Tuesday 23rd Oct 2018 - Logistics Manager Magazine

Wal-Mart gets sourcy with retail rivals

One of the most difficult issues that every major company faces is ensuring that the products they buy from outside suppliers are made well and made right. We all saw it this year as we headed into Christmas.

No company has the perfect blueprint for making sure every factory is a good steward of the environment, that every factory is ethical in how it treats its workers, and that every factory manufactures products perfectly to specifications.

I want to be clear that with sourcing we are already on par with our competitors. But let me ask you this: when are we ever satisfied with being on par with our competitors? Are we ever satisfied with being on par with price or sales or how we treat our associates? No we are not. And we will not be satisfied with being on par with our competitors when it comes to how our products are made or how the people who make our products are treated.

But, you know, our customers won’t be satisfied either. Our customers want products that make them feel good about their purchases. They want to walk into our stores and be confident that the products on our shelves are safe and durable. They also want products that are made in a way that is consistent with their own values.

We believe the progress we can make here will be good for our business. Why? Because suppliers that cheat on the environment, cheat on laws, and cheat on the treatment of their people, will cheat on the quality of product they sell us. But suppliers that are ethical and responsible in how they do business are much more likely to care about quality and, in doing so, care about the customers in your stores.

Now it is one thing to say you want to do this. It is a whole different ballgame to actually do it, especially for a retailer of our size. But your Wal-Mart will do this.

Our first action will apply to all suppliers who work with us through global procurement, who are domestic importers, or who are manufacturers of Sam’s Club or Wal-Mart private brands. We will require these suppliers to demonstrate that their factories meet specific environmental, social and quality standards. We have already started doing this, and we hope to extend the requirement to all the suppliers I mentioned within the next three to five years.

Second, we will only work with suppliers who maintain our standards throughout our relationship. So we will make certification and compliance part of our supplier agreements and ask suppliers to report to us regularly. Any supplier that fails to keep its word will be required to take prompt and serious action. If a supplier fails to improve and fix the problem, we will stop working with that supplier.

Third, we will favour — and in some cases even pay more — for suppliers that meet our standards and share our commitment to quality and sustainability. Paying more in the short term for quality will mean paying less in the long term as a company. Higher quality products will mean better value, fewer problems, fewer returns and greater trust with our customers. Saving people money is a commitment to our customers throughout the life of the product.

While we do these things, we will also work on more far reaching change. Many of our supplier factories have multiple customers, including multinational corporations and local retailers. Each retailer often imposes different standards and requires separate inspections. This often results in duplication of efforts without a real improvement in performance. And in some cases, it allows a competitor to have lower standards and, at times, lower costs.

In the next three years, we would like to build a very different system. We believe that there should be one framework of social and environmental standards for all major global retailers. And there should be one third party auditing system for everyone. This will ensure improvement can occur across the board on a level playing field.

The leading global retail and consumer goods network, CIES, is working on this, and we are working with them and a number of global retailers to achieve this vision. The effort is now focused on social standards, and I believe it should be expanded to environmental standards as well. Today I call on all major global retailers to join this effort. I stand ready to meet with the CEOs of our competitors and make socially and environmentally responsible sourcing a reality across the entire retail industry.

Now there has been a lot of discussion over the last few months about China’s specific role in global sourcing. Clearly, China has an important role to play. It is a major manufacturing force today, and it will be an even greater economic force in the years ahead.

Over the last few months, we have spent a lot of time talking with leaders in the Chinese government and the NGO community. As the growth of China has exploded, the environment has become an increasingly important issue in that country.

We believe we can make a major contribution here. Wal-Mart will work with the Chinese government and NGOs to make sure suppliers comply with Chinese environmental laws and regulations. We will require our suppliers who export from China to certify that they meet key standards. We will include this certification in our supplier contracts. And we will have a mechanism in place to make sure our suppliers meet these standards throughout the term of our relationship. We commit to doing these things as quickly as possible. And we hope to see significant results within three to five years.

Ultimately, we would like to see this effort combined with the industry wide effort I described earlier. But if it is not, Wal-Mart will in fact lead. We will move forward by ourselves.

l This is an extract of the speech delivered by Lee Scott, chief executive officer and president of Wal-Mart Stores Inc, at the Wal-Mart US Year Beginning Meeting on 23 January.

The LEZ said, the better

February 4 proved to be a false dawn for London’s heavily promoted low emission zone (LEZ) after Transport for London agreed that, for the first 28 days, it would only issue warning notices.

This was necessary because it became obvious that many operators had been unable to fit particulate traps to vehicles that did not comply, or buy vehicles that did comply before the deadline. Mike Galey of Eminox, the supplier of emission control systems, said in January: “We are still receiving large volumes of enquiries, showing that there are still many yet to comply.”

It is clear that many operators have been using the 28 days grace to decide on their strategies. It remains to be seen how many will not be able to comply when it comes to an end.

The Freight Transport Association reckoned that as many as 10,000 vehicles working in and around London might not be compliant with the LEZ when it came into force.

RHA chief executive Roger King warned that: “There is no guarantee that 28 days will be long enough to clear the supply backlog and install the new equipment. We will be monitoring the situation carefully and will approach TfL for a further extension if necessary.”

Eminox says it has been assured by TfL that where an operator is able to prove that it had taken steps to comply with the scheme before 4 February, TfL would consider a request for a refund of any daily charges paid between scheme go-live and the vehicle being registered as compliant. The scheme initially requires vehicles of over 12 tonnes to meet Euro 3 emission standards for particulate matter to operate freely within the area bordered by the M25.

It is estimated that each day some 50,000 vehicles are used to deliver goods and services within the Greater London area.

Operators of vehicles between 3.5 and 12 tonnes still have until 8 July to get compliant. There are a number of options available, including applying for a Low Emission Certificate, modifying the vehicle with a particulate filter or buying a compliant vehicle.

The FTA has been recommending that operators which do not take vehicles into London check the Eligible Engines List (to get a Low Emission Certificate) as it might entitle operators to a reduction in Vehicle Excise Duty.

Critics of the LEZ say it is costing London taxpayers some £130m while lorry operators have to pay out another £100m but most of the benefits will come anyway through existing European vehicle emission legislation. Some estimates suggest the LEZ will be responsible for a net reduction in pollution of no more than one per cent.

Last month “The Times” reported that in July cameras inside the zone were detecting 5,000 non-compliant lorries a day but by early February this was down to 1,500. ?

Some of the effects of the LEZ fall into the absurd category. For example Kent emergency services are quite often called upon to support services in London. Fire engines, in particular, are expensive pieces of specialised equipment and consequently are kept for many years.

So they will be hit by the LEZ every time they cross the border to put out a fire.

Apparently, the Kent services will be reimbursed so the cost, estimated to be as high as a million pounds a year, will be paid by London council tax payers.

But perhaps the most absurd thing about the LEZ is that the biggest group of polluters are exempt. The FTA’s head of policy for London, Gordon Telling points out: “The biggest pollution from traffic in London comes from cars and the scheme does not apply to them.”