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In a bid to give more autonomy to executives in regional markets, reinvigorate growth and leverage its global scale to reduce costs, Wal-Mart Stores, Inc. is realigning its U.S. operations by aligning its three operating divisions — logistics, real estate and store operations — under one leadership team. Simultaneously, the world’s largest retailer said it would also organize its U.S. operations into three geographic units — West, South and North — each with its own president.
Walmart’s new global sourcing strategy involves the creation of global merchandising centers (GMC), a change in leadership and structure, and a strategic alliance with global sourcing organization Li & Fung, moves which Walmart vice chairman Eduardo Castro-Wright described as “important elements in the company’s strategy to deliver even greater value to its customers and shareholders.”
Aiming to leverage its global scale in both general merchandise categories and global food sourcing, Walmart first announced the consolidated global sourcing structure centered on new GMCs at its annual meeting for the investment community in October. “The newly established Global Merchandising Centers represent the largest and most important element of our new sourcing strategy,” said Castro-Wright, noting that the centers would “create alignment between sourcing and merchandising and drive efficiencies across various merchandise categories.”
The core of the company’s overall global sourcing strategy will be to continue increasing direct sourcing for the company’s private brands, which currently account for more than $100 billion in purchasing annually. “Our new strategy and structure should drive significant savings across the supply chain,” Castro-Wright said.
Ed Kolodzieski, currently president and CEO of Walmart Japan Holdings G.K. and Seiyu, has been promoted to EVP , in which capacity he will lead Walmart’s global sourcing and report directly to Castro-Wright.
As part of this new strategy, the Bentonville, Ark.-based retail giant also finalized a series of agreements with Li & Fung that are nonexclusive and don’t include volume or shipment commitments. The strategic alliance between the two companies will allow Walmart to realize the benefits of consolidating a portion of its sourcing portfolio. Li & Fung, which is forming a new company to manage the Walmart account, is expected to build capacity that would enable it to act as a buying agent for goods valued at around US$2 billion within the first year.
“In sum, we are redefining how we source products that are imported into Walmart retail markets around the globe,” said Castro-Wright. “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.”
Walmart operates more than 8,000 retail units under 53 different banners in 15 countries.