Post by Ozarks Tom on Oct 22, 2015 1:40:57 GMT
When manufacturers/producers get in bed with a behemoth like Walmart, they should expect this kind of treatment. Unfortunately, as usual it's the little guy that's going to feel the pain.
When Wal-Mart moved to hike wages for its lowest paid employees earlier this year, we were quick to note that the fallout would end up rippling through the supply chain. Here’s what we said in April:
The irony is that while WMT (or MCD or GAP or Target) boosts the living standards of its employees by the smallest of fractions, it cripples the cost and wage structure of the entire ecosystem of vendors that feed into it, and what takes place is a veritable avalanche effect where a few cent increase for the lowest paid megacorp employees results in a tidal wave of layoffs for said megacorp's vendors.
Subsequently, the retailer embarked on a series of efforts to extract every last penny of savings from suppliers including i) an effort to compel vendors to forgo marketing expenditures, ii) adding storage fees and manipulating payment schedules, and iii) demanding that suppliers pass along any savings from China’s yuan devaluation.
www.zerohedge.com/news/2015-10-19/walmart-suppliers-brace-coming-storm-now-we-know-why-they-have-been-pushing-so-hard
I remember talking to a guy years ago who did big business with Sears. His story explains what some of these suppliers are experiencing. He made frying pans, and decided he'd try selling them through Sears. I don't remember his production capacity, but Sears gave him a purchase order for at least twice what he could make without stiffing his old customers, so he did. When his line took off at Sears, they pressured him to add manufacturing capability, so he borrowed to build an addition to his plant, hired more employees, and basically committed his future to Sears. Then Sears called him in and told him he was making too much profit, and demanded a price cut. What could he do? He'd stiffed his old customers, owed the bank big time, had hundreds of employees to support, so he cut his price to the point he was a Sears employee in everything but title. He finally found a sucker (buyer) for his company and ran to Florida.
I'll grant you, greed was his downfall. He should never have stiffed his old customers and made a deal with the devil. I just told that story to explain how little power these suppliers have when dealing with someone like Walmart. Now their employees are going to take it in the neck.
When Wal-Mart moved to hike wages for its lowest paid employees earlier this year, we were quick to note that the fallout would end up rippling through the supply chain. Here’s what we said in April:
The irony is that while WMT (or MCD or GAP or Target) boosts the living standards of its employees by the smallest of fractions, it cripples the cost and wage structure of the entire ecosystem of vendors that feed into it, and what takes place is a veritable avalanche effect where a few cent increase for the lowest paid megacorp employees results in a tidal wave of layoffs for said megacorp's vendors.
Subsequently, the retailer embarked on a series of efforts to extract every last penny of savings from suppliers including i) an effort to compel vendors to forgo marketing expenditures, ii) adding storage fees and manipulating payment schedules, and iii) demanding that suppliers pass along any savings from China’s yuan devaluation.
www.zerohedge.com/news/2015-10-19/walmart-suppliers-brace-coming-storm-now-we-know-why-they-have-been-pushing-so-hard
I remember talking to a guy years ago who did big business with Sears. His story explains what some of these suppliers are experiencing. He made frying pans, and decided he'd try selling them through Sears. I don't remember his production capacity, but Sears gave him a purchase order for at least twice what he could make without stiffing his old customers, so he did. When his line took off at Sears, they pressured him to add manufacturing capability, so he borrowed to build an addition to his plant, hired more employees, and basically committed his future to Sears. Then Sears called him in and told him he was making too much profit, and demanded a price cut. What could he do? He'd stiffed his old customers, owed the bank big time, had hundreds of employees to support, so he cut his price to the point he was a Sears employee in everything but title. He finally found a sucker (buyer) for his company and ran to Florida.
I'll grant you, greed was his downfall. He should never have stiffed his old customers and made a deal with the devil. I just told that story to explain how little power these suppliers have when dealing with someone like Walmart. Now their employees are going to take it in the neck.
