The Wal-Mart effect
By Doug Smock, Editor-in-Chief -- Purchasing, 2/5/2004 2:00:00 AM
"The Wal-Mart Effect" is a major and permanent change in how companies buy products. It will trigger significant restructuring in the production and distribution of products. Those sobering comments were ringing in the halls of the recent annual meeting of the National Association of Chemical Distributors in Naples, Fla.
It was a bit of a wake-up call for me because I never thought of the revolution in purchasing today as the "Wal-Mart Effect".
Suppliers who haven't read PURCHASING magazine for the last three years are suddenly confronted with a 600-lb guerrilla—the purchasing pro with an MBA and a technical degree who represents the whole organic chemicals or cold-rolled sheet spend for a multinational multibillion dollar company—not just the plant or division based in McKeesport, Pa. These pros go to the market armed with tons of data and an arsenal of electronic tools, ranging from sophisticated spend analysis to automated eRFX capabilities. They are determined to find the most efficient and most capable suppliers, whether they are in Kokomo or Bangladore.
Yes, it is a sea change.
I wouldn't call it the Wal-Mart effect, though. I'd call it the rebirth of American business. We no longer have huge advantages in raw materials costs, for example hydrocarbon feedstock costs on the Gulf Coast or cheap iron ore from the vast Mesabi range in Minnesota or even coking coal from my home in southwestern Pennsylvania. We no longer have a commanding position in our domestic market. And we no longer can sit in our easy chairs and feel comfortable about the future of American business.
As Americans, we are competing against extremely bright, highly capable people in India, China and all over the world.
Smart purchasing people are giving American companies the most important resource we have: our creativity, our experience, our knowledge, our work ethics and—maybe most important—our willingness to employ and use to great advantage new technology as it becomes available. Productivity rates in U.S. businesses are soaring right now. It isn't just the digital revolution anymore. We woke up, as our great late friend R. Gene Richter often said in these pages.
Call it the Wal-Mart effect if you please, but just make sure you get on board.
Wal-Mart to poll suppliers on energy use
09/24/2007Prepare for big changes
02/04/2004Dell and Wal-Mart
05/28/2007Gene Richter: Leader, innovator, friend
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