Logistics Report: Tumbling Truck Orders; Brexit’s Many Deadlines; Ailing Pharmacy Chains

Date: Wednesday, April 3, 2019
Source: The Wall Street Journal

The year is already over as far as trucking fleet managers are concerned. Orders for heavy-duty trucks fell in March to the lowest level since October 2016, the WSJ Logistics Report’s Jennifer Smith writes, as ACT Research and FTR both reported fewer than 16,000 orders for Class 8 vehicles last month. The slide is hardly alarming after companies ordered at a historic red-hot pace in 2018, building a backlog with manufacturers that now runs to nine months. But trucking companies are pausing amid mixed signals in the broader economy, including uncertainty over trade and signs that inventories may be piling up ahead of demand. Freight shipping rates also have been cooling in a spot market marked by relative balance between supply and demand. With any new orders unlikely to be delivered before 2020, experts say it’s no wonder most fleets don’t want to make commitments right now.

The only thing moving in the U.K.’s preparations for Brexit is the deadline. British Prime Minister Theresa May wants a further delay of Britain’s departure from the European Union, the WSJ’s Max Colchester and Jason Douglas report, a step to allow time to hash out a new Brexit deal with the opposition Labour Party. That would push the country’s exit from the EU back to May 22 instead of next week. It also signals the U.K. could end up more closely bound to the bloc than she previously envisioned. The political jockeying comes as shipping operations are taking increasingly urgent steps to prepare for a no-deal Brexit. Brittany Ferries hauled trucks and people on the first of 20 new weekly English Channel ferry crossings set up for a no-deal Brexit, according to the BBC. Truckers complained that the backlog will come at customs checkpoints, however, not in transport networks.

Supply Chain Strategies

Shifting drug distribution trends have two of the biggest U.S. pharmacy chains ailing. Smaller profit from the sale of generic drugs is squeezing Walgreens Boots Alliance Inc. and rival CVS Health Corp., the WSJ’s Sharon Terlep and Joseph Walker report, and pushed Walgreens to cut its outlook after what it called the most difficult quarter in several years. Walgreens and CVS are getting squeezed as they negotiate with pharmacy benefit managers, which serve their clients by choosing which drugs to cover and wresting lower prices from drugmakers through rebates. CVS owns one of the country’s biggest pharmacy benefit managers while Walgreens stands alone, leaving it more exposed in the procurement market. Generic drugs account for about 85% of U.S. prescriptions, and pharmacy chains can use them to leverage purchasing power to negotiate lower prices when there are multiple manufacturers competing for the business.

Economy & Trade

An anchor of the U.S. industrial and retail sectors is shifting into a lower gear. Major auto makers posted declines in U.S. sales for the first quarter, the WSJ’s Adrienne Roberts reports, adding pressure on car companies already grappling with weaker demand in key global markets. Analysts expect first-quarter sales for the industry to decline 3% to 4% from a year ago, including a drop of around 5% in March, the unofficial start of the spring selling season. Car prices are rising, but lighter sales volume will likely put the brakes on production. Automotive supply chains have been thinning, with shipments of motor vehicles and parts on U.S. and Canadian railroads down 0.6% in 2018 to the lowest level in five years, according to the Association of American Railroads. That part of the rail business was down 1% this year through the week of March 23.


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