Supplier Beware

Misery loves company, they say, and if it is so, then home textiles suppliers targeted by Wal-Mart's “No More Middlemen” policy can take some solace in news from the fizzy beverage world.

More than 50 Coca-Cola bottlers filed lawsuits on Valentine's Day against Coca-Cola and giant bottler Coca-Cola Enterprises over a direct distribution pilot program at Wal-Mart stores.

Typically, the nation's 70-odd Coca-Cola bottlers deliver their merchandise directly to stores, where they are also responsible for displays and in-stocks. Under the test program requested by Wal-Mart, Coca-Cola Enterprises is shipping its PowerAde bottles directly to Wal-Mart distribution centers, putting the retailer in charge of deliveries and displays.

Although this is a limited test of a beverage that is not exactly the brightest star in the Coca-Cola galaxy, the bottlers see in the experiment the eventual eclipse of their role in the plant-to-store supply chain.

No one can deny that Wal-Mart is the master of supply chain efficiencies, and its ability to continue to squeeze costs out of an already streamlined system is nothing less than awesome. Perhaps the comforting news for Cola-Cola bottlers (and textilians) is that no other retailer comes close to matching Wal-Mart's ability in that regard.

Indeed, following a frenzied 2005 characterized by pedal-to-the-metal retailer pursuits of factory-direct orders, the experience has proven that most retailers lack the systems to successfully execute such strategies from start to finish and are beginning to push back some of the responsibility to traditional suppliers.

As for “in-house product development” initiatives, with rare exception they are neither original nor developmental. In fact, were the country suddenly deprived of the West Elm, Pottery Barn and Crate & Barrel catalogs, there would be no “trend books” coming out of retail headquarters.

The message here for suppliers: They still need you. But as Coca-Cola's PowerAde venture demonstrates, inefficiencies will continue to be identified by Wal-Mart. And where Wal-Mart leads, other retailers will do their best to follow.

Suppliers need to get the jump on this: identify your own inefficiencies. Then root them out, and trim down or firm up your own organization where necessary. In most of the up-and-comer U.S./off-shore hybrid companies, there's an executive sales and marketing team, a product development and support team — and nothing in between. When it's time to pack, label and ship the samples, the work is being done by the same vice presidents who will be traveling to Minneapolis, Milwaukee and Plano to do the pitching.

It's time for suppliers to put their own organizations under a microscope — before their customers do.