Today’s Top Supply Chain and Logistics News From WSJ
Norfolk Southern Corp. is undertaking a big restructuring effort the freight railroad hopes works on two different tracks. The railroad’s plan will cut 1,200 jobs and scale back operations in a bid to reduce costs and meet the steep decline in energy shipments that are eating into Norfolk Southern’s profits, the WSJ’s Laura Stevens and Betsy Morris report. It’s also aimed at fending off the hostile takeover bid by Canadian Pacific Railway Ltd., an attempt that may get some lift from the poor financial results Norfolk Southern delivered on Wednesday. CP’s certainly not impressed. A spokesman there said that NS’s projected $650 million in annual savings falls “well short” of the targets the Canadian railroad has in its merger plan.
Free shipping for online consumers is no longer enough. The latest demand in the retail market is for goods to be delivered fast, the WSJ’s Elizabeth Holmes reports, and their expectations of an acceptable delivery window are shrinking. Retailers say the tougher expectations are being driven by Amazon.com Inc. and its Amazon Prime offering, which charges customers $99 a year for unlimited two-day shipping. And the e-commerce giant, which dominated sales in the holiday season, is upping the ante by offering same-day shipping in some markets. That has retailers whose default shipping option is often five business days or more scrambling to match the frenetic pace. The challenge is that profit margins will almost certainly get more narrow as the delivery windows get tighter.
Shipping lines are cutting back their capacity growth but they may wonder if their acting aggressively enough. The Alphaliner research group says global container ship capacity will expand 4.6% this year, the slowest growth rate in more than 25 years, according to Reuters. That’s less than half the average annual growth rate of 10.3%, and it comes as ship operators are starting to report feeble financial results after a year marked by faltering demand and plunging freight rates. Carriers didn’t scale back their capacity much in 2015 even as markets stumbled, however. Bimco, the ship owner association, estimates shipping space actually expanded 8.1% last year, even after some vessels were idled. Says Bimco analyst Peter Sand, “We are not making it easy on ourselves.”
