Logistic Report: Rising Port Waters; Suppliers Raising Prices; Tesla's Slow-Moving Parts

Date: Monday, February 11, 2019
Source: The Wall Street Journal

U.S. seaports with a close-up look at the impact of the world’s rising sea levels are starting to take their first steps to address the potential impacts on operations. The Port of Virginia is starting to move some critical equipment higher off the ground and other coastal areas are considering similar protections, the WSJ Logistics Report’s Erica E. Phillips writes, as they respond to new assessments that project sharp increases in water levels and stronger storm surges in the coming decades. The actions are relatively limited so far, but infrastructure experts expect plans to accelerate as longer-term master plans are written. Virginia is seeing harbingers of the future, with storm surges and tidal flooding raising concerns at commercial freight and military facilities in the low-lying Tidewater region. Other ports like Houston say their docks are high enough to give them ample time to cope with rising waters.

Higher prices are moving through supply chains toward consumers amid signs that last year’s soaring transportation costs are coming back to earth. Suppliers of household staples like diapers to toilet paper are raising prices again this year after hiking prices in 2018, the WSJ’s Aisha Al-Muslim writes, hoping to offset rising commodity prices and boost profits. The new increases may revive a supply chain tug-of-war over prices from last year, when suppliers sought to pass along rising costs while retailers worried about a consumer backlash. Shoppers have accepted some of those higher prices for consumer staples, however, and in the meantime some logistics costs appear to be receding. Measures of trucking rates have been slipping this year as capacity has grown ahead of demand. Todd Tranausky of research group FTR says lower fuel costs and rising capacity signal “a much better 2019 than shippers expected during much of 2018."

Economy & Trade

U.S. tariffs on imported steel are moving through manufacturing supply chains on two different tracks. Ohio- based Byer Steel Co. pointed to the support from higher prices in reporting stronger results last year and even handed out bonuses to workers, while St. Louis-based manufacturer Laclede Chain Manufacturing Co. is focused on cutting costs and reducing investment after rising materials costs cut short a growth spurt. The WSJ’s Ruth Simon reports the varying responses are part of the complicated impact the tariffs on steel and aluminum imports have had on the industrial economy, creating opportunities for some and challenges for others. Both companies say business has stabilized since the trade conflict ratcheted up last summer but that planning remains difficult amid uncertainties about U.S. trade policy over the long term. Steelmakers’ profits are up, although foreign steel still accounts for a significant share of the U.S. market.

Supply Chain Strategies

Tesla Inc. is facing a new supply-chain problem now that it’s shifting manufacturing and delivery of its Model 3 sedans into a higher gear. As the Silicon Valley auto maker’s U.S. sales approach those of other luxury auto makers, the WSJ’s Tim Higgins reports Tesla is facing growing challenges getting spare parts in place to maintain and repair the growing electric-car fleet. Car owners have faced waits measured in weeks and months for repairs as service centers await spare parts, underlining Tesla’s difficulty in getting its post-sale supply chain moving efficiently and with the urgency of its assembly line. Tesla Chief Executive Elon Musk says the company has been “very silly” about managing parts, storing them at distribution warehouses rather than holding stock at service centers, for instance. Getting the logistics right is crucial given Tesla is targeting a $35,000 threshold to take its Model 3 mainstream.

 

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