TakeAway: Wal-Mart has built its reputation on its ability to cut its costs, and then pass the savings on to its customers.
To lower its costs even further, Wal-Mart is now exploring the idea of buying raw materials in conjunction with the manufacturers who sell products in Wal-Mart.
Wal-Mart would presumably know exactly how much the manufacturers are saving, so it’s no surprise they’re staying away.
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Excerpted from Bloomberg Businessweek, “Wal-Mart Wants More Buying Clout,” by Matthew Boyle and Carol Wolf, October 7, 2010
Wal-Mart Stores purchasing chief Hernan Muntaner has a dream: teaming the giant retailer with soda and snack maker PepsiCo to buy potatoes jointly for a lower price than either company can get on its own. That would allow both to earn more money on the chips and spuds they sell in Wal-Mart’s supermarkets. So far, Pepsi isn’t playing along. But with sales slowing in the U.S. and the price of sugar, meat, and wheat on the rise, the world’s largest retailer is jointly purchasing a growing share of raw ingredients with manufacturers of food and household products sold in its stores. …
It’s all about the retailing giant doing what it’s become famous for: squeezing costs out of its supply chain. And although Wal-Mart is already feared by many suppliers for its enormous buying clout, it’s convinced it can cut even better deals by consolidating its purchasing with partners. Currently, only makers of private label goods sold under Wal-Mart’s house brands have joined in its so-called collaborative sourcing program. Manufacturers of branded products have taken a pass because they’re loath to share pricing data and product formulas …
Muntaner says that “in most cases” the branded companies “are more sophisticated than we are” in buying raw materials. ” …
Muntaner’s primary job is to circle the globe helping Wal-Mart’s international divisions … find ways to use the company’s massive buying muscle to lower what it spends on everything from copier paper to store-branded bottled water. Increasingly, that means selling the benefits of sourcing collaboratively. Muntaner says a soda maker … has teamed up with Wal-Mart in Britain to buy sugar. The soda company paid 14 percent less, he says. Wal-Mart’s sugar costs also fell, savings it used to lower the price of bags of its own house brand of sugar. …
This is just the company’s latest attempt at slowing expense growth. Wal-Mart … wants savings of over a billion dollars eventually.
Edit by DMG
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Full Article
http://www.businessweek.com/magazine/content/10_42/b4199023758279.htm
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