Walmart revamps global sourcing strategy

February 1, 2010
by Purchasingb2b Staff

Walmart Stores Inc—the parent of Walmart Canada—has redesigned its global sourcing strategy.

The company has announced a multi-pronged plan intended to “leverage its global scale to reduce costs of goods, accelerate speed to market and improve the quality of products.”

That includes the creation of global merchandising centres (GMCs), changes to leadership and structure and a new partnership with Bermuda-incorporated global sourcing firm Li & Fung Limited.

Economies of scale

Walmart first announced plans to develop GMCs at an investors’ meeting in October 2009. These centres are meant to allow the company to use its global purchasing power to take advantage of economies of scale in both general merchandise and food categories.

Through its GMCs, Walmart will increase direct sourcing for its private brands, which represent US$100 billion in purchasing annually.

“These centres will create alignment between sourcing and merchandising and drive efficiencies across various merchandise categories,” explained Eduardo Castro-Wright, Walmart’s vice-chairman.

Heading up the new Walmart Global Sourcing will be Ed Kolodzieski—currently president and CEO of Walmart Japan Holdings GK and Seiyu—who has been promoted to executive vice-president.

A new partnership

The decision to partner with Li & Fung to consolidate part of the sourcing portfolio is a core component of the new strategy.

Li & Fung is forming a new company to manage the Walmart account. It will act as a buying agent for goods valued at approximately US$2 billion within the first year of the contract.

The company’s agreements with Li & Fung are non-exclusive and do not include volume or shipment commitments.

Castro-Wright summed up what the changes mean for the company.

“[We] are redefining how we source products that are imported into Walmart retail markets around the globe,” he said.

“By realigning our resources, leveraging our scale and restructuring our relationship with suppliers, we will enable our businesses around the world to offer even more competitive pricing on merchandise and to provide our customers a clear and compelling assortment of better quality products at lower prices.”

Photo courtesy of Walmart Canada.