Many people lament about manufacturing jobs lost here in the United States as Wal-Mart purchases most of their products overseas. But don't think that those overseas suppliers have it easy. First of all, Wal-Mart dictates to their overseas vendor as to how much it should cost the vendor to make that product and how much of a margin they should make. Although the volume is large, any mistake by the vendor is costly. Secondly, if the vendor is late Wal-Mart will either cancel the order or take it with the built in allowance stipulated in the contract. The greater the delay in delivering the product, the larger the allowance would be. I have also heard that Wal-Mart has in their contract a clause that allows them to void purchases without any cause. I do not know this to be true but I could very well believe it from stories I have heard in the course of my business operation dealing in overstock items and cancellations.

Whenever a Wal-Mart cancellation stock lot crosses by desk, I marvel at the quantity. Usually it is over a million pieces of an item. Many times the overseas vendor has already gone out of business due to the cancellation. I recall a time when a Wal-Mart brand pair of jeans was offered for me to sell. The quantity was over a million pairs. There were just three styles among the million pairs. The jeans were basic, made without any designer flare and stretch and ticketed at $11.95. Although offered to me to sell at $3.00, buyers were not interested. For that quantity they wanted to take it for practically pennies to the dollar. The vendor was not yet ready to take such a beating. But as time passes, the vendors always regret not accepting that first offer.

I know many overseas vendors do not entertain Wal-Mart orders. They would rather work with Target or Nordstroms. The relationship between vendor and customer with these other companies are not as one sided. But the fact remains that there are many companies around the world especially in China and other Asian countries eager to secure a Wal-Mart order and many even thrive. As for now, Wal-Mart due to its size is having the last laugh.

Learn more about this author, Prit Thakral.
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