Executive Briefings

How Much More 'Blood' Can Wal-Mart Squeeze from Its Supplier Base?

Wal-Mart has long had what is virtually beyond question the largest retail supply chain, as measured by number of suppliers, global reach, volume of material, and overall spend on supplier goods. Wal-Mart also has been touted as an innovator in supply-chain management, but it's more accurate to say it uses its sheer size and market power to manipulate the supply chain.

Consider, for example, Wal-Mart's merchandise suppliers. For most, the value of the relationship lies in the volume of sales, not the profit margin. The retail giant does not rest in exerting downward pressure on supplier prices. Low-margin business can be sustainable, but it leaves little room for any additional costs that may crop up, as happened with the Sustainability Scorecard Wal-Mart introduced in 2009.

The program set out clear instructions for adhering to packaging requirements for Wal-Mart suppliers. Many of them were forced to change product configurations and packaging designs to meet the retail giant's mandates.

Now consider Wal-Mart's plans to use its massive fleet of some 6,500 trucks to take over the transportation of all inbound materials. The company introduced the concepts at the heart of its plan back in 2010; subsequent delays in launching the program have been a result of supplier pushback.

Is Wal-Mart's supply-chain strategy sustainable? The company will discover that a cliché, in this case "you can't squeeze blood from a stone," is a cliché because it's true.

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Keywords: retail supply chain, supply chain management, Wal-Mart relations with suppliers, Wal-Mart supply chain optimization

Consider, for example, Wal-Mart's merchandise suppliers. For most, the value of the relationship lies in the volume of sales, not the profit margin. The retail giant does not rest in exerting downward pressure on supplier prices. Low-margin business can be sustainable, but it leaves little room for any additional costs that may crop up, as happened with the Sustainability Scorecard Wal-Mart introduced in 2009.

The program set out clear instructions for adhering to packaging requirements for Wal-Mart suppliers. Many of them were forced to change product configurations and packaging designs to meet the retail giant's mandates.

Now consider Wal-Mart's plans to use its massive fleet of some 6,500 trucks to take over the transportation of all inbound materials. The company introduced the concepts at the heart of its plan back in 2010; subsequent delays in launching the program have been a result of supplier pushback.

Is Wal-Mart's supply-chain strategy sustainable? The company will discover that a cliché, in this case "you can't squeeze blood from a stone," is a cliché because it's true.

Read Full Article


Keywords: retail supply chain, supply chain management, Wal-Mart relations with suppliers, Wal-Mart supply chain optimization