Wal-Mart, Li & Fung Sign Sourcing Pact

By Jennifer Marks -- Home Textiles Today, 2/8/2010 12:00:00 AM

Bentonville, Ark. —

Wal-Mart Stores Inc. is in the process of overhauling its sourcing structure, contracting with massive global trade Li and Fung and restructuring its U.S. operation.

On Jan. 28, the company announced the Li & Fung deal, saying the arrangement will help it “consolidate a portion of its sourcing portfolio.”

Wal-Mart directly sources more than $100 billion in private brand merchandise annually. Li & Fung, which will form a new company to handle the Wal-Mart business, expects to source about $2 billion in the first year of the deal, although the contract does not include any volume or shipment commitments, according to the retailer.

Wal-Mart will create new Global Merchandising Centers to realign its sourcing structure. In addition, Ed Kolodzieski, president and ceo of Walmart Japan Holdings G.K. and Seiyu, has been promoted to executive vp in charge of Walmart’s Global Sourcing. He will report to Walmart vice chairman Eduardo Castro-Wright.

On a global basis, Wal-Mart plans to increase direct sourcing for its private brands. “Our new strategy and structure should drive significant savings across the supply chain,” Castro-Wright said.

Li & Fung’s new business handling direct sourcing for Wal-Mart will be called WSG. The wholly owned subsidiary is expected initially to be focused 80% on hard lines and 20% on apparel, Li & Fung president Bruce Rockowitz told HTT.

Wal-Mart’s new Global Sourcing Centers will focus on the multi-national retailer’s global private label brands, while WSG and Wal-Mart’s other vendors will supply the rest, said Bruce Rockowitz, president Trading Ltd.

“Wal-Mart is so large, and it’s hard for one entity to do everything,” he said.

WSG will handle sourcing for all of Wal-Mart’s retail businesses in the United States, Canada, Mexico, Puerto Rico, Central America, Brazil, Chile, Argentina, United Kingdom, India, Japan and China, including Sam’s Club.

WSG will be headquartered in Hong Kong. Li & Fung veteran Dow Famulak, who relocated to London two years ago to build the global trading house’s business in Europe, will move back to Hong Kong to head up WSG. He will report to Rockowitz.

The new business will be staffed by some current employees of Li & Fung as well as some of Wal-Mart’s global sourcing employees, although there could be additional outside hires as the business develops satellite offices in other countries.

“Factories that do business with Wal-Mart today will continue to do business with them. In some cases, we already share the same factories,” said Rockowitz.