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Asia’s Factory Alarms; Slimming Apparel Inventory; Electric Truck Investigations

By Paul Page

 

The Tanjung Priok Port in Jakarta, Indonesia, in July. Indonesia is one of several Asian nations coping with higher Covid-19 case counts. PHOTO: DIMAS ARDIAN/BLOOMBERG NEWS

Factories across Asia are sending warning signals of further supply-chain strains. Manufacturing activity in several countries is faltering as Covid-19 cases are rising, the WSJ’s Stella Yifan Xie and Jon Emont report, adding to global supply-chain disruptions and confirming fears of a slowdown in the region’s economic recovery. Gauges of manufacturing activity plummeted across major Asian economies, in large part because virus lockdowns, port congestion and higher input costs hampered production. There were also signs that global demand for some Asian goods has been leveling off, as consumers rein in spending in the West. The struggles could signal more problems ahead for buyers of Asian products that remain in high demand, such as toys and semiconductors. As more factories struggle to keep operations staffed and fully operational, it is harder for buyers to source the products they need, potentially adding to inflationary pressures world-wide.

 
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Supply Chain Strategies

Gap inventory at a San Francisco store in March. PHOTO: JUSTIN SULLIVAN/GETTY IMAGES

Some clothing retailers are finding that keeping fewer goods on hand can improve their profit margins. The low-inventory strategy runs counter to customary apparel-sector practices that seek to maximize sales by having a full array of choices available at stores. But the WSJ’s Kristin Broughton and Nina Trentmann report companies including Gap, Abercrombie & Fitch and Guess are offering fewer end-of-season markdowns as they keep inventory levels low. Those late-season sales have long troubled retailers, but the financial hit was especially tough last year when many merchants had to slash prices after lockdown orders and a sharp shift in consumer spending left them holding excess stock. Now, measures of operating margins for the newly-lean apparel sellers are up this year. Retailers risk running low on stock, but Abercrombie finance chief Scott Lipesky says losing a sale is less significant in the long run than having too much inventory.

 
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Quotable

“We continue to see extended lead times due to port delays and sea container tightness.”

— A chemical products manufacturer quoted in the Institute for Supply Management’s August manufacturing report.
 

Government & Regulation

A prospective Workhorse electric delivery van. PHOTO: WORKHORSE GROUP

More regulatory clouds are gathering over the electric-truck sector. Financial regulators have opened an investigation into Workhorse Group, the WSJ’s Ben Foldy reports, targeting an Ohio-based firm that was an early investor in now-struggling startup Lordstown Motors. The Securities and Exchange Commission doesn’t say what the investigation concerns or offer any further details, but word of the probe sent Workhorse shares tumbling and raised new concerns in a sector with an array of startups seeking to bring electric vehicles to commercial operations. The SEC’s probe into Workhorse, which was founded to make battery-powered delivery vans and trucks, is the fourth known investigation into an electric-vehicle manufacturer in the past year. Upstarts targeting transportation emerged as hot investments last year, driven in large part by investors trying to replicate Tesla’s big returns. Workhorse in July suspended earlier guidance that it aimed to deliver 1,000 vehicles in 2021.

 
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Number of the Day

54.2

The Institute for Supply Management’s index for manufacturing inventories in August, a return to expansion that ISM says signals supply chains are “finally making headway.”

 

In Other News

OPEC and its allies will keep increasing oil production in measured steps, resisting U.S. pressure for stronger output. (WSJ)

Niche passenger carrier Eastern Airlines is launching an air cargo operation with used Boeing 777 jets converted to freighters. (WSJ)

Retail business Sequential Brands Group filed for Chapter 11 bankruptcy protection and is selling assets. (WSJ)

Amazon is seeking to hire another 55,000 people globally for its corporate and technology ranks. (WSJ)

Amazon has expanded its air operations in the U.S. to 164 freighter flights a day. (Financial Times)

Chinese e-commerce company JD.com is seeking to expand its business with retailers to include broader supply chain services. (Supply Chain Dive)

Three rival logistics companies in Thailand are jointly launching a delivery business for frozen and refrigerated foods. (Nikkei Asia)

Canadian Pacific Railway gave Kansas City Southern until Sept. 13 to accept its buyout offer. (Journal of Commerce)

Women’s apparel retailer Chico’s is moving some of its production out of Vietnam because of supply-chain problems. (Sourcing Journal)

A work stoppage by warehouse workers and truck drivers at food distributor Sysco is disrupting deliveries in the Chicago area. (Eater Chicago)

Growing numbers of bulk carriers are exploring the use of their biggest capesize vessels to carry containers for the constrained box shipping market. (Lloyd’s List)

Star Bulk Carriers hauled 1,400 containers from Europe to China on one of its dry-bulk vessels outfitted to carry boxes. (Splash 247)

Unionized office workers at South Korea’s HMM voted to strike after failing to reach a contract agreement with the container line. (Korea Herald)

U.S. regulators extended certain operating exemptions for truckers under the coronavirus pandemic. (Heavy Duty Trucking)

ABI Research projects consumer packaged-goods companies will spend $23.8 billion to bring digital tools to their supply chains by 2030. (Automation World)

Europe is far ahead of the U.S. in rolling out electric cargo delivery bikes. (Bloomberg CityLab)

 

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, and @pdberger. and @LydsOneal. Follow the WSJ Logistics Report on Twitter at @WSJLogistics.

 
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