Logistics Report: Trade Flows Sagging; Inventories into Cash; Developing Warehouse Perks

Date: Wednesday, June 26, 2019
Source: The Wall Street Journal

Escalating tariffs and other barriers appear to be dragging down global trade growth, and cutting into the flow of goods in transportation channels from ocean to air. The WSJ’s Paul Hannon and Costas Paris write the impact of trade tensions is hanging over the global economy as leaders from the Group of 20 large economies meet this week in Japan. The CPB Netherlands Bureau for Economic Policy Analysis says the total volume of goods moving across borders fell 0.7% in April from March, after dropping by 0.2% in the first three months of the year. The April decline was driven by a 2.6% drop in U.S imports, and a 5.3% slump in exports from Asia’s developing economies, including China. U.S. ports are reporting declining container volumes and the International Air Transportation Association now expects no growth in cargo volumes or pricing this year. 

U.S. companies are managing inventories more tightly in an efficiency drive that is helping them convert capital into cash more quickly. A new study by consulting firm Hackett Group Inc. describes an increasingly tough tug-of-war over cash and the flow of goods in supply chains, the WSJ’s Mark Maurer reports, with more companies using their size to exert favorable payment terms. The 1,000 largest U.S. public companies collected cash from their customers quicker than they had since 2012, and the funds tied up in inventory fell for the first time since that year. The report said the top-performing companies paid suppliers almost three weeks slower in 2018 than typical companies and collected cash from customers almost three weeks quicker—while holding less than half the inventory. Despite the gains, Hackett Group’s Craig Bailey says inventories remain “an untapped area of working capital.”

 

E-Commerce

Developers and warehouse managers are trying to bring the comforts of modern office spaces to distribution centers. Operators facing a tight labor market are starting to incorporate amenities that were first popularized in Silicon Valley’s campuses, adding perks for blue-collar workers at sprawling e-commerce fulfillment centers. The WSJ’s Keiko Morris writes the moves to add perks to the structures come amid soaring growth in distribution demand that is bringing more warehouses closer to cities, triggering a tough search to find and retain workers in a tight job market. In one case, a 1 million-square-foot distribution center near Atlanta was designed with skylights, two full basketball courts, a soccer field a gym and outdoor break areas. It’s a contrast with older dimly lit, spartan facilities that make a poor working environment. Still, critics say the amenities are no substitute for better working conditions and improved pay.

Transportation

Europe’s aviation industry believes more technology will lead to faster growth in commercial drone business. Companies and regulators are pushing to expand unmanned aircraft operations significantly in the next few years, the WSJ’s Andy Pasztor reports, as several businesses seek to harness artificial intelligence for air-traffic control. That use of AI would help solve a major problem in drone operations, allowing companies to separate and keep track of unmanned aircraft at low altitudes. Thales SA says it expects commercial drone sales to surpass military sales next year. The French electronics and aerospace company is convinced that only technology such as AI applications will be able to react quickly enough to maintain a safe buffer around individual drones. European air-safety regulators are pursuing shorter-term initiatives, including regulations establishing enhanced safety requirements.

 

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