Back in my July 9th, 2015 post, I pointed to the data that supports my assertion that the majority of suppliers that deal with Walmart, likely come to regret it.
I also expressed the opinion that this was perhaps one of the main reasons why Walmart sought a relationship with ThomasNet that would enable the retailer to “tap” into the latter’s rock solid supply network to “support its U.S. manufacturing initiative.”
While acknowledging my right to raise said concerns, ThomasNet VP of Publishing Tom Greco made the statement that “We are not here to pass judgement – the suppliers can speak for themselves . . . it is up to them to decide”. In short, our suppliers know the score and can stand up for themselves. As a result, the deal between Walmart and ThomasNet.com should not raise any red flags of concern. Call it a buyer – or in this case supplier, beware axiom.
While I do not at this point have any hard data relative to the level of business that has been directed through the ThomasNet.com supply base – I will hopefully have that information soon – in the context of Greco’s statement, an October 19th article in Reuters is worth noting.
In his article titled Wal-Mart puts the squeeze on suppliers to share its pain as earnings sag, Nathan Layne writes that while the “behemoth has always had a reputation for demanding lower prices from vendors,” this past year has seen a notable increase in terms of pressure on suppliers to drop their prices. Layne goes on to suggest that even by Walmart standards, this latest effort in “turning up the heat,” is notably different than in the past. Given that Walmart summoned major vendors to a meeting and demanded millions of dollars in discounts, while refusing to open the floor to questions, there is a palpable sense of desperation in the demand
The reason for the heavy handed urgency is the result of what was described as a stunning revelation that the retailer’s earnings were going to decline by as much as 12 percent in its next fiscal year to January 2017.
Then to add insult to injury, Walmart announced “sweeping changes to supplier agreements that seek to extend payment terms in some cases,” while introducing “new fees to warehouse goods and place product in new stores.”
Obviously Walmart hasn’t kept up to date on the articles that highlight the risk when there is an erosion in payment terms – including to the overall economy.
Nor would it seem that they have taken note of what one article refers to as being the “concrete evidence” that shows that companies with good supplier relationships perform better in the long run.
While research indicates that Walmart’s approach is unlikely to achieve the hoped for results – at least not on a sustainable basis, they are not likely to change as long as Wall Street rewards them for their predatory approach to supplier relations. For example, maintaining a high Days Payable Outstanding or DPO ratio.
In the end, I guess that Wall Street is ultimately the real enemy of the suppliers. This of course is a worthy discussion for another day.
In the meantime, and going back to Walmart’s deal with ThomasNet, I can only hope that as suggested by Greco, his confidence in his company’s supply base to make the right decision has proven to be true.