Tips from Wal-Mart: Questionable Supplier Management Techniques

I was talking to someone late last month who had significant experience doing business with Wal-Mart and some of Wal-Mart's suppliers. In the discussions, a few fascinating tidbits bubbled up to the savings surface. Even though many of us put Wal-Mart on a pedestal regarding both overall sourcing and supply chain management strategies -- RFID dreams not withstanding -- the actual reality of their everyday supplier management practices is quite unorthodox and in some cases, potentially unethical. Now these anecdotes come from someone who must go unnamed, but my source is as good as any.

In one particular case, my source shared with me how Wal-Mart's procurement team will routinely comment on the state of supplier's offices and facilities in Bentonville. They'll nitpick something as little as the type of tile on the floor as a justification for reducing prices further (linoleum = good, marble or ceramic = bad). After all, if a supplier can afford such an expensive floor covering, they should be giving more back to Wal-Mart in savings. The same philosophy carries through to other items in supplier facilities -- lobbies, age of office space, etc. The cheaper and shabbier, the less likely Wal-Mart is to beat you up (so much for aesthetics and quality of work spaces, I suppose).

The second anecdote is more personal. Not only will Wal-Mart staff nitpick the office environs of suppliers. They'll also go after personnel effects as well. Such as the type of car that a supplier's representative drives. Here, an Acura or BMW certainly sends the wrong message (even an Accord is pushing it). Think old chevy or a pick-up if you want to get on the their good side and not have it used against you in the next negotiation.

The last case is perhaps the most surprising. I heard from my source that Wal-Mart routinely asks for the check-in list (including rates and names) from people staying overnight in one of the major hotels in the area. These guests are often employees of suppliers who are visiting Bentonville. Perhaps they do this for other hotels in the area as well (after all, when you can hold rooms and conference space over a hotel because you're the only game in town, you can pretty much get what you want, even lists like this, I suppose). All of this brings up the question: if my source is accurate, why would they do this? I reckon Wal-Mart wants lists like this because they want to see who is in town (and perhaps how good a rate they negotiated just to make sure Wal-Mart is getting the best rate of all). But regardless, it feels to me like a true invasion of a supplier's privacy. Or maybe Bentonville just plays by different Spend Management rules all together ...

- Jason Busch