Wal-Mart's Direct Purchasing Challenge

Wal-Mart Stores is quickly setting the tone for the shipping industry in the New Year by working to cut even deeper into its transportation and logistics spending. This time, its goal is to increase direct purchasing from suppliers from less than 20 percent to somewhere around 80 percent.

In a Jan. 3 article, Financial Times reporter Jonathan Birchall reports Wal-Mart thinks it can save anywhere from $4 billion to $12 billion by buying direct rather than going to third-party wholesalers for everything from clothing to fruits and vegetables. It’s already set up four merchandising centers around the globe to drive consolidation of purchasing across 15 national boundaries and to enable more direct purchasing.

Although Wal-Mart hasn’t discussed how its sourcing plans will affect its transportation choices, such a major shift is certain to affect how it ships and receives goods and who carries them.

In North America, more direct purchasing means Wal-Mart and its shipper suppliers can move more fully loaded trailers — either from its gigantic private fleet or for-hire units — straight to its distribution centers, bypassing the need to load and unload multiple trucks and move goods through third-party warehouses before they enter Wal-Mart's system. Some longer shipments could wind up in domestic intermodal containers.

That would make Wal-Mart’s distribution network faster and greener — cutting carbon emissions by reducing the use of multiple trucks and partial loads.

Wal-Mart isn’t alone, of course. Shippers of all types are looking to ship more product faster using fewer trucks. Kraft Foods is a good example. It’s taken 50,000 trucks off the highway since 2005, cutting tens of thousands of tons of emissions.

Ray Greer at Greatwide Logistics — a major truckload freight broker that specializes in food logistics — sees shippers following Wal-Mart’s lead by cutting packaging, fitting more cases into each load and thereby reducing the number of loads they ship. He discusses this in an article in The Journal of Commerce's Annual Review and Outlook, which will be published Jan. 11.

Shippers and carriers will have to keep abreast of these trends if they want to be successful — and in some cases, survive — in a very competitive 2010.

Contact William B. Cassidy at wcassidy@joc.com.

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