Today’s Top Supply Chain and Logistics News From WSJ
The U.S. economy’s retrenchment appears to have been a first-quarter phenomenon, and it appears that the manufacturing and shipping of goods are poised to pick up. The WSJ’s Kathleen Madigan reports that a key gauge of factory activity, the ISM manufacturing PMI, advanced a sharp 1.3 percentage points in May after taking a winter pause. Bradley J. Holcomb, who oversees the ISM’s manufacturing survey, said issues such as the West Coast port slowdown and winter weather were a drag on economic expansion. The strongest signal for economic expansion, however, was in the forward-looking measures: The ISM’s index for new orders was up 2.3 percentage points and hiring rose four points.
The strengthening U.S. manufacturing sector is great news for transportation and logistics providers. Barcelona-based Ficosa announced in May that it is building of a new plant in Cookeville, Tenn., to produce rearview mirrors for U.S. auto makers. “The market is growing here,” said Joan Cañellas, chief executive of Ficosa North America. The WSJ’s William Kazer, meanwhile, reports that China’s manufacturing sector is stumbling. The official gauge of economic activity was barely changed at 50.2 in May, but a private survey by HSBC Holdings PLC and the Markit firm remained in negative territory. That’s traditionally been a signal of poor demand in Western countries that buy Chinese goods, but it looks increasingly like a sign of sagging domestic demand.
XPO Logistics isn’t slowing down, however. The company more than tripled its revenue in 2014 largely because of two big acquisitions, commanding a bigger share of the U.S. logistics market, and XPO announced it was loaded up for more, with $3.26 billion in new equity and debt. WSJ Logistics Report’s Erica E. Phillips reported a big part of the new equity pumping into the business will come from three major investors in an earlier round of funding. This suggests XPO’s backers are fully behind the strategy of growing by consolidating the industry. XPO Chief Executive and Chairman Bradley Jacobs gave no hints of where he’s looking for new acquisition targets, saying only that the company’s plan “is still in its early innings.”
What to do with used mobile devices has become a costly and environmentally-sensitive concern for manufacturers even as they scramble to keep up with surging demand. WSJ Logistics Report’s Loretta Chao writes that some experts estimate that manufacturers devote an estimated 8% to 10% of revenue to maintaining reverse supply chain functions, which can involve complex materials disposal and recycling processes. Companies like Hong Kong-based Li Tong Group aim to make money from outcast mobile devices as well as defunct telecommunications equipment, a demonstration of how value can be found even when the basic supply chain aimed at delivering goods to customers is completed.Burt White, vice president of industry supply chains at Chainalytics, says companies want value not just from product sales but also from returns.