By Paul Page

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Drug maker Merck KGaA is building a new supply chain designed to run on its own . The German company is deploying artificial intelligence from sourcing to shipping in hopes of making better and faster planning decisions, the WSJ's Kim S. Nash reports, effectively running like a self-driving car. Underpinning the plan will be sensors and algorithms for Merck's pharmaceuticals and health-care products the company believes will improve demand forecasts and make its manufacturingand distribution more efficient. The idea is to take humans out o many of process at critical points: Merck says its pilots show the algorithms developed for the system are more accurate than humans in 80% of predictions. The effort amounts to what experts call digitization of the supply chain, and it will go into operation next year -- at least the human planners say it will.

Clouds are forming over one of the pillars of the U.S. industrial economy heading into 2017. The Big Three U.S. auto makers are planning to pull back production on even their most popular models in the first quarter, the WSJ's Mike Colias, Adrienne Roberts and Christina Rogers report, decisions that will reverberate across the world of manufacturing and distribution. The car companies set down time at certain factories for as much as three weeks in January, and General Motors Co., will cut 3,300 jobs in the first quarter. Ford Motor Co. and Fiat Chrysler AutomobilesNV are cutting on production of pickup trucks and large cars as waning demand and a shift toward sport-utility vehicles leave "very swollen" inventories piling up on dealer lots. Chrysler had an equivalent of 92 days' supply of its four brands on hand at the end of November, 13 days' higher than a year ago and 19 day's higher than the industry average.

The threat that the U.S. will take back factory jobs lost to China gets only a shrug at the heart of China's manufacturing upheaval. Executives in Shenzhen say the economic forces that built up the sprawling city in southern China are too massive to be rolled back, the WSJ's John Lyons reports, and the efficiencies in manufacturing and distribution too entrenched to be undone. The once-sleepy area now hosts a series of factories, including two big sites operated by Foxconn Technology Group, in a region north of Hong Kong that has become a key hub for global electronics supply chains. Executives say even if U.S. President-elect Donald Trump follows through on threats to impose tariffs on imports, it remains so efficient to engineer, produce and ship electronics from southern China that the region could still outcompete the U.S. The real threat China's factories face, they say, is competition from countries such as Vietnam and the low prices for electronics that are driving down profit margins and leading more manufacturers toward automation.

SUPPLY CHAIN STRATEGIES

One of Apple Inc.'s iPhone parts suppliers is looking away from the increasingly troubled smartphone market. Japan Display Inc. will use a $636 million bailout from the government-backed Innovation Network Corp. to reduce its reliance on mobile devices, the WSJ's Alexander Martin reports. Japan's flagship panel provider and a supplier for Apple's iPhones, but Japan Display has seen its core business slump under pricing pressure and competition from new technology developed by Samsung Electronics Co. The result provides a stark example of the tough impact that heavy reliance on a single customer can have in the rapidly-changing technology world. Japan will use the new aid to acquire another business specializing in new display-panel technology while it seeks customers outside mobile device makers. That may include a new market for advanced technology: automobiles.

Even Amazon.com Inc. is hitting some bumps in figuring out multichannel sales . The e-commerce giant's hot holiday seller, the Echo speaker, is nearly sold out online, the WSJ's Laura Stevens reports, but it turns out shoppers can find the devices at some of Amazon's handful of brick-and-mortar stores. The twist is the result of Amazon's increasingly complex supply chain, including channels that serve its expanding empire of distribution centers as well as its handful of small bookstores and pop-up locations at shopping malls. It's something of a quirk for Amazon, which sells to consumers on the ability to access countless goods anytime, anywhere, but a familiar inventory headache to many retailers. Demand for the Echo speakers, it appears, has been higher than what the company forecast. Amazon must welcome the in-store sales, of course, especially since the customer can walk out with the devices, leaving the company with no added delivery costs.

QUOTABLE

IN OTHER NEWS

Pilots at Korean Air Lines Co. went on strike, canceling some 150 cargo and passenger flights on Asian and Middle Eastern routes. (WSJ)

The U.S. put Alibaba Group Holding Ltd. back on a list of global marketplaces known for counterfeit and pirated goods. (WSJ)

Purchases of previously-owned homes in the U.S. increased in November to the strongest sales pace in nearly a decade. (WSJ)

The Census Bureau says the U.S. population grew at the slowest pace this year since the Great Depression. (WSJ)

Nokia Corp. filed complaints against in Germany and the U.S. alleging that Apple infringed patents in technologies such as display and user interface. (WSJ)

Coca-Cola Co. agreed to buy Anheuser-Busch InBev SA's stake in Coca-Cola Beverages Africa, the company's largest African bottling business. (WSJ)

Retailer Finish Line Inc. cut its outlook after reporting weak demand for apparel and accessories. (WSJ)

Amazon's warehouse workers union in Germany called a strike as part of a dispute over pay and conditions. (Reuters)

The crew of the Hanjin Scarlet remains stranded off Canada's Pacific coast nearly four months after the Hanjin Shipping Co., bankruptcy filing. (Montreal Gazette)

Shipping line Rickmers Maritime faces possible liquidation after bondholders rejected a debt restructuring plan. (Straits Times)

Southwest Airlines Inc. will start carrying cargo on its international flights nextyear. (Air Cargo World)

Truck driving had the highest number of workplace fatalities in 2015 at 745, according to recently released data. (Arkansas Democrat-Gazette)

Pakistan opened a highway corridor linking its Port of Gwadar to western China, providing a new route for Chinese exports. (BreakBulk)

China plans to ban imports of poultry and related products from countries where there are outbreaks of highly pathogenic bird flu. (Reuters)

French retailer FNAC is installing lockers at its Paris stores for pickups of online orders. (Le Figaro)

Wabtec Corp. acquired Pittsburgh-based rail components supplier Workhorse Rail. (Progressive Railroading)

There is a shortage of packaged whipped cream because of a disruption in the supply of nitrous oxide critical to production. (Fortune)

ABOUT US

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

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

(END) Dow Jones Newswires

December 22, 2016 06:28 ET (11:28 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.