How Walmart's Business Practices account for the majority of America's outsourced manufacturing jobs.

http://www.fastcompany.com/magazine/77/walmart.html

The giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?

From: Issue 77 | December 2003, Page 68 By: Charles Fishman Photographs by: Livia Corona
A gallon-sized jar of whole pickles is something to behold. The jar is the size of a small aquarium. The fat green pickles, floating in swampy juice, look reptilian, their shapes exaggerated by the glass. It weighs 12 pounds, too big to carry with one hand. The gallon jar of pickles is a display of abundance and excess; it is entrancing, and also vaguely unsettling. This is the product that Wal-Mart fell in love with: Vlasic's gallon jar of pickles.

Wal-Mart priced it at $2.97--a year's supply of pickles for less than $3! "They were using it as a 'statement' item," says Pat Hunn, who calls himself the "mad scientist" of Vlasic's gallon jar. "Wal-Mart was putting it before consumers, saying, This represents what Wal-Mart's about. You can buy a stinkin' gallon of pickles for $2.97. And it's the nation's number-one brand."

Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a ser-vice for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement.

Indeed, as Vlasic discovered, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us "every day low prices." It's the story of what that pressure does to the companies Wal-Mart does business with, to U.S. manufacturing, and to the economy as a whole. That story can be found floating in a gallon jar of pickles at Wal-Mart.

Wal-Mart is not just the world's largest retailer. It's the world's largest company--bigger than ExxonMobil, General Motors, and General Electric. The scale can be hard to absorb. Wal-Mart sold $244.5 billion worth of goods last year. It sells in three months what

number-two retailer Home Depot sells in a year. And in its own category of general merchandise and groceries, Wal-Mart no longer has any real rivals. It does more business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined. "Clearly," says Edward Fox, head of Southern Methodist University's J.C. Penney Center for Retailing Excellence, "Wal-Mart is more powerful than any retailer has ever been." It is, in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.

Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its 21,000 suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.

Of course, U.S. companies have been moving jobs offshore for decades, long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to "Buy American," has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That's nearly 10% of all Chinese exports to the United States.

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REad the entire article if you really want to understand the outsourcing phenomenon and what has led to it.

Catz

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I'll get nicer when you get smarter.

CATZ This has been one of my pet peeves for years. I don't think that the total "outsourcing" problem is limited to Wall-MART yet Wall-mart is indeed a enormous and a major part of this due to their size.

Last year ( Aug 2003) when Bush floated that 300 dollar tax "rebate" I immediately stated that it was a foolish economic act because all that Bush accomplished was to transfer several hundred millions of dollars to China. We showed a blip in economic activity for one month (Wall-mart confirmed this Aug that they had a substantial drop this Aug as compared to last year).

Giving people with children a one $300 "rebate" does not do anything for the US economic. The yahoos just bring ti to Wall-mart. We need better policies to control outsourcing.

Kerry claims that he has a plan to quell outsourcing but we need details.

We are transferring entire classes of industries to China and neither party has addressed it.

hence my signature

Neither party has adressed it, and neither party will. I'm guessing this stems from their corporate toolship and the fact that if Americans lose their jobs because they allow Wal-Mart to remain the most dangerous force on the planet, next to the Catholic Church and North Korea, it's not hurting them.

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"Violence isn't always evil. What's evil is the infatuation with violence."
Jim Morrison

I don't like bullies. And I am quite positive that bullies cannot be trusted.

Walmart has low prices because they screw their vendors and and their employees. Is that a company you want to support?

You can't "control" outsourcing without passing protectionist laws that would do little except harm the economy we are trying to save. Outsourcing is a reality and although it hurts people in terrible ways, just about every economist (including think tanks like Cato) believe that, on the whole, outsourcing is good for all parties. It is not clear whether what has been true in the past, will continue to be true in the future, but trying to "control outsourcing" is the wrong way to go about it.

Kerry intimated that he could stop, or at least slow down, outsourcing but most people who know something about economics knew that that was an empty promise. The fact that he has come off that position a little (as seen in the last debate) shows that he is getting a little more realistic regarding the power of the federal government over the internal workings of american industry.

That said, we do have tax laws that, if they don't encourage outsourcing, at least remain neutral on the subject. While we should never be protectionist, we should also never encourage the exportation of American jobs.

By the way...Walmart is terrible <--(*)(*)(*)(*) that profanity filter.

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"George W. Bush surrounds himself with smart people the way a hole surrounds itself with a donut." —Dennis Miller

We have a dilemma in what the right thing to do is regarding our outsourcing and purchases from foreign companies. The one thing I do know is, try and find 10 items in your house that aren't made in China, or some other country in Asia. We all hate losing jobs for Americans but yet love to only pay $19.99 for a phone that would have cost you $199.00 if made in the U.S.A.. The wide range thought on outsourcing has merit in that helping other countries with jobs and boosting their economies helps our relations with them, and in some ways keep us safe. The problem is, the big guy always wins in foreign countries and the little guy will always lose. There generally is no middle class in these third world countries, our homeless in America live better than a good deal of their populations.
Business is like water, in that it will always seek it's lowest level, and Wal-Mart is just a business. Not good, not evil, it just is.

In theory it sounds good but hitting them with taxes won't work. The reason is that they still save money even AFTER they would be taxed. It is still cheaper to send jobs over seas and pay hardly any wage to make these products. Walmart is a huge problem. they are killing small towns everywhere. They are killing jobs everywhere. I have seen them destroy two Ohio companies (i am sure there are more).

One was a bicycle company who was pressured by Walmart to make a LOWER quality bike to sell in their stores for a cheaper price. They promised the company TONS of sales. At first it was, but as the next few years went by Walmart kept asking them to drop there prices until the company could not afford it anymore. They filed chapter 11 this year. They RUINED there name as a quality product. Lots of people lost there jobs.

I do not see an end to this companies practices. You can tell people OVER and OVER what they do and everyone does not seem to care that its hurting everyone in the long run. THEY JUST WANT A DEAL!

All that would do is create a trade war and hurt the economy in other ways. Unfortunately people fall for the outsourcing ploy because they don't know any better. You could talk about adding incentives to keep jobs here, but even that would likely have an unwelcome reception internationally. But it is certainly better than tax increases would hurt in numerous ways.

will we (usa) survive going from a manufacturing base to a service based country ?
unimagined changes are coming.

pj034 wrote I am not economically naive to believe that we can stop outsourcing if we wish to function in a free world market economy. Yet I do not believe that having tax policies that encourage or otherwise providing an artificial inducement for outsourcing by giving tax right-offs as a reward is lunacy. If outsourcing is economically sustainable in a free market environment then let the market decide. Having said that I also am very concerned that we maintain our control over industries or classes of industries which are integral to our strategic defense, maintenance of our middle class, and our technological position in the world.