William B. Cassidy | Jan 05, 2010 11:00AM EST
Wal-Mart Stores plans to squeeze billions of dollars out of its supply chain this year by purchasing more goods direct from manufacturers, cutting out third-party suppliers.
The world's largest retailer buys less than 20 percent of its goods directly from manufacturers. It wants to increase that share to 80 percent, The Financial Times reports.
That would have a significant impact on its global and domestic supply chains, cutting logistics costs $4 billion to $12 billion or 5 to 15 percent over the next five years.
Four global merchandising centers are handling purchasing for Wal-Mart stores in 15 countries, driving consolidation of sourcing across national boundaries.
A marked increase in direct purchasing could lead to major changes in Wal-Mart's transportation network, shifting freight among carriers and transportation modes.
In the United States, more freight may move in fully loaded trailers direct to distribution centers, cutting out loading and unloading on multiple trucks at third-party warehouses.
That would help the retailer meet its environmental goals by lowering carbon emissions.
In addition, the company's stores keep getting bigger, presenting additional transportation challenges. Wal-Mart added 38 million square feet of retail space around the world last year, and will add another 37 million square feet this year.
More efficient sourcing, better inventory management and greater supply chain productivity are needed to support that growth. Wal-Mart said logistics improvements helped boost its gross profit 25.2 percent in the third quarter.
Contact William B. Cassidy at wcassidy@joc.com.
