Delta Continues to Restructure

In the past few weeks we have posted a couple of entries regarding Delta’s post bankruptcy restructuring plans. We will continue to keep you updated on their progress.

In further cost cutting measures, Delta has announced that they will absorb their low cost Delta Song service into it’s existing operations during May of 2006. This move is designed to streamline operations and reduce overall costs according the Delta CEO Gerald Grinstein.

As part of its Chapter 11 bankruptcy restructuring, Delta is seeking to eliminate unprofitable routes and expand to more lucrative markets.

Delta plans to eliminate Song in May and merge much of its operations — including its 48 Boeing 757-200 aircraft with satellite TV — into Delta’s transcontinental routes beginning next fall.

“By merging the brands, we will also benefit from a more simplified operation, reduced overhead costs and more focused marketing resources,” said Delta chief executive Gerald Grinstein.

For the complete article read here.

P&O Takeover Talks

BBC News reports that P&O has confirmed that is has received a preliminary contact, “which may or may not lead to an offer.”

UK ports and ferries operator P&O has received approaches on a potential takeover, its board said on Sunday.

The Sunday Times says the interested party is Dubai Ports World, owned by the United Arab Emirates government, which could bid £3bn ($5.35bn).

It said Dubai Ports has hired Deutsche Bank to advise it on a bid, and a first meeting with P&O could take place soon.

The Gulf firm manages ports in Asia, Europe, Australia and South America, and P&O owns ports around the world.

Last week P&O, which has been slimming down its ferries and property arms, cut back earnings expectations for its key ports business.

In the past year there has been strong growth at its Asian ports, but that has been offset by more sluggish economic conditions in the UK and Australia.

Any develpments will be watched closely by others in the market, such as Singaporean state investment firm Temasek and Danish shipping group A.

UPS – International Growth Exceeds Domestic

UPS continues to show growth in their international business…

Though domestic package services are still the dominant line for UPS, its international package business and supply chain and freight segments experienced more rapid growth in the company’s recently reported third quarter.

The pace for revenue growth in international packages was more than double that of U.S. domestic package revenues for UPS during the third quarter. Its supply chain and freight segments jumped 130% to $1.6 billion. Taken together, the two earnings stars are now half the size of UPS domestic package revenues.

U.S. domestic package revenues or $7.03 billion were up 6.9% over the 2004 third quarter. Earnings rose 18% to $1.11 billion.

International package revenues increased 14.5% to $1.92 billion, turning in an operating profit of $318 million (up 19.5%).

Revenues in the supply chain and freight segment, which includes recent acquisitions Menlo Worldwide Forwarding and Overnite Transportation, reached $1.6 billion and turned in a profit of $70 million; a 37.3% increase over the prior-year period. Source – Logisticstoday.com

Change in Supply Chain Strategies

There are a lot of great new articles in the latest issue of Air Cargo World, I strongly suggest you pick up a copy. The article that stuck in my mind is about changing supply chain strategies and how the ever-so-popular Just-in-Time supply chain strategy could soon be gone :

According to the Council of Supply Chain Management Professionals, U.S. businesses had as much as $1.63 billion tied up in inventory last year, up a solid 8.9 percent from the inventory level recorded in 2003. Not surprisingly, the collective warehousing bill rose by $4 billion to $82 billion last year.

The Just-In-Time supply chain model is still around, but today it’s more likely to involve warehouses and slower transportation modes, plus some leeway for disruptions.

The Colography Group has diagnosed a secular slowdown in international air cargo growth brought about by a profound change in global ordering, shipping and distribution patterns. The research and consulting firm found that businesses were integrating warehouses and buffer stock into their distribution networks and relied increasingly on lower-cost alternatives to pricey air freight.
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To some extent, the rise in warehousing is a reflection of companies trying to come to grips with a massive extension of their supply chains.

Instead of trans-North American networks, shippers increasingly are managing intercontinental logistics operations, a process that has gained much momentum with the ongoing stampede to China.
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“Just-In-Time with a 600-mile supply chain in one country is one thing; running a 6,000-mile supply chain between different continents is something entirely different. The 6,000-mile chain has a lot more complexity, more points for potential failure,” said Brian Clancy, a principal at the MergeGlobal consultancy.

At this point in the learning curve, companies still have relatively scant data on intercontinental supply chains, so they have a greater need for safety stock, he said.

One strategy to minimize pitfalls of long supply chains has been the establishment of supplier hubs near the big producers‚ assembly plants. “Basically, that’s a buffer,” said Clancy.

As overseas manufacturing has become more popular, so have supply chains become more complex and difficult to manage, particularly in low-cost, poor-infrastructure countries, not to mention the increasing problem of port congestion and rising airfreight costs due to fuel.

I’ve always felt there is something to be said for sourcing product closer to home, even if the initial cost is a bit higher. You can’t put a price on piece of mind.

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