Wal-Mart Buys Raw Materials With Suppliers

SN STAFF

BENTONVILLE, Ark. — Wal-Mart Stores said it plans to join with its suppliers in buying raw goods to reduce costs, according to published reports.

European sources quoted Hernan Muntaner, vice president for international purchase leverage, saying: "Around the world we found we were buying the same raw materials that Wal-Mart suppliers buy. When you put the volume together of what we bought and what [suppliers] bought, buy[ing] from one [source] can reduce the cost."

According to Muntaner, Wal-Mart's Asda division in the United Kingdom is buying sugar with an unnamed manufacturer at 14% below the usual cost — savings Wal-Mart said it used to lower the cost of bagged sugar and its private-label fizzy drinks. He said the company is also buying paper for office printers with a Chilean supplier, at a cost savings of 2.5%.

In most cases the branded companies "are more sophisticated than we are" in buying raw materials, Muntaner said, though Wal-Mart has found times when that wasn't the case, he added.

Not all suppliers are willing to work with Wal-Mart, Muntaner said, citing Wal-Mart's unsuccessful request to Pepsi Cola to buy potatoes jointly. "Sometimes it's very hard with a big company to have conversations like this," he said.