Friday, May 28, 2010

Wal-Mart is now its own 3PL

From Bloomberg:


The goal: to handle suppliers' deliveries in instances where Wal-Mart can do the same job for less, then use those savings to reduce prices in stores, Abney says. Wal-Mart believes it has the scale to allow it to ship everything from dog food to lawn chairs more efficiently than the companies that produce the goods. "It has allowed our suppliers to focus on what they do best, manufacturing products for us," he says. "With lower costs usually comes increased sales."

Yes, lower costs, increased sales, but also reduced margins? I would assume Wal-Mart is a tough business to do business with. For many of these suppliers Wal-Mart is their sole customer, or would Wal-Mart also be delivering their goods to Target and other retailers? Or would they only be covering the logistics to their own DC's, in which case what do you do if they are not on time? If your 3PL company screws up, you get another company to service your needs. If Wal-Mart screws up, who are you going to complain to? We have laws protecting consumers from a monopoly, but what about producer protection from a monopsony?

And for industrial real estate demand, if Wal-Mart is moving goods to their own DC, this may reduce the need for 3PL space accross the country.

1 comment:

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