Walmart Wants to Take Over Delivery of Products from Suppliers

May 27, 2010
Walmart believes it can ship and transport product more efficiently than its suppliers can, and so, the company is looking to take over delivery service from many of the manufacturers that provide goods to its U.S. stores. According to an article at ...

Walmart believes it can ship and transport product more efficiently than its suppliers can, and so, the company is looking to take over delivery service from many of the manufacturers that provide goods to its U.S. stores.

According to an article at Bloomberg.com, Walmart is currently negotiating this new plan with its suppliers. The company intends to increase the use of contractors, as well as its own private fleet of trucks, so that it can pick up products directly from manufacturers and transport the goods to its distribution centers and stores.

Of course, improved delivery efficiency has multiple benefits for Walmart, including lower supply chain emissions and reduced supply chain costs. These benefits will, in turn, translate into lower prices for Walmart shoppers, says Kelly Abney, Walmart's vice president of corporate transportation in charge of the project.

And I assume Walmart is hoping aggressive price reductions can reverse months of slowing U.S. sales.

But, how will this plan affect suppliers?

The answer to that question is complex. Sure, there are certainly significant advantages to successfully collaborating with a retail giant like Walmart. But, there are downsides to ceding control of your deliveries, too. For example, the Bloomberg article reports that under the new plan, some Walmart suppliers are being asked to surrender up to twice as much as their calculated cost of shipping. At the same time, manufacturers will be losing scale. They'll be losing shipping flexibility. And, they'll have to rethink their own process efficiencies, too.

When all is said and done, will Walmart suppliers be facing increased transportation costs on deliveries to other retailers? Will they be able to reconcile this new scheme with their current operations, while still keeping maintaining a positive relationship with Walmart? For some suppliers, I'm sure, this is going to be a painful bind.

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