Today's Top Supply Chain and Logistics News From WSJ

By Paul Page Features Dow Jones Newswires

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Amazon.com Inc.'s prospective move into the $412 billion pharmacy business provides a prescription for a dramatic makeover in pharmaceutical supply chains already undergoing big changes. Amazon is considering entering a business that appears ripe for restructuring through e-commerce, the WSJ's Jonathan D. Rockoff and Laura Stevens write, but drug distribution presents big hurdles for the retail template Amazon has used to enter other industries. Consolidation of the drug supply chain in the hands of a few big players has also been criticized by many patients and drug manufacturers, who are looking for new ways to buy and sell medicines. But medicines are highly regulated, and Amazon would have to go through insurers since patients typically don't pay directly for prescription drugs. For now, Amazon is building up in healthcare through business-to-business operations -- selling medical supplies for professional use. Experts say the surest path for the company could be buying an existing drug supplier, a plan that would also come with a supply chain already built in.

A new wave of consolidation may be hitting North American freight railroads, even though bids to revive mergers and acquisitions have fallen short. Canadian National Railway Co. and Norfolk Southern Corp. have a new agreement to cooperate on moving rail shipments around Chicago, the WSJ's David George-Cosh reports, a pact that could minimize a key bottleneck and trigger other deals to help ease track congestion in Canada and the U.S. The carrier say they will hand off trains at Norfolk Southern's Elkhart, Ind., rail terminal instead of within the Chicago rail terminal network. For Norfolk trains heading westbound, CN will manage the train and drive it through a bypass around Chicago. That may help untangle a Chicago-area delay that Hunter Harrison had said he would solve when he tried to buy Norfolk Southern as chief executive of Canadian Pacific Railway Ltd. If the interchange plan works, the big railroads may seek other such agreements since the path to formal mergers faces a bigger blockadge than the freight path through Chicago.

The supplier move away from traditional retailers is picking up speed. Nike Inc. says it will change how it works with retailers over the coming years, the WSJ's Sara Germano writes, focusing on just a few dozen of them as it works through the restructuring sportswear market. At the center of the iconic brand's strategy are plans to sell more goods digitally and directly to consumers, a shift from its longstanding model of selling through sporting-goods stores and other traditional retailers. Nike has been at the center of a broader upheaval in retailer-supplier relationships as e-commerce has upended traditional consumer buying patterns, adding new competitors and different distribution paths between brands and customers. Suppliers including apparel and consumer-goods companies fear being left behind if they don't join the e-commerce wave. Nike has already struck a deal with Amazon.com Inc., and the company says it will continue working closely with 40 partners, including brick-and-mortar standbys and new outlets like online luxury boutique Farfetch.

ECONOMY & TRADE

U.S. economic growth is hitting a sweet spot for shipping companies. The 3% annual rate of growth in gross domestic product in the third quarter gave the U.S. its strongest six-month expansion since mid-2014, the WSJ's Josh Mitchell reports, and was built on the solid consumer and business spending on goods and shipments of American products abroad that help fill trucks, trains and ships. The broader economic gains came along with strong third-quarter earnings reports from U.S. trucking companies Old Dominion Freight Line Inc. and Landstar System Inc. that showed consumer spending and recovery efforts from the recent hurricanes is pushing more shipping demand. Consumer spending on durable goods such as appliances rose at an 8.3% annual rate in the third quarter, and business spending on equipment rose at an annual 8.6% pace. That spending, along with strong expectations for holiday sales in the fourth quarter, has companies restocking: inventory replenishment made up nearly three-quarters of a percentage point of GDP.

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QUOTABLE

IN OTHER NEWS

Businesses and households in the eurozone are more upbeat about their prospects than they have been for 17 years. (WSJ)

Toy maker Mattel Inc. says tighter inventory strategies at retailers contributed to declining third-quarter sales. (WSJ)

Akzo Nobel NV and U.S. rival Axalta Coating Systems Ltd. are in merger talks that would create a multibillion-dollar coating and paints giant. (WSJ)

Ford Motor Co.-controlled Argo AI LLC bought Princeton Lightwave Inc., which makes laser systems needed to operate cars without human intervention. (WSJ)

Third-quarter earnings at Brazilian mining company Vale SA surged on higher global prices for iron ore and widening quality premiums. (WSJ)

Mexican cement and construction materials company Cemex SAB's third-quarter profit grew slightly, with more shipments to the U.S. helping offset higher freight costs. (WSJ)

Intel Corp. lifted its outlook for the full year after seeing its third-quarter profit rise 34%. (WSJ)

Finnish telecommunications-equipment supplier Nokia Corp. issued a grim outlook as it battles fierce Chinese competition. (WSJ)

Volkswagen AG earnings fell sharply in the last quarter as the car maker digested mounting costs from its diesel emissions-cheating scandal. (WSJ)

British Airways parent International Consolidated Airlines Group SA reached a record third-quarter profit, helped by a 7.9% gain in cargo revenue. (WSJ)

Swiss chemicals company Clariant AG and U.S.-based HuntsmanCorp. terminated their planned $15 billion merger. (WSJ)

Commissioners in charge of California's ports of Los Angeles and Long Beach will vote this week on a clean-air plan. (Long Beach Press-Telegram)

U.S. solar-panel installers fear potential tariffs on foreign manufacturers could undermine their growing business. (Los Angeles Times)

U.S. steel imports increased 20% in the first nine months of this year. (Northwest Indiana Times)

Goods supplier Li & Fung says retail supply chains built to move big quantities of goods at a slow pace have to get smaller and more nimble. (Sourcing Journal)

Wal-Mart Stores Inc. is rolling out shelf-scanning robots in more than 50 U.S. stores to replenish inventory faster. (Reuters)

The American Trucking Associations wants the federal government to be the sole regulator of "performance and technical" rules for automated trucks. (Arkansas Democrat-Gazette)

CSX is dropping scores of intermodal services from its domestic freight rail network. (Journal of Commerce)

Dry bulk ship startup GoodBulk is buying up to 13 large bulk vessels from CarVal Investors. (Lloyd's List)

Amazon is adding a fulfillment center in Calgary, Alberta, its seventh in Canada. (Toronto Globe and Mail)

French startup Convargo won $19 million in Series A funding for its plan to match freight shipments and truck capacity. (TechCrunch)

ABOUT US

Paul Page is deputy editor of WSJ Logistics Report. Follow him at @PaulPage, and follow the entire WSJ Logistics Report team: @brianjbaskin , @jensmithWSJ and @EEPhillips_WSJ. Follow the WSJ Logistics Report on Twitter at @WSJLogistics.

Write to Paul Page at paul.page@wsj.com

(END) Dow Jones Newswires

October 30, 2017 06:36 ET (10:36 GMT)