Jabba The Hutt In The Supply Chain?

Wal-Mart brecently announced an intiiative to take over the transport of products from its suppliers into its distribution network.  The move might be seen as a natural extension of its traditional practice of requiring suppliers to distribute to Wal-Mart network locations, rather than to the individual stores.  The ostensible objective?  To reduce costs (and perhaps roll back some more prices).

Benign on the surface; possibly even commendable.  But, what are the consequences, unintended or otherwise, on suppliers' relationships with their carriers and other logistics service providers?  They'll have less product to ship with their (often long-standing) transportation partners.  Those partners will have less business, overall.  Maybe, with capacity reductions made during the recession, that's manageable.  But the question is unavoidable.  With lower volumes, will supply chain costs for customers and channels other than Wal-Mart increase?  Will that make supply chains vying with Wal-Mart in the marketplace less cost-competitive?

Wal-Mart's prominence in the world of retail supply chains is enormous, and growing - and would be even bigger and more powerful with an inbound transportation takeover.  Some observers go so far as to maintain that Wal-Mart is really a supply chain operator, as much as, or even more so, than a retailer.

I surely don't attribute all of the ethical failings of George Lucas' master of the interplanetary deal to Wal-Mart.  But I am occasionally reminded of Budd Schulberg's anti-hero in A Face In The Crowd, who, in a memorable phrase, "brung happiness to millions."

Do Wal-Mart's increasingly dominant supply chain - and consumer pricing - positions contain the seeds of diminishing returns, or even backlash?  Are its customers really all that happy with the seductive allure of low prices?  According to the June issue of Consumer Reports, not so much.  Wal-Mart's ratings kept it barely (by a single point) ahead of last-place Kmart (and it was next-to-last in 2002, as well).

Wal-Mart was ranked "worse" or "much worse" in eleven of sixteen categories, and "better" in none.  Maybe that reflects the demographic skew of Consumer Reports' readers.  But it could mean trouble if the humongous enterprise's future growth is tied to targeting increased penetration with middle-class customers - no matter what the supply chain costs are, and no matter how the company controls its supply chain relationships.