This article from the Financial Times outlines the supply chain initiatives that when implemented should dramatically increase margin and profits at Walmart. Direct sourcing will be one of the keys to building strong Private Brands at Walmart.
Walmart aims to cut supply chain cost
Walmart is launching a drive this year to cut billions of dollars of costs from its supply chain by combining its store purchasing across national frontiers in a new stage in the globalisation of its business.
The effort is part of plans by the world’s largest retailer to increase the proportion of goods that it buys directly from manufacturers, rather than through third-party procurement companies or suppliers.
Eduardo Castro-Wright, the head of Walmart’s US stores, has said that the retailer sees the opportunity to consolidate global sourcing as “a major source of leverage for the company in years to come”.
With annual sales of more than $400bn, Walmart is famously tough in negotiating with its suppliers, exploiting the scale of its buying to gain discounts. It spends about $100bn on purchasing private label products such as its Faded Glory and George brand clothing, or its Great Value food and home products. But it acquires less than a fifth of these goods directly from the manufacturers, and has generally made its purchases on a country-by-country basis.