

 
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