Wal-Mart Stores created a group of global merchandising centers and signed sourcing agreements with Hong Kong buying agent Li & Fung as part of a broad plan to cut supply chain costs by consolidating the retailer’s purchasing power and avoiding middlemen.
“The newly established global merchandising centers represent the largest and most important element of our new sourcing strategy,” said Eduardo Castro-Wright, Wal-Mart vice chairman. Wal-Mart announced plans for the centers, at the company’s annual meeting last October.
Castro-Wright said Wal-Mart is working to increase direct sourcing for its private brands, which represent more than $100 billion in purchasing annually. “Our new strategy and structure should drive significant savings across the supply chain,” he said.
Li & Fung, which is forming a new company to manage the Wal-Mart account, is expected to serve as buying agent for about $2 billion worth of goods within the first year. Li & Fung serves as an intermediary between retailers and manufacturers, and uses its buying power and global connections to negotiate favorable prices.
“In sum, we are redefining how we source products that are imported into Wal-Mart retail markets around the globe,” Castro-Wright 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.”
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